Future sustainability of an organization depends on the identification of capabilities and assets that can be used to effectively promote competitive advantage (Doole & Lowe, 2005). It is an established fact that no business has unlimited resources. To address the problem, an organization must define strategic markets, wherein resources can be potentially used to ensure growth of the organization.
Expansion of the business or the organization depends on how the business exploits its resources and capabilities. The strength and weakness of the organization revolve around the resources, and capabilities supply that have higher profitability. If resources of the organization are left unused and untapped, it is impossible to achieve an advantage in the market (Tallman, 2010). Stagnant organizations usually decline – and lose their spot in the market.
Virgin Group of Companies has a diversified and wide portfolio with stakes in mobile, airline, publishing, leisure, transportation, food, and entertainment industry. The wide business portfolio of Virgin Group is wholly attributed to Sir Richard Branson’s, its prolific and visionary founder, business principle, which is to tap and take advantage of new business opportunities in the market to gain more profit and ensure growth of the business. Right now, Virgin Group generates an annual income more than $5billion per annum, from over 200 businesses.
This study looks at the investment behavior of Virgin Group of Companies with the intent to understand its strategic capabilities and growth strategies to effectively maintain a competitive advantage. This study critically analyzes the principle behind Virgin’s market approach to describe and measure its performance and effectiveness.
Strategic Capabilities of Virgin Group
Competitive advantage is achieved by exploiting the organization’s capabilities to stay current in the market. Identification of these important factors helps in understanding the shift of the business environment, prompting new strategies for development.
Diagram 1: Concept of Strategic Capabilities and Competitive Advantage
Development of strategic capabilities is very important to keep the pace with the market movement. Dynamic capabilities can be viewed in opposite with the strategic capabilities of the competitive advantage. According to Birchall & Tovstiga, 2005, p.39,
“Dynamic capabilities are the subset of the firm’s core or distinctive competencies that enable it to build its competitive position in changing market circumstances by allowing the firm to create new products and processes in responses to these.”
It is inevitable for an organization to look at opportunities for market entry to avoid being trampled by emerging ideas and principles in the market. Dynamic capabilities of the organization enable it to promote presence in the market, but with the precursor idea of strategic capabilities. The current position of the business is not a guarantee that the organization can stay at the top. If the business cannot strategically implement new services and products, it would be very hard to maintain market position.
Strategic capability is a conceptual framework of the organization which involves the ability of the organization to implement and develop new strategies, with the help of dynamic capabilities (Armstrong, 2008). Identification of appropriate visions, realistic intentions and motives, resources or the present position of the business, and opportunities or paths of the organization can help to prepare and promote strategies to maintain competitive advantage. Standing at the business objectives and principles is very important to avoid deflating the strength of the organization in achieving profits.
Strategic capabilities involve managerial and organization processes, which include the way things are done within the organization (Birchall & Tovstiga, 2005). An organization maintains a routine or practice which elevates the effective communication and implementation of strategic strategies. Managerial and organization process encompasses the assets, endowment, technology, and capital of the business – and the way the current position is tapped to effect profitability. The process of growth of the organization is achieved by looking at paths or alternative positions that are strategically applicable for growth of the business. The path of the organization may lead to negative or positive implications, depending on the strategies used and implemented.
The changing tide of the market necessitates the organization to change strategies from time to time. To say, the capability of the business strategy does not last, gradually the effectiveness and impact of the strategy lessen due to competitor’s implementation of new strategies (Abraham, 2012). The market may demand new strategies that are applicable at the moment for the business to thrive and survive in the changeable environment.
Virgin Group of Companies understands the value of changeable market environment. For Virgin Group to stay current it must not only limit itself to a single business; it needs to look for opportunities that are profitable for the organization. The principle of looking for strengths in the market can be seen on Branson’s first entry to discount records mailing catalog business. Appreciation of the mail-order catalog business was demonstrated with the increasing customers who purchase records for a discount. However, Branson did not just stop on the strength of the business in selling records. Virgin ventured and expanded to sell records in a store after finding an opportunity from an old store.
The principle is very simple, in its form and retrospect. Dynamic capabilities suggest the need of creating new products or services, while strategic capabilities demand utilization of available positions to create new paths for business competitive advantage in the market. Virgin Group creates new products and services, e.g. in record store, utilizing current position of the mail-order catalog.
Another noteworthy strategic capabilities principle used by Virgin Group is to venture on unknown shores. Attributed to Branson’s belief on market opportunities, Virgin Records signed unpopular groups, which eventually gained mass media due to the excessive leverage of Branson’s effective utilization of Virgin Group resources.
Nonetheless, Virgin Group’s market principle does not depend on competitors’ stand. Virgin Group strategizes ways to stay unique and current. It is impossible for a business to stay alive in the market if it works in the same way competitors do. This principle is aptly applied in Virgin Atlantic. While other businesses are cutting their fares to compete with other airlines, Virgin Atlantic stayed in its position of regular fares while using that position to offer additional features like private bedrooms and showers.
Strategic capabilities implement strength in contemplating market place. Virgin Group creates new businesses that are profitable by selling off chunks of stakes in its other businesses. Although, Branson can continue earning with the current businesses, it is still strategic to sell chunks of share to raise business capital. This principle is still consistent with the strategies of Virgin Group that promotes new ventures for growth opportunities. In addition, Virgin Group stayed current on implementing change when they are needed within the business environment, even if it means selling a business to support another.
