C A S E 9
Virgin Group: Reaching for the Sky in a New Economy
Sir Richard Branson has assembled a collection of companies under the umbrella
brand of “Virgin.” Branson has repeatedly confounded analysts with his ability to spot
emerging trends and profit by them. One senior executive at Virgin describes the
company as a “branded venture-capital firm.” (1) Branson has continually redefined
Virgin’s business operations, branching out into a variety of ventures but always
capitalizing on his exuberant entrepreneurial spirit.
Richard Branson: Young Entre preneur
Born in 1950, Branson’s first entrepreneurial venture emerged when he was a 16-
year student at a boarding school. He founded a magazine called Student to address
contemporary issues of the time, such as the Vietnam War and the Paris student uprising.
While raising about $6,000 over a six- month period to fund the magazine, Branson
recruited well-known celebrities like Jean-Paul Sarte and Vanessa Redgrave, among
others to be interviewed or to write for the publication. (2) Branson, with his
brashness, extraordinary ambition, and passion for success, went on to become a
The magazine was followed in 1970 with a venture into discount records. Branson
and Company ran ads in a mail-order catalog and an increasing number of individuals
purchased discounted records from them. Then his group from the magazine found an old
shop, cleaned it up, and started a discount record store. Searching for a name for the
business, three options were identified: “Slipped Disc,” “Student,” and “Virgin.” Since
they were all virgins at business, the Virgin name was selected. (3) It quickly became the
largest discount music megastore chain in the world.
In 1972 Branson branched out into the music recording business with Virgin
Records. His first recording artist, Mike Oldfield, released “Tubular Bells” and went on
to sell over 5 million copies. When punk rock became popular, Branson signed the Sex
Pistols, a group no other recording studio would touch. Other groups included Genesis,
Simple Minds, Culture Club, Phil Collins, and the Rolling Stones.
Moving on to Othe r Ventures
Other people might have been content with their early success, but Richard
Branson was not finished. Running his business interests out of a houseboat on the
Thames River, he launched Virgin Airways in 1984 (now Virgin Atlantic) with a single
jumbo jet. Taking on British Airways, he sued them for alleged dirty tricks and won. The
airline is famous for its offbeat perks, including massages and premium first-class
Branson also refuses to follow the industry leaders. As many airlines drop fares
and cut service in order to compete for passengers, Branson keeps Virgin Atlantic
focused on reasonable fares and unique customer service, including ice cream with
movies, private bedrooms, showers, and exercise facilities.
Looking back on his various business ventures, Branson says, “I started the
magazine because I had a passion for what I was doing. That’s also why I went into the
airline business, even though everybody I talked to told me that there was no money to be
made there. I felt that I could make a difference. That’s the best reason to go into
business because you feel strongly that you can change things.” (4) Branson’s
business objectives from the start have been to be noticed, have fun, and make money by
constantly starting new firms. (5)
Over the years, Virgin Group Ltd. has created over 200 new businesses,
employing over 25,000 people, with revenues exceeding £3 billion (US$ 5 billion)
annually. (6) Virgin Group Ltd. currently has business interests in planes, trains, finance,
soft drinks, music, mobile phones, holidays, cars, wines, publishing, bridal wea r — and
more. (7) Virgin doesn’t represent a business so much as it represents a business- making
When Virgin starts a new business, it is based on solid research and analysis. The
company reviews the industry and puts itself in the customer’s shoes. Virgin asks several
fundamental questions: “Is this an opportunity for restructuring a market and creating
competitive advantage? What are the competitors doing? Is the customer confused or
badly served? Is this an opportunity for building the Virgin brand? Can we add value?
