The Group Structure
The virgin group is a network of companies which are connected by the “Virgin” trademark. Virgin does not function as a single unit. Richard Branson, the president of Virgin Atlantic, was in charge of the corporate strategy of the entire group. Virgin group holding was the head of the group and held the group’s shares. The companies were managed by Virgin Management.
Virgin had a decentralized management and exercised control over all the operating companies by having representatives on each company’s board. In London, Sydney and New York, the Virgin’s Management office had about 30 investment professionals organized in seven teams. These professionals were on the board of four to five companies. Besides this, the head of strategy consisted of 30 professionals who monitored the new ventures.
Through licensing agreements, Virgin tried to protect the brand name. Agreements were made with terms and conditions which were signed by all the companies that bagged the Virgin name. Virgin’s brand, human resources and marketing teams were regularly in touch with all the operating companies to help and monitor in everyday activities. In the past, Virgin did not face many problems as to how the operating companies used the Virgin brand name. The importance of rejuvenating the brand and the business was well understood by the operating companies. Every time a new company is launched, Virgin as a rule injects five to six people in the new management to ensure that the company has only those people who know the business.
Even in cases where Virgin did not hold majority shares, the licensing agreement would be negotiated by Virgin in such a way that it would possess the right to at least appoint the CEO.
Virgin Media can be taken for example. Telewest, a failing organization, asked Virgin for support. Virgin realized the value of their high speed fiber infrastructure and saw it as a big asset. Telewest thought that the brand name, Virgin, would do them good. Virgin persuaded that they would have share in the new company but got only 14%. Later, Virgin sold the company with an agreement that they select the CEO and the managers. With this strategy, Virgin Media which was almost bankrupt, became the most important and well-known British operator.
FINANCIAL STRUCTURE AND PERFORMANCE
The financial structure of the Virgin group of companies was fragmented. The performance in late 1990s was reported to be poor and continued to deteriorate till 2002 (as shown in figure).
Figure 1: Financial Statement of major virgin companies in 2002 (Grant, 2004)
However, over the year, the financial structure was modified substantially. The cash demands of the retailing and financial services encouraged Branson towards international equity financing. Through his “high-profile personality” and connections, Branson attracted outside investors, in forms of joint ventures and venture capital funds, by offering not only the Virgin Brand but also his...