Influences of Macro-economic Activity on Business Management

This report discusses the macro-economic factors that affect the business activities of Virgin Holiday, including inflation and unemployment. It also analyzes the impact of UK's current growth rate and government intervention methods on the company. Additionally, it highlights the global challenges faced by the company and provides recommendations to overcome them.

Business Management
BMP4003 Business Environment
Assessment 2
Influences of Macro-economic Activity
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Table of Contents
ntroductionI .................................................................................................................................2
An e planation of two macro economic factors that the chosen business will need to considerx -
and the influences these could have on its business outputs macro economic factors e g( - . .,
economic output unemployment rates inflation etc, , .).................................................................3
ow will the current growth rate impact on the chosen business give reference toH UK (
economic life cycle D inflation unemployment rate, G P, , ) .............................................................4
ow can the government current intervention methods affect the selected busines e g fi scalH ? ( . .,
and monetary policies furlough scheme etc, ). ..........................................................................6
hat are the current global challenges facing by the chosen business and recommendationsW
on how to overcome them in this current ti me? ........................................................................7
Conclusion..................................................................................................................................8
References..................................................................................................................................9
Introduction
Business environment means those elements or the factors that affects the business
activities and its decisions among various business organizations. They are mainly external
factors that are beyond the control of the business enterprises . Like, competitors, buyers,
suppliers, governmental control or interventions, consumers, social, political, legal, change in
technology, etc. The business units can have direct or indirect effects of all these factors on
their concerned businesses. The business structures can only respond to the changes which
are experienced by the business firms. No alterations could be made by the organizations
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regarding the external factors(Keogh-Brown, et.al, 2020). Macro economics basically is a
part of economics that deals with the economic components based on large scale, like,
interest rates and national productiveness. It evaluates the conduct and performance of the
business organization of a particular economy. It contains study of economic trends, how the
financial and monetary policies affects the country, etc. The virgin holiday company was
opted for the purpose of preparing a report. The company was formed in the year 1985 which
is a service based company and provides holiday packages for almost all the holiday
destinations of the world. This report encompasses the various macro economic factors that
affects the business activities of the company. Further the report also talks about the growth
ratio of UK at present and in what terms the governmental interference influence the business
operations of the company. It also analyze the global situations faced by the company and
suggestions to surmount those challenges.
An explanation of two macro-economic factors that the chosen business will
need to consider and the influences these could have on its business
outputs (macro-economic factors e.g., economic output, unemployment
rates, inflation etc.)
The factors of macro economics results in the ascension and spill of the economy of
the country which is uncontrollable and sometimes could be controlled by the government of
the country(Fernández-Villaverde and Jones, 2020). It indicates that whether an economy of a
state is growing or not. It contains different components that affects the firmness of fiscal or
monetary aspects regarding economy as a whole. These elements influence the financial and
geopolitical circumstances too. In relation with the company ,that is, Virgin holiday, there are
various factors that impacts the business outcome, they are-
 Inflation : The situation in which the basic cost of the goods and services increases
for a period of time, inflation arise. The instability experienced in the economic
structure is because of the rapid growth of inflation. On the other steady-going
inflation can be measured and is predictable at the same time. Generally inflation
occurs due the increase in demand of the goods and services which increases the
prices of the same. This will automatically increase the business cost of the company
which is being happened in the case of Virgin holiday. This results in the hike of the
labor costs which raises a question of sustainability in terms of the business enterprise
which impacts the supply functioning of the company on the same note.
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 Unemployment: : When there are less or no employment opportunities available in
the country due to various reasons, that gives rise to the situation of unemployment.
There are many individuals in the country that are ready to get employed and looking
for the jobs but not getting it. The pandemic has deepen the issue of unemployment in
the UK. It has affected the employment sector of the country as a whole. This will
give rise to the condition of recession in the country where the job holders are losing
their jobs and the job seekers are not getting the jobs(Batten, 2018). There is an
economical slowdown during the period of Covid 19. For the purpose of the future
requirements, it is important on the part of the company to make certain changes in
the marketing strategy to meet the requirements of the changes that are taking place in
the economy. The labor market is constricting due to which the company has to
increase the wages in order to appoint a new workforce.
From the above observation, it is being understood that the two macro-economic
components, that is, inflation and unemployment, affects the business activities of the
company, Virgin holiday. It gave a hike to the prices of the services which leads to the
increased production cost and low availability of the new labors in the company.
