1. AUSTRALIAN COLLEGE OF KUWAIT
Assessment 2
Music Industry – Virgin Group
Group Members:
Name: Ali Bader ACK ID: 0905639 VU ID: 4085385
Name: Yousef Al Awadhi ACK ID: 0906383 VU ID: 4093732
Name: Mansour Behbehani ACK ID: 0905661 VU ID: 4085474
Unit: BMO 3422 – Strategic Management
Instructor: Dr. Ahmed Khatib & Dr. Andri Ottesen
Due Date: Thursday, 1st
of May 2014

2. BMO 3422 – StrategicManagement
Dr. Ahmed Khatib Assessment 2 1
Table of Contents
Introduction.......................................................................................................................................2
Strategic Situation ..............................................................................................................................3
PESTEL Analysis...............................................................................................................................3
Political.......................................................................................................................................3
Economic....................................................................................................................................3
Social..........................................................................................................................................3
Technological..............................................................................................................................3
Environmental.............................................................................................................................4
Legal...........................................................................................................................................4
Porter’s 5 Forces Model ..................................................................................................................4
How Virgin deals with these external factors........................................................................................5
Generic Business Strategy ...............................................................................................................5
Other Strategies Being Used............................................................................................................5
Strategies Used to Gain Comparative Advantage..................................................................................6
Functional & International Strategy .................................................................................................6
Joint Venture ..............................................................................................................................6
Transnational Strategy.................................................................................................................6
Marketing Strategy......................................................................................................................6
Recommendation...............................................................................................................................7
Reference List.....................................................................................................................................9
Appendix..........................................................................................................................................10
Appendix 1: Detailed SWOT Analysis..............................................................................................11
Strengths..................................................................................................................................11
Weaknesses..............................................................................................................................11
Opportunities............................................................................................................................11
Threats.....................................................................................................................................11
Appendix 2: PowerPoint Presentation Slides...................................................................................12

3. BMO 3422 – StrategicManagement
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Introduction
Strategicmanagement,asstatedby Freeman (2010), mainly referstosequencesof longtermdecision
makingandimplementingstrategiesbychoosingthe rightactionfromdirectorsandmanagerswithin
the organization.Some businessputtheireffortsontheirorganizational resourcesratherthantheir
strategiesaspart of theirplanningprocesswhichresultsinnegative outcomesforthe business.
Furthermore,successful organizationstendtotake theirstrategiesasacore elementfortheirfuture
and longtermgoals and objectives.Witheffectivestrategies,organizationscanensure theirstrong
positioninthe marketandhave a stable competitiveadvantage bymakinguse of theirinternaland
external resources.
Imaginationandjudgmentare consideredone of the most importantfactorswhen anorganization
strategizes itsplansbyrecognizingitsstrengthandweakness,foreseeingitsopportunitiesandthreats
and expandingitsoperation forthe future (Barringer&Greening1998). Lack of strategymightleadto
failure fromthe organizationregardlessof the amountif resourcesanorganizationhas.Toensure its
strongpositioninthe market,organizations needtomake use of bothits internal andexternal resources
and opportunitiessince itisconsideredveryimportant tocompete andmaintainitspositionbetweenits
competitors.
Virgingroup Ltd.,foundedin1970 by SirRichard Branson,isone of the leading internationalinvestment
groupthat is knownforitsstrong brandimage.Virgingroup isexpandingglobally operatinginover50
countries andhas beengrowingitscompany tomanybusiness areasrangingfromtravel,music,
holidays,leisure,mobile technology,financialservicesandhealth&wellness(Virgin2014).
Virgin’sMission:“tocontribute tocreatinghappy andfulfillingliveswhichare alsosustainable”.
Virgin’sVision:“tomake acredible contributiontowardsustainable lifestyleswhilstmeetingor
exceedingthe expectationof ourstaff,customersandotherstakeholders” (Bond2012).

