- Virgin’s organizational structure draws inspiration from the Japanese keiretsu model where each company in a group holds shares in every other company. This has numerous benefits for Virgin, including takeover resistance and better access to information or finance.
- Virgin also structures its over 300 companies according to the products and services they offer. Virgin Hotels and Virgin Atlantic – which houses the company’s commercial aviation products – are two examples.
- In some product-based divisions, there may also be geographic divisions. The Virgin Active health clubs, for instance, are segmented according to the six different countries where the service is offered.
Virgin, formally known as Virgin Group Ltd., is a British multinational that was founded by the enigmatic billionaire entrepreneur Richard Branson in 1970. The company was named for Branson and colleague Nik Powell, who described themselves as virgins in business after opening a mail-order record shop.
Today, Virgin is a vast company with varied interests in air travel, space travel, hotels, financial services, music, fitness, and telecommunications. These diverse interests under the leadership of Branson have resulted in a somewhat unique organizational structure.
To learn a bit more about the internal framework of Virgin, please read on!
Keiretsu business structure
To date, Virgin Group Ltd. is comprised of more than 300 branded companies operating in 30 countries around the world. It’s important to note that each of these companies operates independently with their own assets, employees, products, and services.
Nevertheless, each company in the group has a financial interest in every other company, which means all 300 members work to further and advance Virgin Group’s interests.
This arrangement is known as keiretsu, a Japanese business structure that became predominant in the aftermath of World War II. In essence, the term can be used to describe any set of companies with interlocking shareholdings or other business relationships. In many modern Japanese contexts, one is these companies is a bank or insurance company that provides financial services to each member of the group.
For Virgin, the keiretsu approach has several benefits:
- Takeover resistance – since every company has shares in the other, this shields an individual company from a hostile takeover. If a takeover seems likely, stronger companies raise their respective shareholdings in the weaker, target company.
- Finance – member companies can provide finance to others, which reduces the need to borrow externally. As we noted earlier, one of these companies is usually a bank which, in Virgin’s case, is Virgin Money. This bank funds other company operations and can also serve as a guarantor if a group member does need to borrow elsewhere.
- Information access – every member of the keiretsu has access to fast, updated, and readily available information. Consumer data from visitors to Virgin.com, for example, is shared with all Virgin Group companies to gain or maintain a competitive edge. While strategy and operating procedures are set out by a central headquarters, these companies nevertheless have the freedom and flexibility to make most decisions without consulting Branson beforehand.
Virgin Group structures its over 300 companies according to the products and services they offer. This may seem an obvious point to make, but it should be noted that product-based divisions are also a characteristic of the keiretsu approach.
Some of these companies include:
- Virgin Records – music.
- Virgin Atlantic – aviation services.
- Virgin Orbit – a launch service for small satellites.
- Virgin Hotels, and
- Virgin Pulse – a digital health and engagement company.
Within each Virgin company, there may exist geographic divisions that help it account for the various characteristics of regional markets.
Consider the chain of Virgin Active health clubs, for example, which has the following geographic divisions:
- Virgin Active Australia.
- Virgin Active Italy.
- Virgin Active Singapore.
- Virgin Active South Africa.
- Virgin Active Thailand, and
- Virgin Active UK.
Organizational Structure Case Studies
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