How will the UK current growth rate impact on the chosen business (give
reference to economic life cycle, GDP, inflation, unemployment rate)
UK is a developed economy which provides opportunities to several industries in
order to cater better standards of living. The pandemic created adverse effects on the
businesses in the UK . It shows a downfall of 9.4% in 2020 itself because there is restriction
on the migration of people and various goods and services among the nations. There are
certain factors which poses a huge impact on the economic growth-
Economic life cycle- This particular factor can be defined as certain economical changes
between the period of expansion and contraction. It talks about the situation when the
economy of the country go through the different phases in cyclical form(Gholipour, 2019).
There are various elements that ascertain the present level of the stages of economy, such as,
GDP, employment rates, rate of interest, etc. For the benefit of the investors and the other
business enterprises, it renders a deep observation or evaluation of the economy for a better
understanding. There are four levels of economic cycle in terms of the Virgin holiday
company-
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 Expansion- At this stage, a company experiences reduction in rate of interests and
also a speedy growth ratio with increased level of production. There is an element of
inflationary force which is being built on the business enterprises.
 Peak : At this particular stage, when growth of the economy reaches to its maximum
proportion, there is a sort of dis balance created in the economy of the country which
is required to be corrected(Hesse, Hofmann and Weber, 2018). Because, if it is being
observed in terms of profitability, the company is on its peak but along with this, it
also sometimes leads to the situation of instability in the business operations in
respect to the Virgin holiday company.
 Contraction : The growth which has achieved a peak in the previous stage, at this
level it slows down its pace which is termed as the period of contraction. With this,
the rate of employment also goes down and there is a stagnancy in the prices of the
goods and services. This is the stage which makes the company realize the errors in
terms of their businesses and which could be obviated by doing corrections.
 Trough : The last stage of the economic cycle which poses towards the starting point
of economic growth in totality. After making corrections in the previous level, the
growth which was went down, strike the low point sale and then grab its speed in
order to hike the growth of economy. The Virgin holiday company is now initiated
the recovery process by examining the business environment.
Inflation – The element of inflation enters when the prices of the goods and services use to
get increased with the increased cost of production. The Virgin holiday company was facing
inflation in terms of rise in the prices of the holiday packages which they are offering to their
customers. Inflation makes the customers to face high level of variations in the global as well
as national market. For example- prices of fuel increases with the price of cars, price of the
holiday packages increased with the increase in the prices of the air tickets(Van de Ven,
Zwijnenburg and De Queljoe, 2018).
Rate of Unemployment – The unemployment rate can be measured by the number of labor
or work force in the country without the job. When the economy is in a deteriorating
condition and the the availability of employment opportunities are less, then it can be said
that the economy of a particular country has low rate of employment. The major reason
behind this is, the situation of pandemic that is covid 19.
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How can the government current intervention methods affect the selected
busines? (e.g., fiscal and monetary policies, furlough scheme etc).
The government of the country is considered to be one of the important player which
is capable enough to make any required changes in the financial and monetary policies of the
state. The only purpose to do that is the betterment of the business class and the individuals
who are involved in it. There is a big role of the governmental interference in the economy. It
not only helps in maintaining the level of the currency but also helps in the promotion of the
equivalent and transparent dispersion of the income throughout the country which ensures
the efficiency in the economic activities of that state. Due to this, the companies gets the
chance to maximize the profits and the prices of the shares. If there is an element of
minimization in the company, then it will increase the rate of interests (Lorusso and Pieroni,
2018).The government intervention also encourage the competitiveness among the companies
at the international level. In terms of Virgin holidays, there are various intervention methods
that impacted the business of Virgin holidays-
 Fiscal policy : The fiscal policy measures of the government renders a framework in
which it supports the sustainable growth of the economy. It also helps in the reduction
of poverty. To measure the rate of inflation, rate of interests is used as an instrument
for the same. It helps in evaluating the gravity of inflation in context with the prices
and demands of the different goods and services. Thorough these measures,
government tries to make certain necessary improvements in the expenditure and the
taxation policies including tax rates in order to regulate and to ensure a positive
impact on the economy of the country. This will indirectly impacts on the consumer
market which renders better quality goods and services to them.
 Monetary policy : It means that in what quantity, money is available in the economy
and through what sources it will be supplied in the money market. The monetary
policy of a country depends upon the money accessible in the market by the
individuals. The proper administration of monetary policies helps in maintaining a
balance in terms of inflation, growth of the economy and the ratio of consumption,
etc. The government use to exercise a grip over the taxation policies and norms in
order to promote the activity of investments. The general focus in terms of Virgin
holiday was on the changing of the monetary picture in a diversified manner which
leads to the efficient and effective working of the company. The company that is
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Virgin holiday is working on improving the rate of interests of the individuals by
which the money can be utilized in a proper sense (Metcalf and Stock, 2020).
