Last Updated 08 May 2020

Brand extension

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The diversification strategy of Virgin Groups is brand extension . Richard Brandon its CEO has used unrelated diversification to expand his brand effectively. It obviously helps with the initial recognition. If you know about Virgin airlines, you take Virgin cola more seriously than a no-name product. There is a proliferation of Virgin-branded companies – around 200 separate companies bear the Virgin brand, from trains to phones to space rockets.

Virgin Cola, Virgin Megastores, Virgin Airlines, Virgin Telecommunications are examples of new products created by the Virgin Group of UK, to leverage the Virgin brand and has led to the group entering newer markets. The group manages its portfolio by building impetus where a company is working and selling off established subsidiaries to fund growth in newer companies. The group’s diversification strategy , which mix fundamentals of brand franchising, business incubator and venture capital, is entrepreneurial in nature.

While the group has been successful in a majority of its ventures, it also faced failures in some companies. However some are of the viewpoint that the unrelated diversification of the Virgin Group may have led to the dilution of the virgin brand. Diversification is the riskiest of the four strategies of the Growth Matrix. While the other three strategies can be followed with the same technical, financial, and merchandising reserves which are used for the original product line, diversification with new markets and new products moves away from known quantities and usually requires new expertise, new method, and new capabilities.

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It mostly follows a combination of horizontal and lateral diversification where the company markets new products or services that have no technological or commercial synergies with current products.. Because of the high risks, many company’s diversification efforts has led to failure. But Virgin companies diversification strategies have mostly been successful as it moved from music producing, to travels and mobile phones

Reference:

Carmichael E. , Build a Powerful Brand. The New York Times http://www. evancarmichael. com/Famous-Entrepreneurs/592/Lesson-2-Build-A-Powerful-Brand. html

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