Change is a psychological obstacle for many companies. People think change is negative because it involves giving up your current best method. Consequently, strategies for creating change is very important. Kurt Lewin’s model of change describes a three point process (Lewin, 1947):
Unfreeze –> Change –> Freeze
Step one ‘Unfreezing’ is about accepting the idea that the necessity for the change is strong enough to move away form our current comfortable positions. The second step ‘Move’ is actually starting the process of implementing change, and finally the last step; ‘Freeze”, is where the new change is continued and becomes the new norm. Richard Branson adopted this model in the 1970’s.
Virgin was once a successful Record Mail-order business, however in January 1971 they came up against an unexpected obstacle – the post office workers went on strike. Virgin realised that they needed to ‘unfreeze’ since their “mail-order business was set to go bust: people couldn’t send us cheques; we couldn’t send out records. We had to do something” (Branson, 2007). The ‘change’ Branson implemented was to open a record shop, where they could continue their business without being dependant on the mail. The ‘freezing’ of the business was showed when the business had regained effectiveness and continued to open a further 100 megastores throughout the 1980’s, and 1990’s (‘Virgin Megastores’, 2015).
I can admittedly be reluctant to change. This week we had 6 people dropped into our hockey squad and consequently 6 players dropped out because our coach believed the influx of better players would help us win games. We immediately opposed this decision because we had to reshuffle positions on the pitch, subsequently changing the team dynamics. We consequently won our first game, proving that this was a positive change. This showed me that it can take time to continue the ‘freeze’ before the everyone accepts the new change.
This summer whilst inter-railing around Europe I experienced first hand the ‘Migrant Crisis‘. I was crossing the Greece-Macedonian border via train when hundreds of Syrian migrants were waiting to board our train. After a two hour struggle between the train guards and the migrants, around 200 migrants managed to climb through the windows and break down doors to secure their place across the boarder.
This is an example of forced migration as Syrians are fleeing the civil war. “The average GDP per capita in Syria [is] about a tenth of the averages in most European countries” (Yazgam, 2015), which provides a ‘pull’ for these forced migrants. The migration will effect the economic growth, labour markets and public spending of these host countries – But will it effects be for the EU?
Turkey officially hosted 1.7 million refugees from Syria alone in 2015 (‘UNHCR Syria regional refugee response’, 2014). In the short term, research on the Turkish labour market showed a rise in unemployment. In particular; “large-scale displacement of informal, low educated, female Turkish workers”. Additionally, Turkey spent $6 billion in the form of humanitarian aid (Wagner, Carpio, & Ximena, 2015). A study by Bahcekapili concluded that, “Turkish citizens are in a disadvantaged situation in terms of per capita income” (Bahcekapili & Cetin, 2015). However, the EU has an economy “23 times larger than Turkey” so the negative effects would be drowned out (Sekkarie & Calì, 2015).
Conversely, there are long term benefits. Research has shown that more than one-fifth of Europeans will be “65 or older by 2025” (Proctor, 2015). The graph above shows that 54.2% of the migrants are under the age of 17 helping to alleviate the ageing population issue.
As Wolfgang Schäuble, Germany’s financial minister put; The short-term costs are manageable, while the long-term benefits are potentially substantial (Wolff, 2014).
The Virgin group strategy is essentially the idea that there are always new business opportunities; “opportunities are like buses – there’s always another one coming!” (Branson n.d.). Due to Virgin’s large number of subsidiary companies, they are able adopt an Emergent strategy where they ‘trial and experience’ products and services, without putting the whole Virgin Group at risk (Mintzberg, 1990). It is important with this strategy that the success of other subsidiaries exceed the loss of any failed ones. This strategy has worked, and Virgin have entered the leisure, travel and money markets to name a few. However, Branson has had a few business flops, one of the biggest being Virgin Cola. A SWOT analysis of Virgin Cola shows that the Strengths are
New innovative packaging
and the opportunities are
Expand the Virgin Brand
Enter a large market
Although the strengths and the opportunities of Virgin Cola are attractive, Branson underestimated the threats and weaknesses of the business, specifically what Michael Porter states as one of his 5 Competitive Forces; “the intensity of rivalry among competitors” (Porter, 2008). Coca Cola and Pepsi, two leading soft drink brands, took this potential competition very seriously. Coca Cola doubled their spending on advertising and promotion in response to Virgin Cola (Hayman & Giles, 2015). This along with a few other factors, forced Virgin Cola out of the market. This demonstrated the importance of understanding the competition when entering a new market.
Conversely, competition can be positive. I am currently part of the University Hockey Club, and the competition between players striving to play for the highest team is what drives us to train harder, consequentially producing better results for the University. This theory is relatable to co-workers in the same company, suggesting that internal competition can be as beneficial as external competition.
I was inspired to undertake this module having read Richard Branson’s autobiography “Losing my Virginity” whilst inter-railing around Europe this summer. My degree – Natural Sciences – has provided little fundamental knowledge about business, so I was surprised by how gripped I was by the end of his story. I am looking to work in the technology sector, so taking my first business module is a critical step towards improving my employability prospects.
Businesses will often transition between the private and public sectors for varying reasons, but often to gain public funding. The Virgin Group ltd is a holding company, of which a few of their subsidiaries have changed between sectors to benefit. During the 2008 financial crisis Northern Rock plc was nationalised, and virgin money started the bid for their acquisition with the “good bank” part of Northern Rock plc (Michie & Llewellyn, 2010). In 2011 Virgin Money agreed to buy Northern Rock from the national Treasury with the aim to help UK’s banking sector:
"We believe that returning Northern Rock to private ownership is an important step in rebuilding the UK banking sector”- Sir David Clementi
Virgin Money and Northern Rock combined to form Virgin Money plc, and they floated their stocks on the the London Stock Exchange (LSE) with its IPO of 283p on 17th November 2014 (BBC, 2014), and joined the FTSE 250 in 2015: LSE: VM. This transition from private to public raised around £150m, and allowed virgin to finally pay back the £50m they owed the Treasury for buying Northern Rock. The National Audit Office analysed this sale, and stated that: “although the sale to Virgin Money generated a loss for the taxpayer, it was the best available option to minimise future losses” (Morse 2012). Additionally, Virgin reported “127 per cent increase in underlying profit for 2014 which ended the year at £121.2 million” (Gadhia, 2014) showing that this change also positively affected Virgin Money.