MBA 6024

Organizational Strategy

Executive Summary

Comprehensive Strategic Assessment report is prepared for the shareholders of the Virgin Group and communicates the findings that we have been able to gather from the analysis of the company’s strategy and the strategic alignment. In this strategic assessment we will synthesize the findings, which were deduced from the strategic analysis of the firm and the industry environment. This report compares and contrasts the strategic issues and then assigns the nominal ranking of certain impacts of the issues with the Virgin Group. Among some of the strategic findings, the Virgin Group has a low cost strategy of operating its corporation to a manner, which suits the goals and values of the company. The goal is not taking people to space but connecting space to earth which must be done in friendly manner. The values that are upheld by the firm are all concerned with honest services and charges.

The brand name and the novel entry of Branson into new business frontiers has become an open door to the entire group, as the companies collaborate in business. Branson’s modest approach to business has done a lot to strengthen the brand name, which in turn strengthens the synergies among the separate Virgin companies. Despite public criticisms over possible over extension of this brand, the wide spread use of the brand in capturing new and ailing business is enjoyed by many within the Virgin group. The business collaborations among the ever-expanding Virgin group of companies are indeed a strong indication that without such synergies through use of its brand, majority of the Group’s firms would have folded up and cease to exist. From customers’ point of view, Virgin’s desire and ambition to be known as ‘customers’ champion’ is achieved basically by delivering brand values across the entire Virgin Group.

Strategic Assessment

Over two hundred Virgin companies operate together, with most of the operations conducted through other companies within the group; creating that combined effect. Irrespective of the fact that there is no overall single parent company for the entire group, there exist some companies within Virgin whose functions are basically to own and manage other operating firms within the group; which indeed creates the desired synergies of working and helping one another. Of all these over 200 Virgin companies, majority are operating companies who own assets and offer goods and services, the remaining few are holding companies. For example Virgin Galactic,

The business strategy that is used by Virgin Galactic is the use of its economies of scale to cut on cost of assembling its spaceships. The corporate strategy by the firm is the understanding that it can be able to make space tourism and area through which they can be able to make profits before the competitors will have realized the dynamics that are involved. This is a model the company has used in order to reduce the cost that it passes along to its clients. At the moment the firm is charging $240,000 per person for space cruises and this figure is expected to go down with the firm aligning its strategic fit (Poladian, 2014).

The Firm

The lack of hierarchical structure and Branson’s disregards to established business principles and conventions has succeeded in fostering stronger synergies between the separate Virgin companies. His unhappiness to function as the chairman of public corporation in the merger between Virgin’s music, retail and vision businesses attests to this. Each of Virgin group of companies, are known to be individually setup and managed; unlike what is obtained in large established corporations such as Shell, Chevron, and British Airways etc. In Virgin Group today, the aspirations of employees of each individual company are properly aligned to those of the company; which gives the employees the desired latitude to do a lot of business exploits for their individual companies/group. There are no boards of directors for Virgin Group, and strategic decision-making is solely the responsibility of Branson with a few top management executives.

The strategic elements of the firm that were analyzed for Virgin Galactic are the goals, the resources and the structure of the firm. The main goal of the firm is not only to take people to space but also to connect space to the earth. It shows that the goal of the firm is to make space travel as accessible as other forms of traveling in the world. The resources of the firm are capable of meeting the above goals based on the fact that technological resources and human resources work in tandem to meet the goal. As a firm, Virgin Galactic has the ability of utilizing large-scale assembly to cut the cost of assembly and access to airspace. This meets the strategy of the firm to take market shares from the competitors such as Space Adventures, Ltd., SpaceX, and XCOR Space Expeditions through offering low prices (Poladian, 2014).

There are no boards of directors for Virgin Group, and strategic decision making is solely the responsibility of Branson with a few top management executives. The competitive advantage that Virgin Galactic it has the ability to provide lower airspace travel cost to its customers than many of its competitors. This is due to the firm’s ability to cut operation cost and the Virgins Groups ability to allow this firm to operate independently from the company. This type of management system offers short lines of communication and prompt response to urgent issues; instead of bureaucratic process of waiting for approvals and responses. This is defined almost entirely from Branson’s own personal values and management style. Ironically, this style of leadership, coupled with absence of established formal business conventions, has made many undermine the values and business powers of the Virgin Group; with British Airways being a major victim of this ‘corporate disguise’.