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Strategic Situation
PESTEL Analysis
Political
One of the majorpolitical risksVirginGroupisfacinginclude the commercial set-upof companiesvirgin
groupis associatedwith.DespiteBransonhavingcontrol andownershipof hisbrand,Virginfacesa
more complex control. Eachof Virgin’ssub-divisionshave theirownseparate entitythanotherswhich
makesBransonhave eitherfull control overitssub-divisionbrandorholdingsome stakestowardothers.
In otherwords,Virgin’ssubdivisionsisbasicallylicensedtoothercompaniesdependingonthe region
whenbeingpurchased. Moreover,Virgingroupneedstobe aware of the countryit makesbusinesswith
since itmightcreate negative impactonthe business. Otherpolitical issue Virginneedstobe aware of is
the conflictandrevolutionthat’saffectingthe countrywhichisalso affectingbusinessesincountries
such as Egypt. Furthermore,Lawanddecreespassedbythe parliamentwhichcanhave a negative
impacton Virginasit will affectthe lyricsof the songs,musicvideosandalbumcoverswhichare a
crucial aspect regardingthe albumsandartistsimage andpersona.
Economic
Since Virgingroupisa Britishmultinational brand, the companycandevelopahealthylongterm
strategicplanningsince ithasa safe economicsituationinthe UK.Withitsoffshore operation,Virginwill
avoidmanytaxationsfromUK. Eventhoughthere isa decline inVirgin’sprofitwhenoperatingoffshore
fromfluctuationof currency,itallowsVirgintoincrease itsmarketshare globallywhichcanbe an
advantage towardthe company.
Social
Nowadays,organizationsuse newtechniquesthatinvolve sustainable developmentandcorporate social
responsibility.Virgingroup,withitsmanysubdivision,offeralot of CSR activitiestoensure itattractsits
marketsegmentforitsbeneficial future.Despite Virginhavingastrongbrandimage because of
Branson, the companyitself iskeeningivingthe communitysomethingback.Eventhoughitvariesfrom
one countryto anotherdue to culture differences,Virgin’swell-organizedpromotionsreceiveswide
coverage fromthe press,the mediaandcommunitywhichattractsthe publicto itsbrand.However,if
Virginwouldconsiderexpandingspecificallywhenitcomestoreligioncountries,itneedstotake into
consideration culture sensitivityanditrequiresspecializationwhenenteringanothercountry(Okoro
2012).
Technological
EventhoughVirginisknowntobe strongwithitstechnologyedge fromitssubdivision,whenitcomesto
the musicindustry,itfailstobenchmark. The weaknessVirginisfacingthatmanyothercompetitorsare
undertakingisofferingmusictocustomersdigitallysuchasApple’siTunesandAmazon’sdigitservice.
Virginneedstoensure it improvesitsmusicstrategyandgo digital.

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Environmental
Virgingrouplearnedalotfrom itssubdivision’sstrategies.Virginmusic’sbusinessmodel givesalotof
opportunitiesforVirgintocompete usingInnovationastheirmaintargetsince Virginofferssimilar
productsbut ina differentwayratherthanofferinginnovationinitsproducts,technology,global
managementandmarketing.
Legal
Virginfacedmanylegal problemsinthe pastdue tolack of knowledge tothe country’sculture andlegal
regulations.One goodexamplewouldbe VirginclosingdowninKuwaitbecause of government
censorshiptowardalbumcoversor CD’s lyricscontentswhere itleftitsbrandundesirableforcustomers.
Almost60% of Virgins productswere bannedinKuwaitwhichledthe companytoclose downin2012
(IndiansinKuwait2012). Otherlegal issue Virginisfacingand can’tbe controllediscopyright
infringement, censorshiplawsandbreachof contract. Anexample wouldbe Virgin Suingfamous rock
band30 SecondstoMars due to breachof contract afterinvestingalotof moneyonthe band’splans
for theirfuture concerts,albumsandrecordingsessions.
Porter’s 5 Forces Model
(Parthasarthy 2007)
Basedon Michael Porter’scompetitive strategy,substitutes inotherindustries, rivalryamongcurrent
competitor,potential newentrants,supplierpowerandbuyerpower are the core essentialswhich
conclude foran organization’scompetitive powerinthe global market. Lookingatnew potential
entrantswouldbe Apple Inc.if Virgindecidesto convertitsphysical albumsandgodigital.Anothernew
entrantwhenlookingatitsrecordinglabel includeArticoRecords,Artwood Classic&TeaSea Records
since theyare newand mightbe a threat to Virgin(Ranker2014).

