What is Business Level Strategy?
A business level strategy refers
to a set of actions a business organization intends to undertake in order to
improve on its competitiveness, service delivery and customer relations.
It involves identification and competencies in core areas in order to
gain comparative advantage over other firms. A business level
strategy is a key to market possessions and penetration to new areas due to low
cost of operations. Organizations core competencies should be focused on
satisfying customer needs or preferences in order to achieve
average returns. Customers are the foundation or essence of an
organizations business level strategies. Who will be served, what needs
have to be met, and how those needs will be satisfied are determined by the
senior management. (smallbusiness.chron.com/business-level-strategies/)
Corporate Level Strategy:
Corporate level strategy is the
overall strategy for a diversified company or organization. It is
usually concerned with the mix of businesses that the company should compete in
and also the ways on which individually strategy units
are integrated and co-ordinates. Corporate strategy refers to
overall strategy for a diversified company. Companies have the best
chance of being successful at diversification if they capitalize on the
existing relationships between business units by having them transfer
skills and share activities. (isc.hbs.edu/firm-corpstrat.htm)
BUSINESS
LEVEL STRATEGY
|
CORPORATE
LEVEL STRATEGY
|
It refers
to the strategy that helps businesses to compete
in the market place to gain a competitive advantage
|
It refers to the strategy that is prevalent for the whole organization as a single unit
|
The
mid level managers make the decisions.
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Decisions are
made by the top level managers
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It
acts as a strategy only for
a single strategic business unit (SBU)
|
It acts
as a strategy for an organization as a
whole and relates to
firms overall purpose and scope
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The
kind of strategy concerns with how to best utilize resources with the help of SBU
|
This kind
of strategy concerns
high level of acquisition and
allocation of resources
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It requires
different sets of strategies for different
product line
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It requires
only one strategy so as to function the organization as a whole.
|
Discuss the corporate parenting style of virgin group.
Virgin group is a British multinational branded venture capital conglomerate company founded by business tycoon Sir Richard Branson. It is one of the world's most recognized and respected brands. Its core business areas are travel, entertainment and lifestyle and it consists of more than 400 companies. 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.
According to the resource based view point, the resources which are valuable,scarce,difficult to imitate and can't be substituted by another resource are considered as competitive advantage for the company. From this view point Virgin group has a couple of competitive advantages. The comparative advantages of Virgin Group are decentralization of organizational structure and flexible in decision making allows an entrepreneurial environment for managers to pursue their business effectively, while avoiding the bureaucracy associated with large centralized corporations.
Virgin has chosen strategic alliance and joint venture differentiation and also applied the strategy of corporate social responsibilities.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.
Case Study questions
1) What type of corporate parent is Virgin (portfolio
manager, synergy manager or parental developer)?
The group is a family rather than a hierarchy offering
short lines of communication and flexible response capability. Even
though the companies run their own affairs they help each other in
the process (virgin,n.d.a). They hold the key executive
positions within the individual operating companies
(Pryce,2009). Virgin group is more of a parental developer type of
corporate. It looks at its employees as its own competence and
proficiency to add value to its businesses. Managers are free to make
decisions independently for growth and feel the same degree of
ownership and values. The corporate parent virgin groups brand name
itself act as a great value and benefit to the company overall.
2) How does the virgin group as a corporate parent and add value to its
businesses?
The virgin group comprises of an assorted mix of all the businesses. It
has its ''finger in every pie'' . The group has diversified into 200
businesses. Sir Richard Branson is the most important ingredient to all
the up to date successes. The virgin brand name is by far the
most important asset of the company. Being known as the Customers
Champion, as it has done wonders for all the public. The virgin group's
rationale is to extend its businesses into many market as possible
and in a very low cost and also reduce barriers to enter into
static market.
Some of the value adding activities for virgin group are mentioned
below:-
Understanding of institutionalised
Markets
Virgin’s management team have done many research in identifying
satisfaction in the market. It is this expertise/experience coupled with the
strategy to offer more for less that has help the Group plough through
complacent business industries. (Abdul)
Brand name
The Virgin brand name is a consumer’s champion and as mentioned
previously is a much respected brand with the British public.
