Influences of Macro-economic Activity on Virgin Group
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This report analyzes the impact of macro-economic factors such as inflation rate and unemployment rate on Virgin Group. It also discusses the impact of UK's current growth rate and government intervention methods. Additionally, it covers the global challenges faced by the company and recommendations to overcome them.
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BSc (Hons) Business Management BMP4003Business Environment Assessment 2 Influences of Macro-economic Activity Submitted by: Name: ID: Contents 1
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Introductionp-3 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.)p-3 How will the UK current growth rate impact on the chosen business (givereferencetoeconomiclifecycle,GDP,inflation, unemployment rate)p-4 How can the government current intervention methods affect the selectedbusines?(e.g.,fiscalandmonetarypolicies,furlough scheme etc)p-6 Whatarethecurrentglobalchallengesfacingbythechosen business and recommendations on how to overcome them in this current time?p-7 Conclusionp-9 Referencesp-9 2
Introduction Businesses environment is the collections of all individuals, institution and other factors that are not in control of a business organization but it depends on those factors because they impact the performance of the business activities and its sustainability(Shi, Zhuang and King,2022). It has great importance because it enable the business to identify the opportunities with the help useful resources so that it can be able to cope up with the changing environment. In this report, Virgin group has been taken into consideration which is multinational venture combined founded by the Richard Bronson and Nik Powell. It involves in several business like travel & leisure, health & wellness, music & entertainment, telecom & media and financial services. The report will cover macro-economic factors which have great impact on the business of a concern. Further, it will explained current growth rate and government intervention methods that may affect business. Apart from this, it will discuss the current global challenges that may impact the business. 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 factorse.g.,economicoutput,unemploymentrates, inflation etc.) Macro economic factors are the indicators of the financial growth and decline that can affect the economy. The factors may include the geopolitical, environmental or economic events that can effect the monetary stability of the country as a whole. The factors can be considered as positive, negative or neutral on the basis of their impactontheeconomy(Abdoh,2022).Thesefactorsareanalyzedbythe economist, financial analyst and other professional who provide report related to the financial health of the country. Thus, the two macro-economic factors are explained below in context to the Virgin group: Inflation rate:It refers to the increment in the average price of the goods and services. When there is rise in inflation then people have to spend more on the same products or services and the purchasing power of the persons become low. The employer of a some companies also raise the living cost sopthat the salaries of the 3
employees can match the rate of the inflation. This may help the employees in purchasing those products or services whose prices are raised due to inflation. The inflation rate shows the rise in price and es expressed in percentage. In relation to the Virgin group when the rate of inflation increases then then the company have to face many problem. The problems may include the prices of the raw material and other specific items become expensive due to which the company have to increase the cost of their products. As a result the purchasing power of the customers also affected and they make less purchase which result in loss to the company. But company may protect itself from such loss by adopting new pricing strategy and focus on the expenses which help in increasing the sale of a company. Unemployment rate:It is defined as the percentage of the unemployed worker present in a labor force(Clancy and Ricci, 2022). It indicates the performance of the labor market in a country which affect the income of the families, reduce purchasing power of the people, decrease the morale of the employees and reduce the output of economy. The unemployment rate increases due to the low demand of theproductandservicesinthemarket.Asaresultthecompanylayoffthe employees which may lead to increase in the rate of unemployment. With reference tothe Virgin group, the company have great impact of the unemployment because their products of the products become low. This happens because the demand for the products or service get reduced due to unemployment as there is no earning to thefamiliesduetowhichthepurchasingpowergetreducedandeffectan organization adversely(Uzel and et. al., 2022). Thus, in such ways the macro-economic factors affect the business of the Virgin group therefore, it has to make different strategies to prevent such negative impacts that may affect its business. How will the UK current growth rate impact on the chosen business(givereferencetoeconomiclifecycle,GDP, inflation, unemployment rate) The growth rate refers to the change in the percentage of a specific variable within a specific time period. The growth rate help in evaluating the performance of a company and also forecast for the future presentation(Rajaeifar and et. al., 2022). 4
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The economies growth rate is traced as the the annual rate of change at which GDP of the country increases or decreases. In relation to Virgin group, there are some factors which affect business of a company which are describes as under: Economic life cycle:It is also known as the business cycle which is a periodic growth and decline of the economy of the country that are measured in GDP. It is important because it help the professional to forecast the direction of the economy makes everyone better to produce or consume more goods and services. It has four stages which are depicted as under:Expansion:This is an stage where the companies grow their production steadily and earn profits. At this stage the unemployment rate are low and the stock market have good performance(Islam and et. al., 2022). The consumer are buying and investing which lead to increase indemandfor goods and service where prices begin to rise.Peak:Thisisanstagewherethecompaniesexpandtheirbusinesses carelessly and the investors invest more by purchasing the assets which lead to increase in the growth economy.Contraction:At this stage the economic activity is on the way down where the investors have to face reduction in the value of the assets and the rate of unemployment get increased. The stock market turn into the bear market and the GDP growth is below 2%. Trough:The Trough is the lowest point which occurs when there is recession and the business expects to rebound into the expansion phase. GDP:The GDP of UK is expected to reach 3200.00 USD billion by the end of 2020 according to the analyst. The GDP indicates the production of goods and services in the country which impact the economy as well. when the GDP increases it provide various opportunities to the business because the demand for the goods and services increase which lead to increase in the national income. This also enable change in the living standard of the people and generate revenue to the business. Inflation:This affect the business because the price of the raw material and manufacturing cost get increase due to which the company have to face the low 5
