SWOT analysis on the Virgin Group

“The SWOT process involves a critical assessment of the company’s strengths and weaknesses in relation to the markets, which it seeks to serve, and in comparison with the known strengths and weaknesses of competitors”.

(Strategic Leadership Making corporate plans work by Adrian Davies 1st edition 1991. Woodhead-Faulkner p17)

STRENGTHS

> The Virgin group has the advantage that they are experienced in two different kinds of distribution. Firstly in stationary trade and secondly in mail ordering.

The group is far less integrated than other big groups. This gives Virgin the advantage of higher flexibility. This effect is even more extreme since Virgin has very small strategic Business Units.

> The Virgin Group has a strong brand name incorporated by Richard Branson and is experienced in introducing new products in a competitive marketing environment. The strength of the Virgin brand comes from the relationship that customers have with the idea of Virgin as a maverick, irreverent company built on youthful, entrepreneurial principles.

> Virgin have very few operational relationships between it’s diverse businesses, but all can benefit from the group’s corporate flair at brand marketing and entrepreneurial decision making. Virgin’s corporate relationships could be worth more.

> Branson’s leadership style is a unique combination of energy, originality and shrewdness. While providing leadership to his organisation leaves most of the decision making to his professional managers. He has created an environment, which brings out the best in the organisation’s people by motivating them and giving them overall sense of direction. The involvement of his employees is very important to Branson. By making his business appear fun he encourages their ability to be creative

“If the staff are happy the business will prosper…You should never really criticise your staff. You should always be praising. If you praise somebody they are going to blossom”.

(Richard Branson and the Virgin Group)

> The chairman Richard Branson had highly developed quality management skills, team building skills

> Profile of Chief Executive Officer (Richard Branson)

> Public confidence in other Virgin Offerings

> Reputation of Virgin group and name

> Product or service quality: high quality service for airlines at low prices

> Differentiated products: limo service

> Brand loyalty to products and to the corporate identity.

> Effective promotion

> Excellent distribution network

> Constant R& D leading to new ideas.

WEAKNESSES

> The strength of being not too integrated into the concern can also be a weakness, when errors are discovered too late because of a too loose supervision or when the support of the Mother Company becomes insufficient or because of sluggish communication. Richard Branson’s chaos approach is therefore less efficient.

> Some of the weaknesses of the Virgin group come from Richard Branson himself. For example he does not like justifying his actions to anyone and this was one of the many reasons the Virgin group was re-privatised. In many ways Virgin settled uncomfortable as a public company.

“Being public is incredibly time consuming…every single thing has to be vetted by lawyers. You are tied up in tape. Around 50% of our time was spent worrying about going to stockbroker’s meetings, institutional meetings and analysts meetings…”

(Richard Branson and the Virgin Group)

> The Virgin group always had a problem with the founding and there was never enough money available for them to go through with the buy out. It did not help them when it came to buying EMI and at the end they couldn’t buy it because they didn’t have sufficient funds due to the stock market crash.

> When Virgin started the trains it inherited some outdated rolling stock and routes where new track and signalling were urgently required. This resulted in Virgin having to struggle to run it’s train on time and has developed a reputation for unpunctuality but despite this it has earned a profit of �4.3m in 1997. This will also have an affect on the brand name, as it is associated with the Virgin group.

; Taking bad risks can damage the reputation of the group as a whole.

; Virgin airways may be less able to replicate their value proposition abroad. Reasons include regulatory hurdles, costly access to key inputs and the difficulty of transferring competencies abroad. (FT Mastering Strategy 120p).

; Too much dependence and emphasis on the brand name.

; Age of the life cycle of certain products.

; Restricted product range could cause problems if sales suddenly fall.

; Strength of competitors and existing brands.

; Confidence of public in existing brands.

; Few core strengths; only marketing and brand.

; Lack of focus on businesses: too much diversified.

; Brand not so appealing to youth market.

OPPORTUNITIES: Branson moves quickly when an opportunity presents itself. Richard Branson, the chief executive of the highly diverse Virgin Group, is renowned for his ability to bring out the creative talents in those around him. He encourages other people such as his employees to be creative on his behalf. Using them in a new way offers the potential to identify new and unexplored opportunities.

; Most of the opportunities that are open to Virgin group include Internet and technology development. Branson can use the use of new technology developments and offer his products at a low price, if they are taken over the Internet.

; Other opportunities available are the selling of Work with other rail operators to be on time ; provide customers with effective service: venture with another company.

; Virgin Cola: they could decide and have more alliance with more distributors. Virgin can diversify into new ranges of Virgin Cola products and also have the ability to gain more market share.

; Development of a global brand and possible global marketing

; Developments and advances into soft drinks (and other foodstuffs)

; International growth: airline business can expand to other countries (new markets)

; Increased market growth

THREATS

; Branson has many different ventures in his big group and they could easily be abandoned if it seems not to be feasible after a while. With the customer’s change in taste new competitors enter and leave the market.

> Failure of one of Virgin’s product may cause questioning of other offerings. E.g. Virgin Cola, Vodka and trains. Each time it will have a negative affect on the brand name. The grim publicity about the trains… could undermine the risk perception for the whole Virgin group.

; Other future threat the Virgin group is facing is that the government subsides are declining that the Virgin trains rely on. This would increase Virgin costs and pressure on parts of the company that are making profit.

; Most of Virgin’s main competitors are major players for example Coca-Cola and British Airways. Branson use the brand to take on some very large companies that we believe exert too much power.

> Increasing competition from competitors bringing out new products.

> The greatest threat that Branson faces is that Virgin brand, its most precious asset, may become associated with failure. Also too much emphasis on the brand name as a promotional weapon may act as a threat to Virgin Cola’s success.

; Technology factor

; Substitute products

; Buyers gaining power