Any company, corporation or organisation in a joint venture with the Virgin
Group has the benefit of limiting its risk in the market place. This reiterates
the point made in the last paragraph.
A flat management structure helps encourage innovation; provides flexibility
and promotes the values of shared ownership and responsibility.
Virgin’s senior staff consists of individuals with successful careers. The
Group acquires like-minded partners in ventures who match their ability to
innovate and differentiate.
The airline industry like many industries is cyclic. This proved to be
dangerous by 2001, as Virgin seemed to rely entirely on the profits of Virgin
Atlantic. Deregulation increased the competition in the market place. All in
all most compositors were experiencing losses.
Virgin Rail
The biggest problem faced by the Virgin Group was the Strategic Rail Authority’s
Review in 2000 because it was the most public. Virgin Rail was voted the most
“unpopular” rail operator; and if that wasn’t enough the statistics: Virgin
ranked 23 rd and 24 th out of 25 operators, was ample reason for Sir Richard
Branson to feel a stake go through his reputation (Abdul)
Risk Limitation
Less restriction
Innovation
These collective innovative thoughts and ideas are applied directly into
business; which most often bare fruit. For example Virgin Mobile formulated
partnerships with existing telecommunications operators to retail in mobile
services. The Virgin management team successfully identified that the
complacency was in the handling of network management. Their innovation led
them to promote unique services that shock-up the market. These included “no
line rentals”, “no monthly fees” and “cheaper prepaid” offers. Irrespective of
the fact that Virgin Mobile did not actually operate it own network it had won
the best wireless in the UK. (Abdul)
3) What is the logic of portfolio? Why do you think they are in the
mobile, telephone, travel, financial services, leisure , music, holidays and
health and wellness?
An analysis of elements of a company's product mix to determine
the optimum allocation of its resources. The two most common measures used in a
portfolio analysis are market growth rate and relative market share. The
main logic of a portfolio is basically to minimize risk. It helps in the
proper balance of profit and loss of business. When some business have higher
risk and higher return or lower risk and lower return portfolio helps
them to keep them balanced. In other words it helps to solve a problem of
unbalanced risks that may arise of that exists in the business.
Once a Virgin Company is established several factors contributes to its
successes. The power of the brand name and the founder itself Sir
Richard Branson, the unparalleled network of friends, contacts and
partners. The management style and the commitment from the company
itself to offer something different to all its customers.
In order to diversify the risk and to minimize its effects and also
maximize the profit and distribute its loss Virgin group is associated
with many other businesses.
4) What are the main risks facing Virgin groups as a result of
their strategy? How might they be reduced?
The main risk facing virgin group as a result of their strategy may be,
because one of the major weakness is the leaders ability to say no.
Extensive Portfolio
It has to many a large number of businesses
and any inaccuracy might lead to huge risks for the whole Group as here, one
affects the other.
Virgin Atlantic
Less Diverse
Virgin should become less diverse. Its name has become dilute and its
brand a purely endorsement brand. The brand name alone isn't enough. The pubic
are sensitive and have become smart. Virgin as a corporate parent can add
feasible value to its businesses by investing and developing real proficiency.
On one side it without doubt “limits risk”. On the other hand it sends out a
clashing signal to consumers. How can Virgin be “daring” when Sir Richard Branson value adding process is to limit risk? That is a question we should
work towards eradicating.
Change in Strategy
The Virgin Group should change its policy to accommodate both
independent and joint ventures to rely upon short-term profits on a few of its
businesses for the sake of raises capital and release the ‘ring-fenced’ policy
so that important revenue making Virgin Atlantic can be bailed out during the
low times. Monies can be returned to the short-term ventures when the busy
season arrives. The idea is to not restrict yourself to a policy of philosophy.
Philosophies and policies should be such that can strategically change with
time and environment.
Oliver Furrer,Routledge,Corporate Level Strategy:theory and application, September 6, 2010
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