STRATEGIC STRATEGIC RELATIONSHIPS RELATIONSHIPS

BETWEEN BUSINESSES BETWEEN BUSINESSES WITHIN WITHIN THE VIRGIN THE VIRGIN

GROUPGROUP

The Virgin Group is formed by various strategic The Virgin Group is formed by various strategic business units (SBU). business units (SBU). “A strategic business unit is “A strategic business unit is a part of an organization for which there is a a part of an organization for which there is a distinct external market for goods or services that distinct external market for goods or services that is different from another SBU.”is different from another SBU.” Basically, there Basically, there are 56 strategic business units in the Virgin are 56 strategic business units in the Virgin Group. For example, there are Virgin Travel and Group. For example, there are Virgin Travel and Virgin Trading in the Virgin Group. The Virgin Virgin Trading in the Virgin Group. The Virgin Travel consists of Virgin Atlantic, Virgin Holidays, Travel consists of Virgin Atlantic, Virgin Holidays, Virgin Aviation and Virgin Balloon. The Virgin Virgin Aviation and Virgin Balloon. The Virgin Trading consists of Virgin Megastores, Virgin Trading consists of Virgin Megastores, Virgin Enterprises, Virgin Clubs and Virgin Cosmetics. Enterprises, Virgin Clubs and Virgin Cosmetics.

““Companies within the Virgin Group are part of a family Companies within the Virgin Group are part of a family rather than a hierarchy.”rather than a hierarchy.” Every SBU in the Virgin Every SBU in the Virgin Group are Group are “ring-fenced”“ring-fenced”, separated and independent. , separated and independent. Companies within the group did not even share a Companies within the group did not even share a common accounting year-end. Each of them operates common accounting year-end. Each of them operates their own business-level strategies to achieve their their own business-level strategies to achieve their own competitive advantages in their own segmented own competitive advantages in their own segmented markets. Since decision making are decentralized markets. Since decision making are decentralized within the whole Virgin Group, each SBU is within the whole Virgin Group, each SBU is empowered to run their own affairs, yet other empowered to run their own affairs, yet other companies help one another, and solutions to companies help one another, and solutions to problems come from all kinds of sources. However, it problems come from all kinds of sources. However, it doesn’t mean that each SBU are allowed to influence doesn’t mean that each SBU are allowed to influence other SBU’s decisions. other SBU’s decisions. “Lenders to one company had “Lenders to one company had no rights over the assets of another, even if that no rights over the assets of another, even if that company went bankrupt.”company went bankrupt.” Being run as a series of Being run as a series of independent businesses, Virgin is precisely to keep independent businesses, Virgin is precisely to keep people focused on managing their individual people focused on managing their individual companies and keeps the decision process fluid. More companies and keeps the decision process fluid. More interesting, a failure of one SBU may not have a interesting, a failure of one SBU may not have a negative effect on the reputation of the other SBU, not negative effect on the reputation of the other SBU, not to mention the whole Virgin Group. to mention the whole Virgin Group.

As Richard Branson said in 2005, As Richard Branson said in 2005, “Our model is to “Our model is to develop each business separately with its own develop each business separately with its own shareholder and management. In this way we can shareholder and management. In this way we can concentrate on the job in hand, rather than be part of concentrate on the job in hand, rather than be part of some enormous and faceless conglomerate.”some enormous and faceless conglomerate.”

At the same time, all of these SBUs operate under the At the same time, all of these SBUs operate under the same corporate parent. They enjoy the same value-same corporate parent. They enjoy the same value-adding activities provided by their corporate parent. In adding activities provided by their corporate parent. In that case, it cannot be said that these SBUs are that case, it cannot be said that these SBUs are completely separated. Instead, they are related by the completely separated. Instead, they are related by the corporate parent. In a sense the Virgin Group is a corporate parent. In a sense the Virgin Group is a community, every SBU in it share ideas, values, community, every SBU in it share ideas, values, interests, goals, and the most important, they share interests, goals, and the most important, they share the same brand. the same brand.

As McQuade said in his research As McQuade said in his research “Virgin has been “Virgin has been described as a ‘keiretsu’ organization—a structure of described as a ‘keiretsu’ organization—a structure of loosely linked autonomous units run by self-managed loosely linked autonomous units run by self-managed teams that use a common brand name.”teams that use a common brand name.”

Thank you…Thank you…