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Lookingat supplierpowerforVirgin,the company’smainsource of itsproductheavilyreliesondifferent
and varietyof recordlabelstogetits Albumsfrom. Evenforitsfuture digitalizationof itsmusic
collection,Virginneedstoensure itscontinuouspartnershipwithotherlabel companiestoguarantee its
strongpositiontowarditscompetitors. Onthe otherhand,Buyerpowerisconsideredverystrong
especiallyif Virginfocusesmore onitsdigitalizationof itsmusicalbumsusingtheirname brandVirgin
Digital.Customersof Virginwill have manyopinionswhenitcomestoselectingtheirmusicandwhat
makesVirgin attractive tocustomerisitslow price of musiccollectionitofferswhichmakesVirgin’s
buyerpowerverystrong (Sheys2012). Since physical albumsare losingtheirvaluewithcustomerssince
mostcustomerspreferfastresponse bydownloadingtheirmusic,Virgincan substitute itsproducts in
otherindustries suchasincludingentertainment withinnovationtotheirproductsto wincustomers
over. Lookingat Virgin’srivalrywithHMV isanotherthreat,eventhoughHMV iscurrentlyclosingdown
for itsweaklocal operation.Furthermore,anotherrivalryvirgin needtoputintoconsiderationincludes
famousrecordlabels suchas ECM Records,RecordingIndustryAssociationof AmericaandRRO
Entertainmentsince these recordinglabelsare one of the strongest companiesinthe market(Ranker
2014).
HowVirgindeals with these external factors
Generic Business Strategy
Virginisknownforitsstrong GenericStrategywhichiscostleadership.EventhoughVirginnever
introducesnewinnovationtoitsoperations,it buildsproductswithmuchvariationthat are similartoits
productand ensure itsellsitsproductas lowerasit can. WithVirgin’smanycompaniesassociatedwith
it,Virgincan ensure theyhave lessexpense costandtheywill leadVirgintostrongrevenue forthe
future.Thiswill helpVirgin gaincompetitive advantagewithoutanyissueswhenlowering itsproduct’s
cost.
Other Strategies Being Used
From the SWOT Analysis(seeAppendix 1),One of the majorthreatsVirginisfacingincludescopyright
infringementandmusicpiracy.Thisisknown tobe an uncontrollable threatspecificallysince nowadays
manypeople tendtodownloadillegal musicsince it’sfree.Thishaschangedthe customer’sview toward
Virginastheyfindit’snotworth buyinganalbumfor 10$ whentheycan actuallydownloadthe album
for free.AnothermajorthreatVirginisfacingisconvertingall itsmusiccollectiondigitally.Virginis
makingsure itsvalue inthe musicindustryisstable bycreatingVirgin Digital whichitoffersmusicfor
consumerstobuy anddownloadoverthe cloudwhichisthe same ideaof what Apple’siTunesand
Microsoft’sXbox Musicis offeringrightnow. InAddition,eventhoughvirginisknowntobe one of the
well-knownbrands,ithasneversuccessfullybecomealeadingbrand.The reasonbehindthisisbecause
Virginhastoo manysubdivisionswhichislosingfocusandbeingtoodiverse.Virginiscurrentlyclosing
downsome of its subdivisionstoensure itbecomesthe leadingcompanyonce andforall.