Organization capabilities results to advantage in the market to generate more profit for the organization. In every aspect of Virgin Group strategy, there is a degree of competitive advantage that requires business to contribute to firm’s potential. Because Virgin Group is not resilient to change, organization capabilities are easily achieved and implemented to gain market reputation and share. If the business cannot manage change, capabilities of the organization may be eroded without achieving results.
Basic Growth Strategies of Virgin Group
An organization applies growth strategy to ensure that goals and objective are met through careful utilization of positions or resources toward the definite path of opportunities (Kumar, 2010). Due to unlimited resources of the business, implementation of growth strategies ensures competitive advantage for expansion and development. There are wide empirical literature sources discussing growth strategies of big corporations showing the basic elements working together with the growth strategies of organizations.
These interacting elements of basic growth strategies are shown in Diagram 2. These elements, either qualitative or quantitative, contribute to the movement of the business toward the achievement of its goals and objectives. To consider, growth is easily determined with measurable financial assets, such as investment capital and profit generation. But it is difficult to measure the quantitative elements of growth strategies. Quantitative elements are measured on how they impact other variables of growth strategies.
Without strong and clearly-drawn growth strategies, developments and programs of the organization are temporary, easily thrown and defeated by competitors, and no lasting result is achieved. Growth strategies, with regards to dynamic capabilities and strategies capabilities, result to the creation of new opportunities, new products, or new services, utilizing the organization resources and exploiting them for proper market introduction. To note, it may be that a business creates new products or services, but lacking growth strategies as foundation, development of new products result to failure, rather than profit generation for the business.
Diagram 2: Basic Growth Strategies and Competitive Advantage
Articulation and formulation of growth strategies is the pillar of business movement. In fact, formulation of two or three growth strategies, their implementation, and integration to the business development at the same time result to higher probability of growth than creating just a single growth strategy. For instance, internal business growth strategy can be applied within the organization with the best integration of external strategy for expansion.
To effectively achieve competitive advantage, it is important to have four elements drawn into a single goal; these elements include: growth strategy, market culture, resources, and organizational composition. Kumar (2010, p.335) defines organizational composition as the factor that:
“Measures the fit between company’s strategy and the organizational model… Organizational structure identifies the line of authority, reporting, and coordination, real and perceived career paths and decision-making authority.”
Implementation of growth strategies depends on the ability and capability of the organization to execute them. Organization composition encompasses the leadership and management skills of key players. The performance of the management is the core of the growth strategy; otherwise, a well-developed strategy will be lost in translation and execution.
Earlier, the dynamic capability of an organization is described as the main logistics of resources for the creation of new products or services. In basic growth strategy development, resources or the position of the business, as defined in strategic capabilities, must be considered because of limited source. The strategy must aim to promote the potential exploitation of resources or the capital of the business.
Nonetheless, for a business to achieve growth through implementation of strategy, it is very important to create a timeline that details market movement. Pitfalls may happen anytime in the implementation of growth strategy because of the incompleteness and changing value of variables playing in the business growth strategy (Dringoli, 2012). The importance of evaluation of business growth strategy results to creation of contingency strategies that answer problems within the market at the fastest time avoiding impact and risk of loss.
In Virgin Group, business growth strategies are defined and simple, compared to bizarre and complex strategies of competitors. As a young business, Branson expanded the business by tapping relative section of the industries. In conception, these new businesses are just additional features of the existing business.
Take for instance, the music venture. At first, it was just mail-order music record catalog business, but because of the opportunity, it delivered birth to the record store, which is formed just an additional feature of the existing business. The current resources or position of Virgin prompted Branson to add another feature to the expanding music section of Virgin’s portfolio. To note, these businesses are interconnected to each other, playing and helping each other to grow. As a result of the strategy, it is easier for Virgin to create new opportunities within the music industry.
As the company grows, Virgin Group shifted to the opposite tide of competition. Instead of creating strategies to leverage competitors move in reducing fares – and of course, features and services – as in the case of Virgin Atlantic, Branson promoted Virgin Atlantic as a different and unique airline business. Because the airline industry is leaning to a different direction, among all competitors, Virgin Atlantic can take reputation in providing first-class services and features.
Taking into account the Internet venture of Virgin, the same principle is being applied. Virgin still build a new business on the bedrock of other businesses. By building a new business on a strong one, a new business can easily grow to its own – and eventually, develop new opportunities for the business to continually become a key player in the market.
Lastly, it must be noted that Virgin Group – and Branson – can easily adapt to the movement of the business strategy. The culture of the organization in leading and managing the implementation of business strategy is a good element that helps the business to grow by creating new businesses supplanted upon existing and reputable business.
Conclusion
Competitive advantage is an important subject in strategic management. Empirical studies have been attributed to determine and measure competitive advantage, as it creates potential growth for the business. First, competitive advantage is achieved by an organization through careful analysis of the current situation. The movement toward the goal of the business starts on the current position. By analyzing potential of current business position, new opportunities are easily drawn by the business. A business that can see opportunities in the market can stay current and strong, to avoid stagnation leading to decay and being drowned in competitors’ ideas and strategies.
To effectively implement strategies of the business in maintaining a good competitive advantage, there are elements and factors that should be subjected to scrutiny. Both quantitative and qualitative elements play important roles in the business strategy. Resources of the business can only be used and exploited to promote growth, under the care of individuals who are geared toward growth and development.
The need of maintaining a strong strategic management is imperative and essential for a business to strive and stay alive in the market competition. Otherwise, if the business fails to implement effective strategies, development of new products for business opportunities would be defeated, resulting to business failure.
