Sir Richard Branson and the Virgin Group of Companies - Essay Example

?Sir Richard Branson and the Virgin Group of Companies Executive Summary This is a business case study of the Virgin Group of Companies, which is managed and owned by one of the most famous world entrepreneurs, Sir Richard Branson. Assessment of the entrepreneurship skills of Sir Richard Branson will contribute in the application of these skills in business and marketing strategies. Section 1 Introduction The manager and owner of the Virgin Group of companies, Sir Richard Branson belongs to the group of the most successful entrepreneurs in the business world. According to Carmichael (2006), the entrepreneur (Branson) is the owner of one of the most recognisable brands globally that is valued at an estimated fortune of $3.2 billion. The success of his prestigious group of companies is a confirmation of his ability to apply the necessary management skills and strategies required for successful businesses. Sir Richard Branson had no initial intentions of becoming an entrepreneur although this did not prevent him from building his status as one of the most successful entrepreneurs globally. Having launched a student magazine at the age of sixteen and managed a student advisory centre, Branson had a background in business establishment and management i.e. habitual entrepreneur (Branson, 2011; Shavinina, 2008: 9-15). However, the success and expansion of the Virgin Group led to incorporation of other business ventures making him a portfolio entrepreneur. Some of the personal entrepreneurial characteristics that have enabled Branson to emerge as an exemplary entrepreneur include his high level of motivation, high levels of self confidence, abundant energy levels and the ability to sustain the entrepreneurial approaches in long term (Branson, 2011). Additionally, he has exhibited his worth as a risk-taker, the ability to set achievable goals, innovation and a problem solver (Bolton and Thompson, 2000). He variably contributed to the entrepreneurial sector through the establishment of a brand image and identity of the Virgin Company in the global markets. The company’s marketing strategies prioritises on the customers; improving loyalty. His management skills have led to the growth of the company to international standards. The employee commitment that the company exhibits indicates that Sir Richard Branson possesses effective employee management skills that keep employees always motivated. The dedicated and united employee team has utilised the business and marketing strategies associated with the business to constantly enable the business improve performance. Application of these strategies in all marketing segments has enhanced the application of innovation in all marketing segments. Analysis of the Virgin Group of companies exemplifies the entrepreneurial characteristics of Branson. Entrepreneurship can be defined as a process whereby individuals or group of individuals apply organised efforts in the pursuance of opportunities (Kuratko and Hodgetts, 2004). An entrepreneur should target to create value and growth through innovation and maintenance of uniqueness. This has been the main factors that have enabled Virgin Group of companies to be successful since its establishment. According to Shavinina (2008), the formation and management of the affiliate companies of the Virgin Group exhibits adherence to the entrepreneurial process. The initial stage of the process involves the exploration of the entrepreneurial context. For instance, the establishment of Virgin Airlines was Branson’s attempt to offer reasonable freight charges for transatlantic flights. The second stage involves identification of the possible opportunities that guarantees competitive advantage. The venture is then established once the opportunities are identified paving way to management once all its structures are in place. According to Carmichael (2006), Branson’s skills portrays him as a transformational entrepreneur due to his insistence on maintaining Virgin Group of companies as an organisation characterised by informality and information. The strategic establishment of the company has made Branson an impeccable example of how entrepreneurs should behave. Initially, an entrepreneur should engage in assessing the potential of the venture, deal with the start-up issue and switch to the management of the venture (Deakins and Freel, 2003). Application of the entrepreneurial skills in the management of the Virgin Group of companies have placed the affiliate ventures at a strategic position for performance stimulation and making changes. Some of the secrets of Branson’s success include adopting new strategies capable of challenging the most competitive entities, undertaking the right strategies for the brand and enjoying business activities (Hitt et al, 2002). He believes that his leadership qualities developed through trial and error; since the establishment of his first company at the age of 16. The success of the entrepreneurship skills of Branson has downplayed some of the misconceptions that Timmons and Spinelli (2004) relates to entrepreneurship. They include the notion that entrepreneurship only requires a