week 14: Learning entry (Virgin Group:case study)

Difference between 'Business unit level strategy' and 'Corporate level strategy'

Business unit level strategy:

 Business level strategies are the detail actions taken to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product or service markets.(albany.edu,2013).This strategy is prevalent in different businesses having different strategic business units (SBU). This kind of strategy takes concern of an organisation's position in the industry as compared to it's competitors. Business-level strategy is concern with a firm's position in an industry, relative to competitors and to the five forces of competition. It is an organisational entity with its own unique mission, set of competitors and industry. (sagepub.com,2013). It otherwise can also be known as competitive strategy.

Corporate level strategy:

It refers to the pattern of decisions that determine a firm's goals and objectives, produce the principle policies for achieving this goals and objectives and define the range of businesses that the firm is to pursue.(Andrews,1971). Simply, corporate level strategy acts as the main strategy of an organisation which looks out for the overall purpose, objective and scope of the organisation. This strategy deals with a company's overall set goals, acquisition and allocation of resources.

Corporate level strategy	Business unit level strategy
It refers to the strategy that is prevalent for the whole organisation as a single unit.	It refers to the strategy that helps businesses to compete in the market place, to gain a competitive advantage.
Decisions are made by the Top level managers.	The mid-level managers make the decisions.
It acts as a strategy for an organisation as a whole and relates to firm’s overall purpose and scope.	It acts as a strategy only for a single strategic business unit (SBU).
This kind of strategy concerns high level of acquisition and allocation of resources.	This kind of strategy concerns with how to best utilize resources with the help of SBU so as to gain competitive advantage.
It requires only one strategy so as to function the organisation as a whole.	It requires different sets of strategies for different product line.

2. Discuss the corporate parenting style of Virgin group.

>  Virgin group was founded by Sir Richard Branson in the year 1970.Virgin group operates several lines of products and services around the world ranging from mobile telephony, travel, financial services, leisure, music, holidays and health & wellness. It being one of the world's most recognized and respected brand, employs approximately 50,000 people in 34 countries with more than 200 companies working under same virgin parental control management system.

As per written in the case study, Virgin group stands for value for money, quality, innovation, fun and a sense of competitive challenge,they empower and encourage their employees so as to deliver customer experience continually and consistently generating flexibility and shared beliefs among the customers and employees. Virgin group companies are a part of one big family rather than a hierarchy, thus operates with a decentralized  power.

The corporate parenting style of virgin group has helped a lot in it's success. They support and practice same management style in every sector of business they control and operates under same brand name delivering consistent customer satisfaction.Virgin's corporate parenting style also include it's partnerships with other industries so as the combined skills, knowledge and operational expertise would lead in building exciting and successful companies.

The brand name, joint ventures and innovation has helped create virgin group as a success.

 Case study questions:

1. What type of corporate parent is Virgin (portfolio manager, synergy manager or parental developer)?

> As virgin group is a recognized brand in the world having several SBUs, I believe it is a parental developer type of corporate parent. Virgin books, virgin mobiles, virgin hotels, virgin earth and many others are the SBUs of virgin group. All the SBUs operates under same virgin corporate patent so as to add values to all it's businesses. The corporate parent virgin group's brand name itself act as a great value and benefit to the company overall.

2.How does the Virgin Group, as a corporate parent, add value to its businesses?

> The brand being the single most important asset for virgin group, it has certainly added value to its businesses. The ultimate objective of virgin to establish itself as a major global name, which means it has to have core businesses running potentially around the globe. They always try to prove the promise while entering into new markets and have been able to do that consistently. They have a very good customer following who are loyal to the brand virgin and barely doubt to buy products produced by the virgin group, thus creating a strong market value. The brand virgin group has been so successful and familiar in the market over the time that its new products are also being responded nicely in their initial phase.

Virgin group, as a corporate parent has added values to its businesses through following ways:

• Brand name: Brand name is the one thing that is the ultimate identity of any product line and virgin group being a successful brand name worldwide has added value to its customers.
• Partnerships with other industries: The way Virgin group has been collaborating and joint venturing with other industries, they have been able to generate combined skills and operational expertise ultimately building successful companies. Thus generating more market share with added customer following.
• Decentralized management: The decentralized management system practiced by the virgin group has helped it's employees a lot to be motivated  and encouraged to work and continually support the company. 
• Innovation and market understanding: Virgin group has been playing the innovation game. The brand has innovated several products and services getting various positive responses from the market. It has not failed to prove the promise whenever entering the new market. To add up,virgin group has high level staffs who are very qualified and successful innovators and  they only recruit the ones who can match up to their level of innovation and differentiation.   

3. What’s the logic of portfolio? Why do you think they are in mobile telephony, travel, financial services, leisure, music, holidays and health & wellness?

The main logic of the portfolio is basically to minimize risk. It helps in the proper balance of profit and loss of business. When some businesses has higher risk and higher return or lower risk and lower return, portfolio helps keep them balanced.

Portfolios being an investment strategy, it helps mitigate the unpredictability of markets for investors. It benefits businesses by basically maximize profit and minimize loss by distributing it. Thus, portfolio strategy has been adopted by many companies nowadays and to manage portfolio BCG Matrix, Parenting Matrix e.t.c are used.

Virgin group has been involved in different products and services sector such as mobile telephony, travel. financial services, leisure, music, holidays and health & wellness because of the fact that the risk of failing in business in minimized. For example, when virgin group is involved in these many sectors it will have a benefit of getting maximum profit due to loss distribution. For instance, say one  business sector of the virgin group is in a decline state of life cycle, it wouldn't possibly generate much loss for them because there will be another business sector which will be in it's boom state.

4.What are the main risks facing Virgin Group as a result of their strategy? How might they be reduced?

> The main risks facing virgin group as a result of their strategy may be:

• Broader portfolio: The virgin group is immensely broadening it's portfolio which may be a risk for them. Having huge quantity of businesses running through may affect it negatively as all the businesses are interrelated in case of portfolio.
• For example: Virgin Atlantic- its airline industry became so dangerous in 2001. This industry was the one generating huge profit and when it went in loss the company had to bear loss. Likewise, it also had issues for bad service in railway industry.

> According to me they may be reduced by following ways:

• They should be less diversified because too much of spreading may create risk. Thus, they should deeply analyse 4Ps (Product, Price, Place and Promotion) while trying to introduce a new product or service.
• They should not be fully reliable in their brand name.

References:

Johnson, Whittington and Scholes (2011) Exploring Strategy, 9th Edition, Pearson Education, Chapter 1 

Johnson, Whittington and Scholes (2011) Exploring Strategy, 9th Edition, Pearson Education, Chapter 7 

De Wit, B and Meyer, R (editors) (2010). 4th Edition Strategy: Process, Content, Context, Thomson International Business Press: London. chapter 6 

Oliver Furrer,Routledge (2010) Corporate Level Strategy:theory and application

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frontierim. (n.d.). Retrieved October 8, 2013, from www.frontierim.com: http://www.frontierim.com/uploads/frontierinvestmentmanagement-thebenefitsofportfoliodiversification.pdf

sagepub. (n.d.). Retrieved October 8, 2013, from www.sagepub.com: http://www.sagepub.com/upm-data/54278_Chapter_7.pdf

World Academy. (n.d.). Retrieved May 3, 2013, from worldacademyonline.com: http://worldacademyonline.com/article/34/475/defining_the_organization___s_purpose.html