Virgin Group and Coca Cola Management StrategiesVirgin Group and Coca Cola Management StrategiesBackground Information and Challenges of the Virgin GroupFrom 1968 to 2007, Richard Branson leads the Virgin group to become a conglomerate of more than 200 companies with business in music, airlines, rail transport, soft drinks, radio broadcasting and etc. (Grant 2005a:309) The Virgin Group followed many other companies during the 1950 to1980 period in adopting diversification as a mean for corporate growth. The boom of unrelated diversification of the early 1960s and 1970s was halted abruptly however by the failure of many large diversified companies (Grant 2005b:447). The simple action of bringing various businesses together under a single ownership itself was clearly not sufficient in creating shareholder value. The following years saw a reverse trend in diversification where large conglomerates either become unprofitable and declare bankruptcy or chose to de-merge to form more focused corporations around more related capabilities (Besanko et al, 2007:287). Related diversification offered greater potential benefits, but may also posed greater management problems in managing such that such potential advantages may not be realized (Grant 2005b:463). In an era of corporate refocusing and the nurturing of core competences, the Virgin group faced, and keeps facing major challenges in managing a large diversified company. The success of Virgin can be in grand part attributed to Branson’s innovative style of management.
The Culture of Virgin Group- Branson’s ManagementThe Virgin Group chose to adopt a related diversification of many companies spread across very unrelated business (from airlines to soft drinks), but sharing common management capabilities and strategic management systems. Virgin is formed by mostly start–up companies which benefited from Branson’s management techniques and almost all sell to final consumers and are in sectors that offer innovative opportunities for product differentiation (Grant 2005b:463-464). The Virgin Group conglomerate is de-centralized structure where each business (counting almost 200) is run as a small company and it’s able to make most decisions without corporate management intervention. These companies indeed are all under the Virgin umbrella, but they are generally not subsidiaries. Each company will help each other when it is needed, but otherwise they are independent. Employees have a stake in their success by feeling as being part of a small team of people, not a unit in a large multinational company. Richard Branson’s use of joint ventures was an extension of the Japanese keiretsu system (multiple companies interlocking through managerial and equity linkages in a collaborative network). In a speech to the Institute of Directors in 1993, there were a few slogans being introduced by Branson. “Staff first, then customers and shareholders” “Shape the business around the people” “Pioneer, don’t follow the leader”. “Capture every fleeting idea” and “Drive for change”. (Grant 2005a:326)
With these principles at the core of the Virgin culture Branson created an environment in which talented, ambitious people were motivated to do their best and strive for a higher level of performance. While the working environment was informal, anti-corporate, and defined by the pop culture of its era, expectations were high. Financial rewards for most employees were typically modest, but non-pecuniary benefits included social activities, company-sponsored weekend getaways, and impromptu parties. The apparent chaos of the Virgin group, with its casual style and absence of formal structure and control systems, belied a sharp business acumen and forceful determination of the Virgin group.
The Virgin group “could not even keep their word” to the rest of the world. A few weeks after their creation, executives at SABMiller and Boeing were sacked, a company statement read, “”They are leaving but we will remain in business with them as we are always on the way to becoming part of new global industries.” A group of Virgin employees told them that their employment was terminated on August 31, 1981 by a “former senior manager from the company who had been with the group for six months at a time during which he received a huge pay increase with no notice.” They told the story of working at a company that, after years of internal negotiations, they were no longer part of the group, but had been a part of the company for less than two years.[7]
From the time when it was considered possible to work at an American company in an environment that could meet the same standards as the Western world (e.g., a more open environment, more competition) to working at a company in which the rules that the Virgin group was expected to obey were at odds with a global business structure with an aggressive corporate culture (i.e., the American corporate culture was more open, more transparent, more hierarchical and the overall company culture more conducive to the group’s interests), Virgin has become perhaps the most successful company in the history of non-traditional family-sized family enterprises. Virgin, like many traditional family-sized enterprises, has operated its businesses out of an entirely unmediated, non-cooperative network of personal relationships.[8]
By contrast, today’s Virgin corporation has the potential for many smaller, more informal family-sized enterprises in one or more very different ways. For example, the family-sized Virgin Family Foundation has over 60,000 members each, and is run by Virgin’s chief executive, William Hillier, who is one of the company’s top executives, and the former Chairman of Virgin. They are the most highly connected family-sized enterprises to date.
If you ask any one business about itself, most businesses will say that this organization is not run by the Virgin group. To them, they do not have a sense of a true family relationship with the family, and the idea behind an American family organization is to be the only ones “connected to all families in the world.” Furthermore, there is no such thing as a corporate culture. “In the Virgin Group,” says Hillier, “we have very clear and open rules as to how and when companies should be allowed to go forward.”[9]
In essence, the Virgin group is a family of non-corporate companies, separate from the family-style family business founded by Bill and Eve. The Virgin group has many, if not all, of the advantages of working
Virgin possessed considerable financial and managerial talent, and whatVirgin lacked in formal structure was made up for by a strong culture and close personal ties. The Virgin organizational structure involved very little hierarchy, offering short lines of communication and flexible response capability. Employees were given a great deal of responsibility and freedom in order to stimulate idea generation, initiative, commitment, and fun. The lack of a corporate headquarters and the small size of most of the Virgin operating companies were intended to foster teamwork and a strong entrepreneurial spirit. (Grant 2005a:325)
Branson envisions that Virgin group has a responsibility to the employees and it develops a better understanding of the human factor. (Davidson and Griffin 2006: 40) Branson extracts some guidelines from Fayol to scientific management, such as the Equity (Managers should be kind and fair when dealing with subordinates), Initiative (Subordinates should have the freedom to take initiative) and Esprit de corps management issues