great idea, easy, risky gamble, found only in the small businesses and that the entrepreneurial ventures and small business are the same. Some of the distinguishing features between small business and entrepreneurial ventures that are exhibited by Sir Richard Branson include focus on profitability and growth as the main goals of establishing an organisation, innovation and utilisation of opportunities. Section 2 Branson has variably contributed to the entrepreneurial nature of the current business. He variably contributed to the entrepreneurial way of conducting business due to his success in the establishment of a brand image and identity of the virgin company in the global markets. His excellent management strategies and marketing prowess led to prioritisation of the customers as the principle targets in all marketing approaches. These approaches made the customers identify the products and services associated with the company leading to the establishment of an ardent customer loyalty (Bragg A. and Bragg M, 2005). Branson’s management skills have led to successful internationalisation of the company. Establishment of international ventures has been facilitated by his employee management skills that have enhanced cooperation and commitment to the company culture (Branson, 2007; Kuratko and Hodgetts, 2004; Stutely, 2012). He has applied the superior strategies for success in business that include information sharing, reduced status differences, ensuring employment security, establishment of self managed teams and decentralised decision making. Other strategies include reducing the status of differences, training and fair compensation in relation to the company performance (Birkinshaw, 2001). Since the establishment of the company, the focus has been directed into the drivers of the organisation success; employees. Employee management in the Virgin Group of companies is accompanied by detailed human resource planning strategies. The process involves job analysis, job description and job specification (C?adez? and Guilding, 2012: 484-501). Job analysis involves the assessment of jobs and the behaviours necessary for task formation. Description involves a written statement of the role an employee plays, the way in which it is undertaken and the reason why it is undertaken. Job specification is the guideline on the specifications required for holders to perform their required tasks effectively. Branson’s management skills do not only involve management of the new employees, but also the continuing employees. Some of the strategies employed include orientation, performance appraisal, training as well as compensation and benefits (Morris and Kuratko, 2002). Effective entrepreneurs employ employee orientation to reduce the initial anxiety that employees feel when beginning a job, familiarise with the organisation and facilitate their transition from being outsiders to insiders. Some of the performance appraisal methods applied include graphic rating scales, critical incidents, accomplished objectives and multi-person persona comparison among others. An entrepreneur does not apply the appraisal methods to intimidate employees; they are meant to encourage employees take responsibility for their roles, making them focus on productivity. Branson understands that a high per capita out put cannot be achieved unless employees are motivated. Some of the entrepreneurial strategies of ensuring employee motivation applied by Branson include recognising the individual differences, individualising the rewards, ensuring that employees match to their jobs and focusing on goal achievement. Other ways applied in ensuring motivation includes linking the rewards to performance; creating a success perception towards goals achievement among employees and analysing the system to ensure fairness (Fertig, Zeitz and Blau, 2009: 197-222). Motivation is a theoretical component of various concepts. Maslow’s Hierarchy of needs states that human needs are contained in a hierarchy of five needs that enables them to exert effort (Appendix 1). Hertzberg’s Two-Factor Theory of Motivation proposes that the factors that contribute to job satisfaction are not as the ones that contribute to dissatisfaction (Appendix 2). Focus on specific goals in improving performance is a factor of the goal setting theory (Appendix 3). Branson has applied this goal-setting theory through assigning various company ventures to individuals and assigning them specific goals that they are expected to achieve. The theory also alludes that once the difficult issues are accepted by an individual, high performance is achieved. Application of the reinforcement theory is also visible in Branson’s principle that an employee’s behaviour is a function of its consequences (Appendix 4: Branson, 2007). Emphasis on team work has enabled the management to effectively and efficiently realise the consumer needs as well as apply innovation in the fulfilment of these needs. Some of the strategies that Branson applies in the formation of effective teams include ensuring both internal and external support among teams, formulation of clear goals, negotiating skills, appropriate leadership, effective communication, mutual trust and