Table of Contents

Executive Summary .......................................................................................................2

Problem Statement .........................................................................................................4
Literature review............................................................................................................8
Conclusion ...................................................................................................................10
References....................................................................................................................11

Executive Summary
The case focuses primarily on Richard Branson and Virgin, Inc based on three man
aspects: the organizational structure of the company, the style of the leadership and the
management approach towards motivation of employees.
The Virgin Group which was conceived in 1970 as Virgin Records by Sir Richard
Branson, has gone on to grow in business sectors ranging from mobile communications,
to transportation, travel, telecommunication, financial services, leisure, music,
holidays, publishing and retailing. It has expanded beyond the borders of an average
conglomerate into a global business empire of more than 300 companies, employing
more than 50,000 people and doing business in more than 30 countries, and generating
more than 18 billion US dollars in revenues annually. The business has witnessed
continual growth since it was started. The nature of leadership in existence in Virgin
Group draws many features from the personality of Sir Richard Branson.

Figure 1 The Virgin Holdings

The management of Virgin Group does not fall in to any particular model. It has a
unique management structure whose characteristics do not fit those of the existing
models, however it does employ aspects of different concepts which comes together to
form its own distinctive style. The management of Virgin group with a heavy weight is
contingency approach. The decision-making and plans executions are done with close
reference to the problem at hand. This has seen the group attain notable milestones in
streamlining its management. In this management model, the dynamics of business
environments is appreciated. It recognizes the fact that different environments require
different management approaches.

The Virgins culture is developed with the set of policies, beliefs and attitudes learned
and shared by the majority of the organisations members. Virgins dominant culture
has affected the way in which they have developed its products and its staff. Virgins
dominant culture has led to the brand recognition of the Virgin which leads to make
positive impressions among general public, and allows to set up new businesses in new
markets easier.
Sir Richard Branson is one of those leaders who have been able to take on lifes
challenges and turned them into learning opportunities. He has adopted a technique
which is closely related with Japanese Keratsu system. His companies are connected
with each other very well and supports each other up to certain degree. He gives his
subordinates more freedom to work their tasks. By proving such freedom, managers
would inevitably feel more of a sense of responsibility, ownership and would try their
up most to make a success of it. However organizational goals of Virgin Group cannot
be dissociated with those of Sir Richard Branson. This addresses that the management
style in the organization has some elements of bureaucracy in leadership.
Sir Richard Bransons leadership style falls in the category of transformational. He is
famous for his risk taking ability and habit. He is also interested with people who are
willing to take risks and the best in their tasks. In his ventures, he looks for people who
are outgoing and willing to start new businesses. The most common feature that has led
to achieve great milestones in business is the ability to motivate fellow partners in
pursuit of a new business opening. His focus deviates from routine perspective of
employees where the management expects the workers to perform to deserve
compensation. He believes everyone wants to deal with top person so he provides his
managers to deal with him directly. He has close touch with the day to day activities of
various companies within his group.
Virgin has a diverse approach so they dont have any set of traits for a person to become
employee at Virgins. However they use to select people who are ready to take
responsibility in their own and can work hard. Thus company has created its value in
the business and market and made its brand as symbol of success and trust.
In this case, the study examines the problems arisen among those three key areas of the
organizational behaviour as mentioned earlier and proposes possible solutions with
relevant facts and literature.
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Problem Statement
1. The strong belief of Virgin in Brand Franchising as primary marketing
tool
A brand franchise is an arrangement between the corporate of particular brand and
wholesaler or retailer for the distributor to use that brand exclusively in an area. That
is, the wholesaler or retailer is the only company permitted to sell that brand product
within certain geographical boundary.
There are several benefits of entering into a brand franchise arrangement. If the brand
name is well-known, the retailer will find it is much easier to gain the consumer pool
in the local market. Manufacturers also benefit from it. Brand owner can place the
products in front of prospective customers, without establishing their own local retail
outlets by contracting with wholesalers and retailers.
However for global conglomerate like Virgin group there are certain issues can arise
with brand franchised strategies. Those are

Limited control over the business - Business operations set out and bound by
the rules of locals

Threats by reputation issue - As a franchisee you would rely on the brand of the
business to gain customers. If there is any issue has arisen in one of the
subsidiary of certain brand it will affect other subsidiaries reputation as well

Lack of brand awareness It is difficult to open a business and capture the

market in a new location where the people do not have any idea of the particular
corporate or its products.

Solution
- Corporate should appoint its experts and highly skilled people along with the locals at
top management of the business organization when open a business in a new location
to ensure the control of the franchisee in business activities.
- Corporate can use more familiar and different names rather its own brand to establish
businesses in different locations to avoid the issues regarding the reputation damage
- Corporate should conduct thorough and effective market and risk analysis aligned
with its brand and products in certain location before establish the business venture.

