CASE 20
The Virgin Group in 2015
TEACHING NOTE
■ SYNOPSIS ■
By 2015, Richard Branson’s Virgin group of companies extended from airlines and railways to financial
services, telecommunications, and music publishing. Despite the advancing maturity of Branson and his Virgin
empire, the entrepreneurial vigor that had driven Virgin into new areas of business remained strong. Recent
ventures had included the launch of a US airline, the acquisition of retail banks from Northern Rock, a cruise
line, a hotel chain, and satellite launching.
Yet the despite Virgin’s refocusing around fewer businesses. The corporate strategy and business logic of the
Group remained opaque. This lack of clarity was reinforced by uncertainties over the financial health of the
group. Although several of Virgin’s worst performing businesses had been either closed or divested, the limited
financial information available on the Group pointed to a lack of profitability in several of its businesses.
Questions over the strategic coherence of the Virgin empire centered upon the identity of the Virgin brand.
■ TEACHING OBJECTIVES ■
The case is primarily a case in corporate strategy. Although the Virgin Group is not a single corporation, the
close linkage provided by the Virgin name and Branson’s ownership implies that we can talk meaningfully
about a corporate strategy for the group.
Once we understand how the group creates value for the constituent companies, we can address the structure
and management of the group. What systems does the group need to possess in order to ensure that value is
created for the constituent companies? What changes to the financial, organizational, and managerial structure
can best support the group’s strategy?
capabilities that can be deployed across multiple businesses within the diversified corporation.
■ POSITION IN THE COURSE ■
I use this case to address issues of diversification in the corporate strategy section of my strategy course.
■ ASSIGNMENT QUESTIONS ■
1. What common resources and capabilities link the separate Virgin companies?
■ READING ■
R. M. Grant Contemporary Strategy Analysis (9th edn.), Wiley, 2015, Chapter 13 “Diversification Strategy,”
especially the sections on “Competitive Advantage from Diversification (pp. 348-352) and “Relatedness in
Diversification” (pp. 355-356).
■ ANALYSIS ■
1. The common resources and capabilities that link the Virgin companies. To begin probing the strategy
and business rationale of the Virgin group, I ask about the resources and capabilities that are common
to the different Virgin companies. The two critical resources are the Virgin brand and Richard
Branson. The capabilities of the group reflect the personality and aptitudes of Branson himself: a risk
2. Which business should Virgin divest? The simple answer is: those businesses that are performing
badly. However, we encounter several problems here. First, because most of Branson’s ventures are
private companies, we do not have good information on their financial performance. Second, current
and past performance is not a good guide to future potential. Most of Branson’s new ventures lost
of the kinds of businesses where Virgin’s resources seem to be capable of creating competitive
advantage. These include:
• consumer businesses (as opposed to businesses serving producers);
• startup businesses (Branson’s skills are in building businesses from scratch, not acquiring
established businesses);
about Virgin Wines?
3. What criteria for new diversification? The above “desirable characteristics” for Virgin businesses
identify the sectors and types of enterprise where Virgin can create competitive advantage. Beyond
these, Virgin needs to appreciate the limits to its brand’s appeal. To what extent is the appeal of
Branson and the Virgin brand limited to Brits of a certain generation? The development of the Virgin
4. What is the Virgin business model? These issues concerning the content of the Virgin business
portfolio (and the next set of issues that concern the structure of the Virgin group) focus attention on
the identity of the Virgin business model. Virgin has described itself as a “branded venture capital
organization” and “an international investment group.” However, neither of these accurately describe
Virgin’s business model. Venture capital and other investment firms typically to invest in other
people’s business ventures; Virgin initiates new business ventures, often inviting other firms to invest
in them.
Possible descriptions of Virgin’s business model might include:
• A brand licensing organization. If the key resource is the Virgin brand, is brand licensing to other
is that the Virgin brand is closely associated with the personality and character of Branson and
separating the two may be difficult.
5. What changes in the financial, organizational, and management structure of the Virgin group? To
recommend changes in the group’s structure it is important to identify the current structure of the
group. Historically the Virgin group of companies has lacked formal structure: the operating
companies were (and still are) are linked by a number of holding companies (mostly offshore-
registered companies) but these are entirely financial and legal conveniences with little management
role. The primary formal linkage between the companies was the role of Branson as a major
Does Virgin need further changes to its organizational and management structure? To recommend
changes in the group’s structure, it is important to recognize the tasks that that need to be performed
in coordination and controlling the Virgin companies. These include:
• Protecting the Virgin brand. At present it is not clear who owns the Virgin trademark and what the
terms are under which each of the companies uses the brand. At minimum the brand needs to be
• Ensuring management control and management continuity. It appears that the Virgin Group still
depends upon the informal and personal relations between Branson and his associates. Yet given
the risks imposed by Branson’s lifestyle (extreme sports, partying, etc.), it seems likely that further
formalization of corporate management control is needed. This would involve closer monitoring of
the performance of each company, advising and influencing board-level and senior management
appointment, and undertaking inter-company coordination. Would such a structure require the
■ KEY TAKE-AWAYS FROM THE CASE DISCUSSION ■
Fundamental to this case is analysis of competitive advantage at the corporate level. This has its foundations in
the identification and understanding of the resources and capabilities of the company and the potential for
deploying these across multiple businesses.
Virgin is a particularly interesting case for analyzing the resources and capabilities that confer corporate-level
competitive advantage because at first glance the Virgin companies have little in common with one another.
This leads to a discussion of the nature of “relatedness” in diversification.
This approach also sheds light upon the processes of value creation. Analyzing diversification strategy (whether
for Virgin or for other diversified companies) requires that we recognize the processes through which value is
Finally, having defined the common resources and capabilities and the model/logic/processes through which
value is created, we can then be specific about the organizational structure, management systems, and
leadership style appropriate to the corporate strategy being pursued. The framework for presenting these points
is shown in the slide below:
NOTES
1. C. K. Prahalad and R. A. Bettis, “The dominant logic: a new linkage between diversity and performance,”