unified commitment (Olson, 2004). According to Carmichael (2006), the management skills of Branson have led to the creation of opportunities such as maximisation and successful utilisation of the internet, establishment of strategic alliances, mergers and joint ventures with other companies, establishment of brand identity, creation of brand loyalty to the customers, creation of new marketing sections that have expanded markets, incorporation of technology through implementing new information systems and successful marketing strategies that have enhanced the company publicity. Process management in the Virgin Group of companies has been constantly ensured through perfecting the decision making processes. The process followed by the company management include recognition of the need to make a decision, identifying the required decision criteria, ranging and weighting the criteria, development of other alternatives, analysis and evaluation of each criteria and selection of an alternative and making a decision (Bruijn, Heuvelhof and Veld, 2010; Bragg and Bragg, 2005). Some of the styles incorporated in making effective decisions when managing processes in Virgin Group of companies includes directive style (fast decision are made through focus on the short run strategies), analytical style (ability to cope with unique situations, conceptual style that provides a person the capability of finding creative solutions to the problems) and behaviour style that focuses on the importance of being acceptable to the colleagues. Carmichael (2006) asserts that the managerial training strategy of the Virgin Group of companies ensures that the abilities are equipped with all the decision making styles for effective performance. Bruijn, Heuvelhof and Veld, (2010) posit that the process management also involves coping with any changes that may affect the organisation. The entrepreneur is required to play critical roles in stimulating and implementing change through acting as a catalyst for change, acting as a cheer leader and coach as well as assuming the role of a primary organisational change consultant. Branson’s ability to manage creativity and innovation has transformed the virgin group of companies into an innovative culture. According to Bridge, O’Neil and Cromie (2003), some of the characteristics of the business entity that portrays innovativeness in its culture include acceptance of ambiguity, low external controls, tolerance to conflict and risk, focusing on the open system and laying emphasis on productivity. According to the 2006 marketing plan of the company, the business model applied by Branson is the focus model. This model addresses the focused segment of the market conditions, nature of the products and cost management strategies (Branson, 2011). This model is only applied when conditions are favourable for the application of direct cost leadership or differentiation strategy. This model relates to the concept of serving a certain market segment in such a superior way that any competitor cannot be able to penetrate (Barrow, Barrow and Brown, 2004). Although application of the focus model in the business may be limited, the profit margins can be surmountable because it involves addressing a substantial market segment. This model is strategic and suitable for the company because it is configured in various marketing segments that are capable of addressing focused strategies that cater for the variety needs of the customers. Such segments include Virgin Records, Virgin Express, Virgin Cola and Virgin Vodka among others. Establishment of these segments exhibits the entrepreneurial skills of Branson as a risk taker. These ventures were accompanied by excellent services and ensuring brand quality leading to success as the company due to the capability of targeting specific subgroups of the market. The actions and entrepreneurial strategies of Branson and his Virgin Group of companies can be justified through focus on various entrepreneurial theories. According to Wood, and Michalisin (2010: 222-239), some of entrepreneurial theories include Lachmann, Mises, Shackle, Schumpeterian, Hayek and Knight. An example of the application of these theories in Branson’s entrepreneurial skills can be exhibited by his idea of exploring a wide range of business ventures. This exhibits application of Schumpeterian theory of entrepreneurship that focuses on new innovations, application of new production techniques, improvement of the management processes, establishment of new markets and new sources of supply. Such business ventures include trains, airlines, cellular phones and beverages (Branson, 2007). Targeting different consumer functions ensures improved profits. Generally, application of these theories is exhibited by Branson’s business characteristics that enable him to implement and apply effective business styles. He also perceives the business risks as an opportunity to grow and generate profit. He portrays adaptive characteristics to all business activities and applied such opportunities to address and satisfy his target market. He applied the entrepreneurship theories in guiding his business decisions as well as applying innovation in the introduction of