2. Negative aspects of the Keiratsu system

Keiratsu system the interconnected business relationship and shareholdings that exist
between the subsidiaries of particular corporate group and each company holds some
form of ownership in the other, thereby ensuring a direct effect of performance on each
other. The system is centralized with a bank which lends money to all companies in that
group, in return for equity, a monitoring entity and the right of control.
However the downsides of this system are:

Less control over the access to capital keiretsu company knows they can easily
access capital. This could potentially allow a company to take on too much debt
and lead its business.

Issue of the reputation damage As mentioned earlier in the brand franchising,

if a company of the group faces any failure or setback in business it will impact
other companies as well like chain reaction.

Solution
- The bank which acts a centralized institution of the Keiratsu system should implement
policies and regulations regarding the rights of capital access for each company.
- The corporate can form several keiratsu groups instead of establishing single large
keiratsu group to avoid the complexity and impact of chain reaction as well.

3. Issue of the loosened and people oriented operations

People oriented operations can benefit the employees of each company hold a stake in
the success of the business, with the requirement that each company be self-sufficient.
But there are some consequences can be occurred as a result of people oriented
operations.

Misuse of Influence recruitment of unqualified people and wrong decision

making can be resulted due to the personal influence of managers. This will lead
the company into the wrong direction deviated from achieving the
organizational goals and gradually spoil the reputation of the company.

Lack of cooperation between managers creates unhealthy competition

between local managers leading to lack of co-operation and coordination. As a
result, interdependent functions may suffer and resolving interdepartmental
conflicts becomes difficult.

Less Control Trust and faith between employees and managers are the key
factors to drive the work force of the organization towards the success The risk
is once-trusted associates may mismanage or even abuse their new found power
and it will difficult to control them or turn them back into right position.

Solution
- Corporate should control the degree of authority delegated to the lower levels of the
organization in order to overcome control and influence issues
- Sufficient financial resources should be provided to ensure the accomplishment of the
tasks under the responsibility of the people oriented operations

4. The transformational leadership of Sir Richard Branson

Sir Richard Branson uses both transactional and transformational leaderships according
to the requirement of the situation. But as a leader and innovator he prefers and chooses
transformational way mostly over the transactional approach of leadership. But there
are some cases where transactional approach seems to work best. For instance, where
the employees are lagging behind from the scheduled completion of a project which
involves precision and high risks, transformational style would fail to address the
significance of the situation.
Solution
Branson can further improve his leadership skills by focusing on the use of transactional
leadership style in managing the employees in his group of companies. The use of
rewards as well as penalties needs to be given for the purpose of regulating the
processes as well as the people in an effective manner.
As a leader he can provide feedback to the employees, discussing about their
limitations. The use of appreciation as well as criticism in the form of constructive
feedback can be used to lead the employees in an effective manner.
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5. Sir Richard Branson: backbone of the Virgin group

Sir Richard Branson, founder of the Virgin group who is considerably the single most
important ingredient to all the success that has been achieved up-to-date. He is one of
the most eminent figures in the business world as he is well known for his risk taking
behaviour. Through the able leadership of its Chairman, Sir Richard Branson, the
management team has come up with a unique formula of managing large scale
businesses like Virgin Group. To a large extend, the success of Virgin Group is directly
attributable to the input of Sir Branson. He has succeeded in opening a new chapter of
management, which deviates from conventional methods. There is a formidable blend
and balance between management and leadership.
But the million dollar question is what will happen to virgin after Sir Richard Branson.
Is there powerful, energetic, charismatic and breakthrough leader after him to run the
Virgin group successfully?
Solution
Sir Branson should consider the significance of leadership after his period to ensure the
sustainability of the Virgin throughout the time. He should select and train the
employees who are in higher positions in his companies and have great potential to
become leaders.
Sir Branson is one the effective leaders in the world as the chairman and founder of the
Virgin group. If he would create the effective and efficient leadership to expand the
Virgin Empire and its reputation as much as he did, then he will become a great leader
ever.

Literature review
Franchising
A brand franchise is an arrangement between a corporation and a local retailer or
wholesaler to function as the exclusive seller for the corporations products within a
defined sales territory (www.wisegeek.com).
Franchising as a concept is simple: A parent company (the franchisor) develops a
model for a successful business and builds and advertises a brand. An individual (the
franchisee) licenses that brand, products/services, and business model typically with
exclusivity for a specific geographic location.
Franchises work for those who:
Want the security of choosing a brand-name business with proven products.
Want a "turnkey" operation with established business operations and guidelines,
training and support.
Are willing to follow rules. Most franchisors do not allow you to deviate from the
products and services they sell, the suppliers they use, and the way they do business.
Have money to invest up front. You will have both a franchise fee and startup costs.
Are willing to split the profits. You are likely to have monthly royalty and advertising
fees and a variety of other fees and costs.
Are willing to work hard. Just as with any business, running a franchise still takes a
lot of work to succeed.
Are willing to take the risk that the franchisor may not renew their license at some
time in the future (Rhonda Abrams, USA TODAY).