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As forVirgin’sexternal opportunities,Virgincanlearnfromitsmistake andlookforways to expandits
companyby ensuringitsresearchtothe country’sculture sensitivitytoenterthe mark.Moreover,Virgin
can use its Virgin Digital brandtoexpanditsdigital musiccollectionwhichwill attractmanycustomers
since technologyischanginghowpeoplebehavetowardaproductor service. Virgincanalsouse its
strongbrand image to implementmanyadvertisingcampaignwhichthe companyiscurrentlydoing.
Virginismakingsure togive customergoodimage withitsCSR strategybycreatingfestivalsforsingers
to performensuringthat40% of theircarbon footprintemittedfromthe festivalisfromthe
transportationalone (Virgin2010).
Strategies Usedto Gain Comparative Advantage
Functional & International Strategy
What makesVirginGroupdifferentthananyothercompanyisthe targetedstrategythe companyis
usingwhichisthe five pillarbusinessempire systemthatSirRichardBrandonis keentodevelopwhich
are travel,mobile phones,entertainmentretailing,leisure andpersonal finance. EventhoughVirgin
neverusesinnovationaspart of theirstrategytowardthe company,theydo howeveruse Functional
and internationallevelstogaincomparative advantage.
JointVenture
WithVirginGroup,any companywhohas a jointventure withVirginhasthe freedomtomake decision-
makingorderas if theyare the owners.Withmanyretail outletsandmanyholdingcompanies,Virgin
can gain comparative advantage as itwouldgive the partneredcompany’smanagerstomake decisions
basedon theirexperience andculture theylive in (BKStrategic2010).eventhoughthisisan advantage
for Virgin,Virginneedstoputintoconsiderationculture sensitivity since itfaces alotof issuesfrom
governmentcensorshipthatforcedVirgintoclose downinmanycountries.Recently,TiVo&Virgin
joinedtogetheraspartnersinthe UK whichgave TiVothe opportunitytodecide by themwhatto use
fromVirgin’sproductforitscompany.
Transnational Strategy
Virginalsooperatesitsfirmtowardtransnational strategy.The reasonbehindthisstrategyisbecauseit
will costlessforVirgintooperate whichwill alsoease the company’snegotiationprocessthatwilllead
to fasterresponse andbe able totransferinformationandexperience easily.
MarketingStrategy
Virginhasmanyweirdtechniquesforitsmarketingstrategybygivingcustomerexceptionalservices
whetherit’sfromitsmusiceventstheyprovideoritsotherindustryitoperateswhichisVirginAtlantic
airlines.The mainreasonbehind Virgin’ssuccessotherthanitsfamousfounderSirRichardBransonis
wordof mouthfromits qualityproductitoffersorcontestsitprovides.VirginGroup increased publicity
and made sure it generatedpositivewordof mouthbyestablishingweirdpublicstuntsandmany
surprisingconteststhat attractedcustomer’sattention(Martins2013).

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Also,whenitcomestoVirginGroup’smarketingstrategy,theyalwayschange the company’sattributes
basedon the regiontheyoperate insuchas includingcelebritiesandsingersfromthe local regionitself.
Thisway,Virginwouldattractits local customersandensuresitmaintainsitsoperationinthe local
market(Parthasarthy 2007).
Recommendation
VirginGroupcan learnmanythingsfrom othercompany’sstrategicmanagementandvice versa. Virgin
Group has focusedheavilyonitsaviationindustryVirginAtlanticwhichisthe mainsource of Virgin’s
revenues.Virgincangainadvantage withVirginAtlanticanduse some of itsgeneratingrevenue to
improve VirginMusictofurthergaincompetitiveadvantage.WithVirgin’swide diversificationof
divisions,Virginischangingitscore visionand makingitscorporationdilutedwhichisconfusingits
primarycustomers.Despite itsdilutedstatus,Virgin iscurrentlyinasustainablepositionand
maintainingitssocial responsibilitythoughvariouseventsandconcerts.The company isalways
committedin givingsomethingbacktothe public.Appropriate supply chain,supplieradJointventure
withothercompaniessuchasTiVois aidingVirgininlaunchingitsbrandinthe global marketinthe
musicindustry.
Virginalsosuedrockband,30 Secondto Mars, fortheirdeparture withVirginmusicdue tomany
financial feesthe bandrequestedbefore theirdeparturewhichresultedinVirginlosingalotof profit.
Virginshouldmake sure tooverviewanycontractto reduce any legal battle the companymightface
towardartists.VirginshouldfocusitsalbumsandmusicwithitsVirgin Digital tocompete withits
successful andnumberone competitor,Apple’siTunes,inthe digital musicsector.Physical discsare
consideredtobe fadingawayto customersthatgive Virginthe opportunitytogive customersthe music
theydesire inthe fastestwaypossible.
WithVirgin’scurrentstatus,the brandimage isconsideredlowerthanbefore since Bransonsoldhim
companywhichmade customerslookat Virgindifferently.Virginshouldkeepinmindthatfindingnew
customersisas importantas keepingoldonesespeciallywiththeirmarketingstrategycurrentlybeing
usedto spreadwordof mouthas itis believedtobe the mosteffective advertisingtechniquetodate
thoughnegative impactmayhappenwithdissatisfiedcustomers asitmayruin Virgin’sreputation.
Virgindepend all itsproductsonotherbrandsbymakingverysimilarproductswithatwist excludingany
innovationintheirproducts. EventhoughVirginisconsideredtobe a companywitha well-known
brand,Virginshouldmake sure theyadvertisethe productsince Virgin’sproductisnotwell-knowntoits
customers. Currently,Virginisnotfocusingaloton theirrecordlabel asmuch as theyare onother
divisionandthisiscausinga lotof haze inthe organizationitselflosing focusonthe musicindustryand
manyof itsrecordingartistssuch as 30 SecondstoMars.