Industry Enviroment

It is indeed my opinion that Branson divests from transport business (both Air and Rail travels). My position is based on the premise that different empirical studies about transportation, have consistently proved that the transport industry generally has been unprofitable for so many decades. Return on investments for firms operating in this industry has also remained on the negative side of the financial scale, compared to those in lucrative industries such as the ICT. Narrowing this perspective to Virgin Group specifically, it is glaring to note that the privatized railway industry in the United Kingdom where Virgin has acquired great stake; has performed so poorly that it nearly ruin the hard earned brand name of the group. Since Virgin’s entry into this line of business around late 90s, Virgin Rail has been known to set horrible records of poor performance and financial accounting. This same ailing situation is found also in air travel. Viewing this strictly from a business perspective, I would recommend Virgin to divest fairly quickly from this industry to avoid total crumble.

The future of space tourism has come under great scrutiny after test pilot Alsbury died in an accident. This will have a great impact when it comes to the profitability of the firm Virgin Galactic. The industry profit potential is high due to the fact that space tourists and enthusiast will still increase in numbers as year goes by. Changes in the economy should also be considered as a factor that will ensure that the industry continues to gain large profits. The average consumer who can afford such a trip to space will continue to increase, as interest remains high.

Whichever is the true position on the group’s financial structure, the synergies created by way of combined effects by these companies are the attractive dimensions for this analysis. The bottom line here is that, these companies are not public, but privately owned and financed by internal cash flows and equity. Others are financed through joint venture agreements or external debt. According to Branson, each of his companies is funded individually and separately on a standalone basis. The idea is to nurture the companies to stand on their two feet and compete favorably among themselves and others in their lines of business.

The macro environment of the firm is quite favorable for the company. The main concern is the social environment where people are concerned with the environmental effect of commercial space travel. The technological environment favors Virgin Galactic since they have developed spaceships that are able to move further in altitude than normal spaceships that have been created by its competitors such as XCOR Space Expeditions.

The economic environment is favorable for the company due to the fact that there is a large consumer base for space travel. The company will be able to gain from the increasingly improving advancements in economic and technological conditions in the United States. The politics that has been associated with the accidents that involved the test spaceship has not positively aided the company meet its short term goals and the media has been deeply digging into this issue. (Glueck, 2010).

Strategic Issues and Recommendations

For now, the organizational structure of Virgin Group is nothing to see Virgin grow beyond Branson. Many describe Virgin as a flat organization that is centered on one individual. The inability of Virgin Group to operate under a formal structure leaves many of its performances to questioning. As it is today, Branson calls the shot and determines the business and policy direction. It is true, that Branson has excellent business acumen and charisma, and it has been working for him under this loosely structured arrangement. But what happens when Branson departs today? How would it be if Branson retires? We all wish him and his group well, but in case of any eventuality, how would their future look like without Branson? To ensure a proper succession plan, I would expect Branson to restructure Virgin Group to a formal structure, with centralized decision making body, such that any other top opinion former coming after him can easily fit in. Virgin Group should also have a corporate headquarters, where the group’s policy and financial decisions are centralized.

With regards to Virgin Galactic the firm should take advantage of the fact that there are number of space enthusiasts who are willing and able to pay to go to space. Strategically, Virgin Galactic should have to do two things to ensure that the company is a leader in the industry; management should ensure that they build on their strength, which is basically the fact that they have superior technology; secondly they must ensure that they clear the air on the case of the accident that led to the death of one of their space crew captains. For Virgin to survive Branson, he should institute without delay a centralized and systematic management structure that is universal for every CEO; without which his absence might only become catastrophe for Virgin Group. He should also be willing and indeed prepared to give up full operating control of his enterprise, and be willing to consolidate both physical and liquid investments. I would also recommend a more structured and centralized financial accounting system for the group.

Branson has indeed taken the name ‘Virgin’ to an enviable height. Many see the structure and management style of his business empire as being reckless, but Branson has consistently proved to his critics that he and his group have staying power, and would continue to dominate the global business space!

REFERENCES

Fleisher, C., & Bensoussan, B. (2011). Business and competitive analysis: Effective application of new and classic methods. Upper Saddle River, NJ: Financial Times Press.

Glueck, W. (2010). Business policy and strategic management (3d ed.). New York: McGraw Hill.

Jeffs, C. (2010). Strategic management. Los Angeles: SAGE.

Poladian, C. (2014). The future of space tourism after the Virgin Galactic accident. International Business Times, November 3. Retrieved from http://www.ibtimes.com/future-space-tourism-after-virgin-galactic-accident-1717996