Virgin Atlantic - Strategic Memo

2384 Words Apr 4th, 2008 10 Pages
1998 was a rather trying year for Virgin group of companies.
With the hopes for an economic upturn still remaining, it is recommended that the Virgin group approach and review, with great urgency, the matters outlined in this memo. Questions have been raised by many noted publications including the Economist and Marketing News regarding the current financial state, brand strength and future of the Virgin group. Many has quipped Mr. Branson and the Virgin group as over-exerting and extending company resources, capabilities and competencies beyond a controllable and unprofitable threshold. Many critics have pointed to Virgin’s brand losing goodwill and compromising core values due to the brand stretching. With over 20 holding companies
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• Virgin Cola o $5 ₤ millions in loss on $30 ₤ millions in revenue. o Attained only 8% of market share.
• Virgin Rail o Showed positive EBIT ($12.6 ₤ millions), Net Cash Flow ($7.5 ₤ millions) and EVA ($12.1 ₤ millions). However, Virgin Rail is plagued with operational deficiencies and future profits are questionable. Customer satisfaction is declining due to unreliable schedules and poor customer service.

As shown on Table 1, we can quickly acknowledge the financial health of the 13 businesses as indicated by the Net Cash Flow, EBIT and EVA. Virgin Travel Group is strong in all three indicators boasting EBIT ($51.5 ₤ millions), Net Cash Flow ($37.9 ₤ millions) and EVA ($32.5 ₤ millions). Most of the media-related Virgin endeavors, such as Cinema and retail, are all experience negative growth and troubled cash flows.

Value Chains As an umbrella brand name, the number of value chains and links existing between customers and the Virgin group of companies and between each of the Virgin operating businesses increase as Virgin continues to implement diversification and market extension strategies. Goodwill is built by the company’s core values and product/service offerings. Most importantly, Virgin has been capable of sustaining the same values across each of the companies. With recent critiques of elasticity and stretching, Virgin’s goodwill has slightly been tarnished. However, it will not be a hard task

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