This is the BCG matrix analysis of Virgin Group which provides vital information to the company about its products/services positioning in terms of relative market share & growth and place them in BCG matrix quadrants; Cash cows, stars, Questions Marks and Dogs.
BCG matrix is a useful tool for analyzing the current functioning of the different products being managed by an organization and their market share. A high market share is regarded as a sign of product profitability, while the market growth is deemed as showing future growth of these products. The implementation of BCG matrix on Virgin Group is presented as follows:
Cash Cows
Some products have a high chance of generating revenues for an organization on a long term basis. The high market share enables these products to be positioned as a stable source of earnings for the firm. The market is working at a mature stage, however the products which are identified as cash cows do not show any significant negative impact due to the slow pace of industry development. The high market share is enough to sustain the profitable income originating from them, thus adding to the financial stability of the firm. There are some products of Virgin Group which are seen as a central source of earning for the business entity. Out of the wide range of product portfolio, there are some products which make significant contributions to the financial strength of the company. A prominent example in this domain is the Virgin business units operating in the industry of media and telecommunications. The telecommunications and media industry is quite saturated with the number of companies operating in this segment, thus showing that the industry has grown to such an extent as to be classified as a mature one. The maturity level of the industry adds to the pressure of maintaining a profitable business, however, cash cows such as the virgin telecommunications fare better despite the saturated industry. Press Association (2016) has mentioned that Virgin telecommunications has recorded an increase of more than 35% in the revenues generated by this business segment. This increase can be attributed to the rising number of customers of Virgin Telecommunication. The alliance with Liberty Global has been a beneficial move for the organization as it has brought the needed level of growth to the business. Moreover, the organization has been using its airline as a cash cow, bringing in high levels of profit from company operations (Powley, 2016).
Stars
Products which have a potential for growth and make a significant contribution to the earnings of an organization are termed as a Star. Additionally, one of the main features through which a star can be recognized is that the market of that product is expanding, opening up new possibilities for those products. When the market matures, these products can be seen as a cash cow as they are likely to maintain a high market share. For Virgin Group, the Music and Entertainment segment denotes a star. The reason behind this categorization is that the virgin record has been able to bring in some cash for the company, yet it required continued investment to maintain a steady flow of earnings.
Question Marks
Apart from cash cows and stars, there are some products which are not able to perform that well. These products are termed as question marks in the BCG matrix. The rationale behind this classification is that there is a great deal of ambiguity attached to the future prospects of these business units. Since they are not performing up to the mark, they can’t be viewed as profitable ventures. However, the possibility of future growth and profitability can’t be overlooked. Keeping this situation into consideration, the question mark has the possibility of growing into a star or a cash cow. But the present situation is quite uncertain owing to the low market share of the product. The business units of finance as well as health and wellness can be included in the category of question marks as they do not bring in sufficient earnings for the company. They seem to have the potential to be profitable with the passage of time, however present performance of Virgin Group in these segments is not extraordinary. The health and wellness venture has the potential to become a star with the passage of time as increasing number of businesses understand the need to have a healthy workforce. Likewise, the employees find the health solutions to be particularly appealing, thus indicating the development chances the industry offers to this business unit. The health and wellness segment operating with the name of Virgin Pulse needs financial support from the group in order to grow into a profitable business unit (Kaufman, 2015). The main goal of the business is to target the organizations requiring wellness programs for employees. In case if Virgin Pulse receives a favourable response from the target market, it can become a star or even a cash cow. However, the current position of Virgin Pulse can be identified as a question mark.
Dogs
The BCG matrix has also recognized that there are some products which are likely to bring low profitability for an organization. Whether an organization invests in those products from a short term or long term perspective, there seems to be no significant improvement in their profitability ratios. The management faces the dilemma of using these products as a point of further investment or refrain from further financial input in those products. The small market share and slow market development doesn’t offer any hopeful chances of stability of the product. Due to this situation a probable course of action is to invest in more profitable ventures. Even though Virgin has been able to maintain profitable businesses across different industries, some business units continue to pose a threat to the company. For instance, in the railway industry which is operating at a mature stage, managing a business has been a risky move by Virgin Group. As a result of the industry dynamics, the railway segment has not been quite profitable for the business. The low revenues have not supported the company to gain significant financial strength from the railway segment either. Despite the efforts to maintain high revenues, Chakrabortty (2013) has highlighted that the railway segment is not profitable for Virgin Group.
References
Chakrabortty, A., 2013. The truth about Richard Branson’s Virgin Rail profits. The Guardian, [online] 10 June. Available at: <https://www.theguardian.com/commentisfree/2013/jun/10/truth-richard-branson-virgin-rail-profits> [Accessed 23 October 2016].
Kaufman, A. C., 2015. Virgin Pulse Investment Is A $92M Bet On Employee Wellness. The Huffington Post, [online] 27 May. Available at: <http://www.huffingtonpost.com/2015/05/27/virgin-pulse_n_7453582.html> [Accessed 23 October 2016].
Powley, T., 2016. Virgin Atlantic’s pre-tax profits soar 81%. Financial Times, [online] 23 March. Available at: <https://www.ft.com/content/e9396bf0-f0f3-11e5-aff5-19b4e253664a> [Accessed 22 October 2016].
Press Association, 2016. Virgin Media reveals 38% leap in profits after record customer growth. The Guardian, [online] 16 February. Available at: <https://www.theguardian.com/media/2016/feb/16/virgin-media-38-per-cent-profits-record-customer-growth> [Accessed 21 October 2016].
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