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For Virgin’sfuture strategy,twomainaspectsshouldbe putintoconsiderationwhichare conductinga
researchand developmentstrategytofurtherinclude innovationtoitsproductsandexpandingitsmusic
collectionwithitsVirginDigital service. EventhoughVirginisbecomingmore successful initsregion
country,Bransonis tryinghisbestto focusmore on the global marketandwithVirgin’scurrent strategy;
IndividualswilllookatVirginasa followerwithitsproducttheyprovide ratherthana leaderfor
introducingnewinnovationtotheirproducts.Virginshouldfocusmore onforeigncountriesafter
intense researchaboutculture sensitivitysince the companyfacesalotof legal,political andsocial
issuesregardingproductandservicestheyoffer.

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Reference List
Barringer,BR & Greening,DW1998, ‘Small BusinessesGrowththroughGeographicExpansion:A
Comparative Case Study’, Journalof BusinessVenturing,vol.13,no.6, pp.467-492.
BK Strategic2010, Virgin StrategicManagementAnalysis,viewed28April 2014,
<http://globalsocialmediamarketing.com/marketing-portfolio/virgin-international-strategy-analysis/>.
Bond,M 2012, A Company Profile:Virgin,Examiner,viewed25 April 2014,
<http://www.examiner.com/article/a-company-profile-virgin>.
Freeman,RE2010, StrategicManagement:A StakeholderApproach,Cambridge UniversityPress,
Cambridge,UK.
IndiansinKuwait2012, Virgin Megastoreto close Kuwaitoutlet,An Inchara Infoway,viewed27April
2014, <http://www.indiansinkuwait.com/ShowArticle.aspx?ID=15384&SECTION=0>.
Martins,AT 2013, How to PromoteyourBusinesswith Word of Mouth Marketing,viewed27April 2014,
<http://www.mytopbusinessideas.com/promote-business-word-of-mouth/>.
Okoro,E 2012, ‘Cross-Cultural EtiquetteandCommunicationinGlobal Business:TowardaStrategic
FrameworkforManagingCorporate Expansion’, InternationalJournalof Businessand Management,vol.
7, no. 16, pp.130-138.
Parthasarthy,R 2007, Fundamentalof StrategicManagement,HoughtonMifflin,New York.
Ranker2014, MusicIndustry Companies,viewed28April 2014, <http://www.ranker.com/list/music-
industry-companies/reference>.
Sheys,GC2012, Marketing Strategiesof Virgin Group:SWOT Analysis,Marketing Doctrines,viewed28
April 2014, <http://marketingdoctrines.blogspot.com/2012/07/marketing-strategies-of-virgin-
group.html>.
Virgin2014, AboutUs,Virgin,viewed 25April 2014, <https://www.virgin.com/about-us>.
Virgin2010, Virgin Group’sCorporateResponsibility and SustainableDevelopmentReport,Conker
Design,viewed27April 2014, <http://cdn0.virgin.com/doc/sustainability-
report/lo_res/Virgin_Sustainability_Document_2010_Lo.pdf>.