Will it interact with our other businesses? Is there an appropriate trade-off between risk
and reward?” (9)
Not everything touched by Branson turns to gold. He was forced in the early
1990s to sell his beloved Virgin Records to Thorn EMI to secure the survival of his
Virgin Airlines. As a result, Branson now employs a strategy of using wealthy partners to
provide the bulk of the cash necessary to run a business, with Virgin providing the brand
name recognition in exchange for a controlling interest in the venture. Rather than mixing
with investment bankers, he has a habit of keeping his companies private — preferring to
sell off chunks of his empire to fund new business startups. His sale of a 49 percent share
of Virgin Atlantic to Singapore Airlines for $979 million provided him the needed cash to
plow into his Internet ventures. (10)
Although Virgin represents a late arrival to the Internet, Branson has attacked the
venture with the same enthusiasm as his previous business startups. Many of his business
interests already had a presence on the Web, including Thetrainline.com, a joint venture
with the British transport company, Stagecoach. The site sells tickets for Britain’s 23
train operators, has over 1.8 million users, purchases of $2.5 million weekly, and is
adding 55,000 new users each week. (11) By transferring an airline-type reservation
system onto the Net, Virgin earns 9 percent of every ticket booked. Virgin will sell
competitors’ services right alongside its own. What Branson is hoping to do is leverage
his presence into a “cyberbrand” with a premium presence on the Web.
“Virgin’s approach to the Net has been very clever,” claims Simon Knox,
professor of brand marketing at the Cranfield University School of Management in
Bedford. “Each launch of a new business builds upon the one before, rathe r than
developing isolated branded businesses.” (12) Others, like Michael Arnbjerg, with the
market research firm IDC in Copenhagen, disagree. He argues that: “Virgin can leverage
its brand in certain market sectors, but that’s not enough to become a major player.” (13)
Expanding the Business Portfolio
The Virgin Group’s main focus is on providing services rather than on producing
products. To help fuel its services growth, Virgin actively seeks business proposals from
the public via its Web site. “If you have a fantastic idea for us, then we’re all ears! We’re
always on the lookout for fresh ideas to improve our current companies and to create
brand new ones.” (14)
In soliciting proposals, the company emphasizes that: “Virgin is famous for its
down-to-earth good value and service, so all new ideas will need to reflect these values.
We also have a great sense of fun, and we like to do things just a little bit differently from
the rest.” (15) Virgin asks people who submit business proposals to address the following
issues: the nature of the product or service idea; the business sector into which this idea
fits; the idea or project’s current stage of development; the proposal submitter’s
involvement in the project, as well as the role he/she/they would like to maintain; the
reason for approaching Virgin and the anticipated role of Virgin in the project; and an
assessment of the venture’s potential. (16)
Virgin says that it respects the intellectual property rights of all new business
proposals that it receives. The company notes, however, that it receives “hundreds of
proposals which are often similar to those suggested by others, or to ideas which we have
developed internally.” (17) While only a few submitted proposals actually move forward
in the business development process, the ones that are most likely to be successful are
already well developed, have large scale potential, and can be implemented quickly. (18)
What does the future hold for Sir Richard and the Virgin Group? If history is any
predictor, the company’s portfolio will continue to embrace a wide range of businesses
that have the potential for providing quality service in a fun and different way.
1. What are the key strategic questions that the Virgin Group asks when starting a new
2. How has the Virgin Group established a competitive advantage?
3. How would you characterize the corporate strategy of Branson’s Virgin Group?
4. What are the main advantages and disadvantages associated with Virgin’s solicitation
of business proposals from the public to help grow the business?
You Do the Research
1. Examine the range of businesses that fall under the Virgin Group’s corporate
umbrella. Does investment in these different businesses make sense from a business
strategy perspective? Why or why not?
2. Do a SWOT analysis for Virgin Group Ltd.
3. How dependent is the success of Virgin on Richard Branson? If something happened
to him, would the company be able to survive?
1. Hamel, Gary. “Bringing Silicon Valley Inside,” Harvard Business Review,
September-October 1999, 71 - 84.
2. Rosenfeld, Jill. “Training to Work,” Fast Company, August 2000, 77+.
3. “Richard Branson’s Virgin Success: The Incredible Triumph of an Enigmatic
4. Rosenfeld, op. cit.
5. “Richard Branson,” Askmen.com,
6. Hamel, op. cit.
7. Virgin Group homepage, http://www.virgin.com.
8. Hamel, op. cit.
9. “The Virgin Story,” http://www.virgin.com/aboutus.
10. Capell, Kerry. “Virgin Takes E-wing,” Business Week e.biz, January 22, 2001, EB30-
14. “Business Proposals,” http://www.virgin.com/aboutus.