new products and services in the market. Therefore, Branson is able to combine theoretical entrepreneurship with effective and efficient leadership skills to enhance company growth. Some of the challenges that an entrepreneur such as Branson experiences include being content with any changes affecting business as well as failure, decision making workload, require numerous skills and talents and faces tough economic choices (Blackwell, 2004). They are also required to be content with taking risks as well as maintaining growth because any aspect of weakness in business growth spells doom for the company or the entrepreneur’s dreams. According to Branson (2011), the threats undermining his efforts of applying entrepreneurial skills include: increase in taxation and enhanced restrictive government legislation and changes in tastes and preferences among consumers. Others include increased competition whereby the competitors have devised new and superior innovative methods that have put the competitive capability of Virgin tours into test and insecurity as indicated by terrorism, airline hijacks and warfare in some of the airline destinations. Conclusion Branson’s entrepreneurial skills have significantly contributed in transforming Virgin Group of companies to world class status. Such is indicated by significant technological support in the company activities, visionary human resource management, strong customer focus, continuum in learning and development as well as a flexible organisational structure. The analysis of the entrepreneurial characteristics of Branson has enhanced the realisation of the rewards accrued from the status of being an entrepreneur. Some of these rewards include the high degree of independence, an opportunity to apply a wide variety of talents and skills, the freedom to make decisions and the potential to benefit from surmountable financial rewards. Entrepreneurs are also characterised by a feeling of achievement, the position grants one an opportunity to counter challenges and they are accountable for their own decisions. References Barrow, C., Barrow, P. & Brown, R. (2004) The business plan workbook, business enterprise guide, London, Kogan Page. Birkinshaw, J. (2001) Entrepreneurship in the global firm, strategy series, SAGE Publications, London. Blackwell, E. (2004) How to prepare a business plan, business enterprise guide, London, Kogan Page. Bolton, W. & Thompson, B.K. (2000) Entrepreneurs: talent, temperament, technique, Oxford, Butterworth-Heinemann. Bragg, A. & Bragg, M. (2005) Developing new business ideas, London, Prentice Hall. Branson, R. (2007) Screw it, let's do it expanded: lessons in life and business, London, Virgin. Branson, R. (2011) Business stripped bare: adventures of a global entrepreneur, New York, N. Y, Portfolio. Bridge, S., O’Neil, K. & Cromie, S. (2003) Understanding enterprise, entrepreneurship and small business, Basingstoke, Palgrave Macmillan. Bruijn, J.A., Heuvelhof, E.F. & Veld, R.J. (2010) Process management: why project management fails in complex decision making processes, Berlin, Springer-Verlag. C?adez?, S. & Guilding, C. (2012) ‘Strategy, strategic management accounting and performance: A configurational analysis’ Industrial Management + Data Systems, vol. 112, pp. 484-501. Carmichael, E. (2006) Losing his Virginity: How Branson Achieved Success, viewed 05 Jan 2012 from . Deakins, D. & Freel, M. (2003) Entrepreneurship and small firms, London, McGraw-Hill. Fertig, J., Zeitz, G., & Blau, G. (2009) ‘Building Internal Motivation for Worker Competency Certifications: A Critique and Proposal’ Human Resource Development Review, vol. 8, no. 2, pp. 197-222. Hitt, M., Ireland, R.D., Camp, S.M. & Sexton, D.L. (2002) Strategic entrepreneurship: creating a new mindset, Bodmin, Blackwell Publishers. Kuratko, D.F. & Hodgetts, R.M. (2004) Entrepreneurship: theory, process, practice, Mason, Thomson South-Western. Morris, M.H. & Kuratko, D.F. (2002) Corporate entrepreneurship, Fort Worth, South-Western Thomson. Olson, D.L. (2004) Managerial issues of enterprise resource planning systems, Boston, Irwin/McGraw-Hill. Shavinina, L.V. (2008) ‘Early Signs of Entrepreneurial Giftedness’ Gifted and Talented International, vol. 23, no. 1, pp. 9-15. Stutely, R. (2012) The definitive business plan: the fast track to intelligent planning for executives and entrepreneurs, Harlow, Pearson. Timmons, J. & Spinelli, S. (2004) New Venture creation: entrepreneurship for the 21st century, Boston, Irwin/McGraw-Hill. Wood, M. & Michalisin, M. (2010) ‘Entrepreneurial Drive in the Top Management Team: Effects on Strategic Choice and Firm Performance’ Journal of Leadership & Organisational Studies, vol. 17, no. 3, pp. 222-239. Appendices Appendix 1: Maslow’s Hierarchy of needs Source: http://communicationtheory.org/maslow%E2%80%99s-hierarchy-of-needs/ Appendix 2: Hertzberg’s Two-Factor Theory of Motivation Source: http://www.web-books.com/eLibrary/NC/B0/B66/057MB66.html Appendix 3: Reinforcement Theory Source: http://www.learningandteaching.info/learning/behaviour.htm Appendix 4: Goal Setting Theory Source: http://faculty.washington.edu/janegf/goalsetting.html Executive Summary: 48 words Essay Word Count: 2 500 words Read More