The key to successful unrelated diversification is identifying an industry which has an identifiable area of growth which can deliver the required profit, where the company has internal capabilities that generate a competitive advantage. Virgin Atlantic’s market entry in the 1980’s was a good example of this as it came about at a time when great customer service was a rare quality in the airline industry. The industry which was instead overwhelmed by cancelled flights, delays and lost baggage. Virgin’s internal capability of providing an excellent customer experience throughout its existing companies offered an advantage that would be hard for competing airlines to reproduce – and therefore potential to charge a price premium for a superior
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In conclusion
The examples above demonstrate that an unrelated diversification strategy is financially risky but looking beyond this, there are other considerations that can be as impactful to the bottom line for example – brand strength, reputation and confidence.
By not delivering one single strong message as to what they represent can dilute the brand impact, for example Virgin Money and Virgin Trains, don’t have a single message as they are just associated to the generic Virgin brand.
Virgin has grown but because they don’t specialise in a market or industry they find it difficult to be deemed a specialist in the market. They may enter the market to be a disruptor or be innovative but as they grow their portfolio they may lose impact over time but they do have the opportunity to rely on the overall brand name that may be at the forefront of consumers’ minds for example: in the airline and media industries, Virgin has lost some of its impact, subsequently, the brand name survives on its credentials as a strong global business that creates efficiency and profitability that competitors don’t offer, rather than something more impactful to …show more content…
This is an uncertain market that offers no commercial value as yet, but brings the benefits of innovation by associations for the Virgin brand.
With consumer markets constantly being disrupted, the Virgin Group may have felt the limitations didn’t suit their entrepreneurial model of the past so they have taken their interest to an infant industry that holds strong media interest can reengage existing consumers demonstrating that the Virgin brand is always trying to push existing boundaries of possibility.
Overall the unrelated diversification has worked well for Virgin and they have learned many lessons along the way, this model will only suit a certain type of organisation and it plays to the strengths of an entrepreneur who is happy to try new things and isn’t afraid of
In conclusion
The examples above demonstrate that an unrelated diversification strategy is financially risky but looking beyond this, there are other considerations that can be as impactful to the bottom line for example – brand strength, reputation and confidence.
By not delivering one single strong message as to what they represent can dilute the brand impact, for example Virgin Money and Virgin Trains, don’t have a single message as they are just associated to the generic Virgin brand.
Virgin has grown but because they don’t specialise in a market or industry they find it difficult to be deemed a specialist in the market. They may enter the market to be a disruptor or be innovative but as they grow their portfolio they may lose impact over time but they do have the opportunity to rely on the overall brand name that may be at the forefront of consumers’ minds for example: in the airline and media industries, Virgin has lost some of its impact, subsequently, the brand name survives on its credentials as a strong global business that creates efficiency and profitability that competitors don’t offer, rather than something more impactful to …show more content…
This is an uncertain market that offers no commercial value as yet, but brings the benefits of innovation by associations for the Virgin brand.
With consumer markets constantly being disrupted, the Virgin Group may have felt the limitations didn’t suit their entrepreneurial model of the past so they have taken their interest to an infant industry that holds strong media interest can reengage existing consumers demonstrating that the Virgin brand is always trying to push existing boundaries of possibility.
Overall the unrelated diversification has worked well for Virgin and they have learned many lessons along the way, this model will only suit a certain type of organisation and it plays to the strengths of an entrepreneur who is happy to try new things and isn’t afraid of