11. BMO 3422 – StrategicManagement
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Appendix
Appendix 1:DetailedSWOTAnalysis
Appendix 2:PowerPointPresentationSlides

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Appendix 1: Detailed SWOT Analysis
Strengths
One of the well-knownstrengthsforVirginGroupishavingastrongbrand because of the famous
entrepreneurandfounderof the companySirRichardBranson.Also,because VirginGrouphasmany
subdivision,itisknowntohave highbudget&investmentwhichisbeneficialandcanhelpVirgingroup
itself payforitsqualitylabor,productsandservices itoffers.Furthermore,Virgingroupisknowntogive
customersthe rightproduct,reliabilityandquality.Furthermore,VirginGroupisverycommittedtoits
customersbyprovidingthemwithhighlyskilledworkforce.
Weaknesses
Because VirginGrouphasmany subdivisionandrecentlyintroduceditsVirginCreditCardandVirgin
Trains,The Brand’simage seemstobe diluted.Thisalsoincludesthe introductionof VirginAtlanticand
VirginCarsas it made customersconfusedonwhatVirginGroupistryingto achieve.One of the
weaknessesthatVirginneedstouse isInnovation.Virgingroupalwaysgetsimilarproductsfrom
competitors andtry to change ittheirwaywhichcan be negative andundesirableforcustomers.
Opportunities
Virginhasman opportunities forittoimplementthatcan be beneficialforthe company.Expandingits
businessintonewmarketentrywouldbe agoodideahowever,Virginneedstomake sure it
understandsthe country’sculture beforegoingintothe countrysince itfacesa lotif political andlegal
issuesdue ti lackof culture sensitivity. Virginhasthe opportunitytochange itssupplierforthe better
since the companyfocusesonwide range of suppliersratherthanbeingnarrowed.One of the main
opportunitiesfirVirgintodoisdigitalizeandexpanditsmusicalbumstohelpease Virgin’soperation
and cope withitsIT procedures.Increasingtheiradvertisingcampaigncanalsobringpositive imagefor
Virginasit wouldgive awarenesstothe communityaboutthe company’scapability toenhance the
musicpower.
Threats
Lookingat Virgin’sthreats,one of the mainandbiggestthreatthatVirgincan’tresolve isillegal music
downloads.Musicpiracyhasbeena threatto many companieswhoare inthe musicindustry.Music
digitizationandexclusive contentsfromcompetitorssuchasApple’siTunes&Microsoft’sXbox music
are threatsthat Virgincanfollowtoreduce the threatsfrom companies.Anotherthreatvirginisfacing
include notbeingaleadingbrandbecause of itssubdivision.Virginhastoomanybrand namesunderon
name whichmakesthe companydilutedasitneedstobe more focusedonitssubdivisionsfrom
differentindustriesbyminimizingthemtobe lessdiverse andbe able tobecome the leadingcompanyin
the musicindustry.

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Appendix 2: PowerPoint Presentation Slides
Background
• Founded 1970
• Established by Sir Richard Branson
• London, UK
• Mission: “to contribute to creating happy and
fulfilling lives which are also sustainable”
• Vision: "to make a credible contribution
toward sustainable lifestyles whilst meeting or
exceeding the expectation of our staff,
customers and other stakeholders”

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PESTEL
Political
Economic
Social
Technological
Environmental
Legal
Suppliers
Porter’s Five Forces
Rivalry Among Current Competitors
Pressure to Gain Market Share &
Other Competitive Advantages
Substitutes in
Other Industries
Potential New
Entrants
Buyers
Pressure to win customers over
Pressure for
better terms/
bargains
Pressure for
better terms
Pressure of entry

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SWOT Analysis
Strength
• Strong brand name
• High budget/investment
• Right product, quality and
reliability
• Highly skilled workforce
Weaknesses
• Too loose supervision
• Mixture of brand product
image
• Does not introduce new
innovation
Opportunities
• New market entry
• Better supplier deals
• Expand its digital music
• Obtain information using
Information technology
• Advertising campaigns
Threats
• Copyright infringement
• Music piracy
• Music digitalization
• Not a leading brand
Generic Strategy
• Cost Leadership
– Many companies under one name
– Less expenses
– Higher revenues
– Cost advantage

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Cost Leadership Demonstration
Demonstration
Functional/International Strategy
• Joint venture
• Many retail outlets
• Many holding companies
– TiVo & Virgin (UK)
• Transnational strategy
– Less cost
– Less negotiation time = faster response
– Transfer of experience & information
• Marketing Strategy
– Word of Mouth
– Change attributes based on region
Video

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Recommendation for Future Strategies
• Current strategy
– Should become less diverse
– Advertise for product awareness
• Future Strategy
– R&D Strategy - Innovation
– Fully digitalized music
Thank You
THANK YOU Any Questions?