Keiratsu system
The limited competition within the keiretsu may lead to an inefficient company
because a keiretsu company knows they can easily access capital. This could potentially
allow a company to take on too much debt and lead it into taking on overly risky
strategies.
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The economic crisis in Japan in the late 1990s forced Japanese companies to compete
for price and quality by using market-based systems instead of keiretsu relational
arrangements. This occurred due to major horizontal banks' reports of profit losses
(Brian Twomey, Investopedia.com).

People oriented operations / Decentralized system

A possible disadvantage of a decentralized structure is that you must relinquish a bit
of control. You must put your faith in others to continue to carry out your company's
vision and mission. For a business owner who has worked hard to build your enterprise
in your own unique way, the process of "letting go" can be difficult. There's also the
risk that once-trusted associates may mismanage or even abuse their newfound
autonomy and power. Another potential disadvantage of decentralization is that the
organization may become fragmented. Units that once worked well together in your
centralized structure may lose their sense of team spirit and cooperation. Decentralized
units may put their own best interests first instead of those of your company as a whole.
Areas such as productivity and customer service may suffer as a result. Innovative ideas
that once spread quickly throughout the company may now remain within individual
units (Chris Joseph, Demand Media).
A highly decentralized organization can be the battleground for unhealthy competition
between local managers leading to lack of co-operation and coordination. As a result,
interdependent functions may suffer and resolving interdepartmental conflicts is
difficult when authority has been delegated. In addition, there is costly duplication of
work (activities, processes and outcomes) that may impact economy of scale (Preeti
Sunil, buzzle.com).
Transformational leadership
Richard Branson could have used task oriented leadership as well as people oriented
leadership according to the requirement of the situation. On the other hand, in cases
where employees are lagging behind from the scheduled completion of a project, the
people oriented leadership style would fail to address the demand of the situation. In
addition to this, the greater degree of reliance is beneficial for tasks and projects that
carry low risk. But when a project involves high risk, a leader needs to use a blend of
people oriented and task oriented leadership styles to achieve the objectives in an
effective manner. Branson can further improve his leadership skills by focusing on the
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use of transactional leadership style in managing the employees in his group of

companies. The use of rewards as well as penalties needs to be taken into consideration
for the purpose of regulating the processes as well as the people in an effective manner
(Brown, 1998).
Transformational leaders stimulate innovative thinking by encouraging their teams to
take carefully calculated risks. By running workshops and conducting focus groups,
leaders help teams ponder complex ideas. By spurring intellectual curiosity and
creativity, you can foster individual expression and help your team solve problems in
new ways. Without establishing procedures for acknowledging and accepting failure,
however, transformational leadership strategies can cause you to pursue ideas with little
or no merit (Tara Duggan, Demand Media).

Conclusion
There are many things to be learned from leadership and management of Virgin Group
Limited. The company has cut itself a niche in various industries. It has also proven
that all things are possible with dedication and commitment. Virgin group have their
own ways of developing people. It should consider various business strategies rather
than brand franchising approach. It should focus more hidden capabilities of people
who are working in Virgin and those are trying to attain higher professional success
though their hidden skills in order to sustain the success of business. Sir Richard
Branson Today he is recognized as one of the leaders who have faced failures and
were still able to be successful in the corporate world. But he can further improve his
leadership skills by focusing on the use of transactional leadership style in managing
the employees in his group of companies. Also he should concern the leadership after
his time to ensure the continuous growth of his corporate empire throughout the time.

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References

Brian Twomey, Understanding Japanese Keiretsu, Available at:

http://www.investopedia.com/articles/economics/09/japanese-keiretsu.asp

Brown, M. (1998), Richard Branson: The authorized biography, Headline

Book Publishing, UK

Chris Joseph, Advantages & Disadvantages When Companies Decentralize,

Available at: http://smallbusiness.chron.com/advantages-disadvantagescompanies-decentralize-11938.html

Preeti Sunil, Advantages and Disadvantages of Decentralization, Available at:

http://www.buzzle.com/articles/advantages-and-disadvantages-ofdecentralization.html

Rhonda Abrams, Strategies: Is franchising a ripoff or road to success?.

Availabla at:
http://www.usatoday.com/story/money/columnist/abrams/2015/02/20/smallbusiness-columnist-abrams-franchising/23650217/

Tara Duggan, Negatives of Transformational Leadership, Availabl at:

http://smallbusiness.chron.com/negatives-transformational-leadership10533.html

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