Exploring Strategy and Innovation - Essay Example

EXPOLORING STRATEGY AND INNOVATION By Foundation Department: Introduction Virgin Group was founded by Richard Branson in 1970 in the UK (Mills, 2007:89 and case study). The ground has enlarged and diversified and currently it has more than 200 branded companies all over the world (case study). Question 1 What and how common resources and capabilities link the different Virgin Companies Resources and capabilities refer to productive assets owned by a firm/industry and the performance of the firm (Robbins, 2009:212), the resources themselves are not productive bur the need to be converted into capabilities and this is achieved by better management and co-ordination. In order for the company to gain a competitive edge, it has to focus on its strengths in resources and capabilities and also ensure that the two works together. For Virgin Company, the major resource is Richard, its founder. He portrays strong leadership which very important in developing new capabilities for the company. His carefree adventure and entrepreneurial skills helped him in coming up and implementing his new business ideas. He is very aggressive leader and his devotion to business has resulted in the establishment of other Virgin Companies such as Virgin Cola, Virgin Rail, and Virgin Record and Virgin Atlantics. His leadership role has enabled him to establish a strong corporate culture and also promote the image of the company and the spirit of entrepreneurship. He believes in doing things differently and thus does not advocate for bureaucracy and thus he has become more strategic and charismatic leader and his business dream have been the force behind the success of the Virgin companies (Hellriegel & Slocum, 2010:344). Virgin brand is also another major link (Enz, 2010:345). The names of the brands and the trade marks acts as reputation assets. With the brand the group has been able to create other companies with similar quality since the Virgin brand has instilled confidence in customers (Thorne and Pellant, 2007:234). The brand gives the firm, its competitive advantage in the market and thus helps a lot in safeguarding and attracting a new market share for the company. The companies have also got enough investments and working capital. Richard Branson ensures that all the companies are well funded and the proceeds from one company may be used to invest in another company. This was the case in 1992 when a Virgin record was sold to EMI and the funds realized was used in Virgin Atlantic. This helps to ensure that all the companies are running and thus offering the best opportunities for growth (Plunkett, 2009b:34) Question 2 Discuss and evaluate Virgins various diversification moves in terms of related and unrelated strategies Virgin Companies in its growth strategy have diversified into several business enterprises. This includes Virgin Cola, Virgin Rail, and Virgin Record, Virgin Retail, Virgin Records and Virgin Atlantics. Some of the ventures are related while others are not related (Plunkett, 2009a:45). For example, Virgin Rail and Virgin Atlantic are both travel business while the Virgin Retail and Virgin Records are in the music industry. Virgin Cola and Virgin Record are not related at all. The main reason why the Virgin Group expands is to maximize its profits by capturing a bigger market share. This ensures that the groups’ profits have increased. The group also diversifies so as to mitigate the risks in the business, that is, if the travel industry is not doing well the music industry will be doing well and thus maintain high profits. The other reason for the diversification is the existence of a market opportunity (Morschett, Klein and Zentes, 2010:68). In every business that is well diversified, some diversifications are more related than others (Daft, 2010:373), like the Virgin Retail and Virgin Records. This is because the two shops sometimes stocks the same music records and thus are very similar. Question 4 Assessment on whether moving further into the banking industry is the right strategic option for the Virgin Moving to the banking industry for the Virgin Records will depend on the analysis of the industry. This can be done by looking at porters five forces model and his three test experiments. Porter indicates that for organizations to compete, they must apply cost leadership and focus on achieving market dominance (Orcullo, 2008:48). This is driven by five forces that are the bargaining power of buyers, bargaining powers of suppliers, the threat of new market entrants, the threat of similar products and the level of existing competition (Schermerhorn, 2010:146). These are the factors that the Virgin Companies need to critically analyze so as to maintain a competitive edge in the market (Henry, 2011:66). Porter further identified how organizations can spread and achieve growth by diversification by carrying out three critical tests for success. These are; The attractiveness tests where high return on investment, high entry barriers, few substitutes, few buyers and bargaining power of suppliers offers competitiveness. The cost entry tests where if the cost of entry is very high there will be low return on investment. The better-off test where the group will assess on how the entry to banking services will provide a competitive edge (Grant, Jordan, 2015:242).. For Virgin Group to venture in banking industry is an ideal option since they have the required facts and there is demand for these services (Griffin, 2013:211). The company will gain a lot as the profits will increase and also be able to finance its operations’ independently without depending on an external banking industry (Butler, and Russell, 2010:148) Question 4 What would be the challenges faced by a successor to Sir Richard Branson and what might he or she do to progress the company? The successor of Richard Branson will face a number of challenges because different individuals have different skills and knowledge. The Virgin Group operating style will offer the first major challenge. The decisions are made by Branson or some of his pals, if the successor will not be able to make important decisions alone will be required to instill a new style that may face resistance from the staff (Plunkett, 2008b:89). Furthermore, he will be required to follow the steps of Richard, which may be sometimes very difficult. The Virgin Group should not change its brand image since it is one of its resources that enable the company maintain a large market share resulting to increased profits. References Best, N. & Barnwell, H. 2009. T4 : test of professional competence in management accounting. Burlington, MA: Cima Publishing. Butler, R. and Russell, R.2010. Giants of tourism. Wallingford, Oxfordshire, UK Cambridge, MA: CABI. P. 148 Case study: virgin global entrepreneur. P.261 Daft, R. 2010. Organization theory and design. Mason, Ohio: South-Western Cengage Learning.p.373 Enz, C.2010. Hospitality strategic management concepts and cases. Hoboken, N.J: John Wiley & Sons. Grant, R. & Jordan, J. 2015. Foundations of strategy. Hoboken: Wiley. P.242 Griffin, R. 2013. Management. Australia Mason, OH: South-Western Cengage Learning.p.211 Hellriegel, D. & Slocum, J. 2010. Organizational Behavior. New York: Cengage Learning. Henry, A. 2011. Understanding strategic management. 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The essential guide to managing talent: how top companies recruit, train, & retain the best employees. London Philadelphia: Kogan Page. Read More