1.3 Discuss the appropriateness of the identified corporate strategies in terms

Question

1.3 Discuss the appropriateness of the identified corporate strategies in terms of the growth objectives of the Virgin Group. (10)

Requires an evaluation of strategies identified in various strategies in the virgin group.

How does cost leading strategy, differential strategy and focus/nice strategy link to the growth strategy.

Read the following and answer the above question.

The Virgin Group in South Africa Virgin has a rich and varied history, which includes airlines, records, bridal wear, holidays, vodka, cars, bank accounts, mobile telephones, cosmetics, condoms, gymnasiums,... the list goes on. Richard Branson founded Virgin Records in 1970 as a mail-order record retailer and then opened a record shop in Oxford Street, London. During 1972, a recording studio was built in Oxfordshire, and the first Virgin artist, Mike Oldfield, recorded „Tubular Bells, which was released in 1973. This album went on to sell over five million copies. Since then, many household names, including Belinda Carlisle, Genesis, Phil Collins, Janet Jackson and the Rolling Stones have helped to make Virgin Music one of the top six record companies in the world. Since its early years, the Virgin Group has expanded internationally with around 200 companies in over 30 countries. In 2001 South Africa became one of these 30 countries when Richard Branson became the lifeline that saved the bankrupt Health & Racket Club from liquidation, upon the request of former president Nelson Mandela. Branson recalls: “I was literally in a little cottage in the country when somebody said that Madiba was on the phone. He just said to me that this chain of health clubs had gone bankrupt, that 6 000 people were about to go out of work, and that he wondered whether I could get on a plane that evening and come down and try and save the jobs which was his principal interest. And of course, if he calls, you have to do what youre told. But as its turned out, I think weveinvested a lot of money in health clubs and its been very successful.” Ever since entering the South African market through rescuing the bankrupt health club group and rebranding it as Virgin Active, the Virgin Group has kept its eyes open for other opportunities in Madibas rainbow country. Since 2001, the Virgin Active brand has expanded and it is now looking at opportunities in the rest of Africa. While exploring developments into Africa, Virgin Active SA continues to open „large format clubs with four-to-eight lane heated swimming pools that have become its signature in the SA health club arena. Virgin Active SA has been adding niceties that appeal to communities around their clubs. Its club in Soweto has a hair salon, while the Boulders Club in Midrand has a DJ booth and Virgin Active Constantia includes a Woolworths Cafe. Following on the heels of Virgin Active, the Virgin Group launched Virgin Mobile and Virgin Money in South Africa. Virgin Mobile launched through a joint venture with Cell C in 2006. Virgin Mobiles entry strategy was to offer contract-free deals and mobile number portability. Virgin Mobile has gone through various stages of evolution. Initially the Virgin brand helped to shake up the cellular market. As a result of fierce competition from MTN and Vodacom, Virgin Mobile embarked on direct marketing by placing sales people inside retail stores. The company has pulled out of this franchise model and has between 10 and 20 owned stores that provide a retail experience closer to its target market. Virgin Money SA is a financial services business and its value proposition is a range of products without superfluous fees. On entering the South African financial services industry, Branson stated Virgins belief that they can save people millions of rands if people switch over to the new Virgin credit card by offering more choice and privileges. Virgin Money also expanded their range of products to include the Virgin Money Home Loan. Virgin Money launched direct life insurance in 2013 and extended this to offer insurance for small and medium enterprises. Virgin Moneys „Insurance like it should be did not charge any insurance excesses (a first for the insurance industry in South Africa) and fixed premiums for 24 months. Virgin Life Care is a health management company that focuses on improving g the health of its members through effective lifestyle management. Virgin Life care partnered with Discovery Vitality, Momentum Multiply and Virgin Active and aims to motivate people to make healthy decisions and to stay active. The value proposition is: customers are assessed in terms of health and fitness, a personalised health and fitness programme is developed and customers are then rewarded for keeping with the programme. The success of the Virgin Atlantic brand is also transforming the travel experiences of South African travellers. Virgin Atlantic offers daily direct flights between Johannesburg and London and also operates between Cape Town and London. Being part of the Virgin family has its benefits: Virgin Atlantic offers extra incentives to Virgin Money credit card customers. The Virgin way of doing things is to enter new countries and new markets., as opposed to expanding further into the things Virgin already does. According to Branson, Virgin likes to take on industries where it feels they are fat and bloated, and they are not looking after the consumer. Branson argues that by global standards, Virgin is still a small group, but the brand is a major multinational on. Adapted from Louw L and Venter P (2015) Strategic Management Developing Sustainability in Southern Africa Third edition. Oxford University Press

Explanation / Answer

The Virgin group as a resounding culture makes attempts to understand the needs of all its customers and create offerings that give them an unforgettable experience. In order to establish a lead over its competitors and peers, it has adopted many generic strategies to scale that growth. A few of them in case of Virgin South Africa can be highlighted as follows:

-       Cost Leadership: As can be seen Virgin mobile at the time of its launch made it a point to offer contract-free deals along with the Mobile Number Portability feature. The offering with Virgin Money too was to eliminate all unnecessary fees, with insurance all unwanted excesses charged to the customer was removed. Cost advantage would be passed on to the consumers through the Virgin Credit Card which would provide an array of options and privilieges.

-       Differentiation: Virgin Atlantic airlines pioneered some features that helped them to differentiate themselves from other airlines. Offerings with customized and flexible services to its customers resulted in delighted customers with a high level of satisfaction. Daily flights between important locations, additional privileges to Virgin card holders and tailor made offerings to business class and economy class passengers.

-       Focus: The focus for Virgin had always been to enter the niche markets. The Health club segment through Virgin Active was an effort to reach out to a finite number of customers but with a potential of a scale far higher than that of a mass market. When it came to Virgin Life care, the approach was to focus on improving health through effective lifestyle management and not the usual means of offering treatment. The experience is more personalized and one with a lasting impression.

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