 Furlough scheme : The whole world has been stopped and everybody is being
restricted from doing any kind of activities whether business, social, political, etc.
because of the pandemic and the lock down. The workers or the employees are in the
expectation that this phase will going to end soon and they would be surely joining
their respective jobs. The Virgin holiday company has been provided its employees
with a scheme under which they can take temporary leave which is rendered by the
company as a special request. The extra expenses came to an end at the time of corona
and the business laid importance on making the working conditions much better for
the employees and the workers. For the other business corporation, this could be an
example where the above approaches ensures high profitability in the market.
What are the current global challenges facing by the chosen business and
recommendations on how to overcome them in this current time?
It is important to understand the global challenges that are faced by the business
enterprises. In the context of Virgin holiday company, there are certain challenges on the
global level which is being administered by the above mentioned entity-
 Significance of Foreign Politics, policy and relations : The various policies, norms,
rules and regulations made by the government and the political environment created
by the different leaders affects the decision making process of the company by the
way of resources, conveyance, transport and overall economic structure(Duval and
Furceri, 2018). .
 Unemployment : The period of pandemic adversely affected the job availability in
the country and the individuals are forced to remain unemployed. The companies are
unable to generate the profits and facing high amount of losses. But slowly and
gradually the situation has been changed now, as the effect of covid is reducing day
by day. The companies started growing once again and establishing themselves like
they use to do in the previous times. The lap-straked chores of the companies are now
getting solved which ensures huge success to the companies. The issue of
unemployment is being reduced and at present the organizations are giving back the
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jobs to the existing employees and generating new employment opportunities for the
new entries.
 Fuel efficiency : The cost of the company is considered to be one of the major aspects
which affects the management and administration of the airline industry. If the prices
of the fuels increases it will automatically accelerate a hike in the prices of the tickets
in terms of the airline industry. In context with the Virgin airlines, they are influenced
by the major issues in relation to the similar problem which can cause a high level of
reduction in the profits and revenue of the company.
 Travelers comfort and experience : The airline industries are totally dependable on
the amount of satisfactory feed backs they receive from their customers. In this
regard, the company, Virgin airlines is not able to attain the satisfaction of the
customers. There are certain areas by which the customers always remained
discontented and because of that, the company is not performing up to the mark in
terms of excellence.
The suggestions in this regard to the company Virgin airlines is that it must reinitiate
the services from a new stance by making a proper and purposeful study of the likes and
dislikes of the customers. The main thing which should be established in the company is a
speedy customer support and the safety standards. The airlines companies can re accelerate
its business by getting a financial support in terms of funds from various financial institutions
available in the market. With this the airline company should try to build a new framework in
which they must also include the concern of employment generation through their business.
This will provide number of job opportunities to the individuals of the country. Moreover, it
will lead towards providing better services to the travelers. This will yield maximum
profitability for the company.
Conclusion
The conclusion drawn from the above report is that the branch of macro economics
studies the overall structure of the company. The management and the administrative
functions of the business is influenced by fluctuations in the prices of the goods and services,
monetary flow, economic growth of the country, unemployment, etc. The monetary flow in
the market is evaluated by the fiscal and monetary policies of that country. The Airline
industry faces a cut throat competition from the already established companies in this field
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and the hike in the prices of fuel. In the end, there were certain recommendations that were
made to the company so as to increase its efficiency in terms of furnishing better services and
customer support to the passengers in order to become successful among the other airline
companies.
References
Keogh-Brown,et.al, 2020. The impact of Covid-19, associated behaviours and policies on the
UK economy: A computable general equilibrium model. SSM-population health, 12,
p.100651.
Fernández-Villaverde, J. and Jones, C.I., 2020. Macroeconomic outcomes and covid-19: A
progress report (No. w28004). National Bureau of Economic Research.
Batten, S., 2018. Climate change and the macro-economy: a critical review.
Gholipour, H.F., 2019. The effects of economic policy and political uncertainties on
economic activities. Research in International Business and Finance, 48, pp.210-
218.
Hesse, H., Hofmann, B. and Weber, J.M., 2018. The macroeconomic effects of asset
purchases revisited. Journal of Macroeconomics, 58, pp.115-138.
Van de Ven, P., Zwijnenburg, J. and De Queljoe, M., 2018. Including unpaid household
activities: An estimate of its impact on macro-economic indicators in the G7
economies and the way forward.
Lorusso, M. and Pieroni, L., 2018. Causes and consequences of oil price shocks on the UK
economy. Economic Modelling, 72, pp.223-236.
Metcalf, G.E. and Stock, J.H., 2020, May. Measuring the macroeconomic impact of carbon
taxes. In AEA papers and Proceedings (Vol. 110, pp. 101-06).
Duval, R. and Furceri, D., 2018. The effects of labor and product market reforms: The role of
macroeconomic conditions and policies. IMF Economic Review, 66(1), pp.31-69.
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