purchasing power of the customers. This lead to decrease in the demand of the company's goods and services(Ren and et. al., 2022). Unemployment:This affect the business because there is no earning source for the people which reduce their purchasing power due to which company have to face loss in the production. Thus, in such ways the growth rate of country can affect the business of the Virgin group. Howcanthegovernmentcurrentinterventionmethods affecttheselectedbusines?(e.g.,fiscalandmonetary policies, furlough scheme etc). There are some government intervention method which have a great impact onthebusinesses. In relation tothe Virgin group, various policies have been mentioned which are as under: Fiscal policy:This policy refers to the use of government spending and tax policies so that it can influence the economic conditions. These are of two types whichareexpansionaryfiscalpolicywhichishighlyusedatthetimeof unemployment and recession. The government use this policy by lowering taxes so that the aggregate demand can be increased(Carrasco, Jawara and Meyer, 2022). Second is contractionary fiscal policy which is designed to slow the economic growth rate when there is high inflation. It raises the taxes and cut the spending. The fiscal policy help in mobilizing the amount of the resources so that it can provide finance to the numerous projects. This help in providing the information to promote the saving rate and gives adequate incentives to the private sectors so that they can expand their activities. The main objective of the fiscal policy is to decrease the instability in the dispersion of the income and wealth. Moreover, it includes the price stability, provide full employment to the people of the country and optimum use of resources. It also help in accelerating the rate of economic evolution, promote investment, capital arrangement and development(Shalyari, Arman and Salahmanesh, 2022). With reference to the Virgin group, it is impacted by the fiscal policy because the taxes of the government are charged fro the company therefore, it also has to increase the price of their products. As a result, company have to face low income 6
generation or sale due to the lower demand of the customer because of their lower income. Monetary policy:This policy are issued or made by the central bank that manage the supply chainof money in form of cash, credit money market and checks.Thispolicyhelpinincreasingtheeconomicgrowthbypreventingthe inflation through reducing the liquidity(Erer and Erer,2022). The main objective of this policy are managing the unemployment, control the inflation by reducing liquidity and keeping up with long term interest rates. There are two types of monetary policy which are expansionary fiscal policy which is used by the central bank to control the inflation. They control the inflation by limiting the amount of lending to control the supply of money. Therefore, they charge higher rate of interest through lending of money. Second is contractionary fiscal policy which is used by central bank to avoid the recession and control the unemployment. The bank charge lower interest so that the comp[any takeloaneasily toexpandthebusiness and hire thestaffand equipment. It increase the liquidity by providing lower rate of interest. Moreover, individual also borrow for spending more in buying new appliance and so on. This help inincreasing the economic growth of the country and reduce the rate of unemployment(Novales, Fernández and Ruiz, 2022). Therefore, monetary policy assist businesses like Virgin group by providing them lower interest loan so that they can expend its business and hire employees to run the activities of the business. Whatarethecurrentglobalchallengesfacingbythe chosenbusinessandrecommendationsonhowto overcome them in this current time? There are various challenges that company have to face while expanding its business which are depicted as under in context to the Virgin group: Foreign laws and regulation:When the company expand its business internationally so it has to follow the rules and regulation of that particular country in which it will operate its business(Shamdasani,2022). Therefore, the company have to understand the law of the country where its target market are. This will help the company to successfully operate its business internationally. 7
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Currency rates:These rates may affect the business in two ways first by changing the cost of providing goods that are purchased from different country and by charging the attractiveness of the products to the manage customers. Therefore when the rate of the currency gets depreciated the it provide benefits to the exporter of the country and provide negative impact on the importers. Alternatively, when the rate of the currency gets appreciated then the exporter of the country have negative impact of it and the importer is provided benefits of it. Thus, in such ways the virgin group can be impacted by the rate if the currencies while expanding its business to other countries. Choosing the right global shipping method:The company have to choose the right shipping method to transfer its goods to other countries. Therefore, it has to chooselowcostmethodsothatitenableanorganizationtopayfreightfor transportation. It has to choose the carrier company which charge low transportation cost that help a business concern in saving cost and keep safe their goods. Political risk:The company have to face the political risk because theare various laws, policies, taxes of government that are impose on the business of an organization. Therefore they have to cope up with every party of government so that it can run its business successfully(Ramlee,2022). The government changes time to time and the rule and regulation also changes according to the new government. Therefore, the company have to adjust with new government policies for successful running of the business. Thus, in such ways the company may affected by the risk of politics and their rule and reguletion. Communication difficulties and cultural differences:When the company expand its business so it has to consider the communication difficulties and cultural differences because different county have different language and different taste or perception. Therefore, the company have to bring products according to the taste or culture of that specific country. A language barrier also occur to communicate about the products so the company have to promote its products in the language which prevails in the country so that they may get aware about the new product or services of an transition. Thus the company have to face global challenges while expanding it business activities. But from the above discussion it has been recommended that to expand 8
the business internationally the company should cultivate partnership tn the region where it wants to operate its business and must have knowledge of the market where it is expanding its business. Conclusion From the above discussion, it has been concluded that the factors of business environmenthavegreatimpactontheactivitiesofthebusiness.Theprofit, production or the investment are determined by the business environment. The factors may be of any type such as human, economic system, economic policies, monitory and fiscal policies and so on. The report has discussed about he macro- economicfactorwhichpositivelyandnegativelyimpactthebusinessofan organization. It has explained the inflation rate and the unemployment rate which may reduce the production of the business when the both factor increases because it reduce the purchasing power of the customers. Further, it has stated the current growth rate of UK which may impact the business of the Virgin group. In addition to this, it has furnished information about method of the government such as fiscal and monetary policies which affect the business of company. Apart from this, it has discussed the global challenge that company may have to face during the course of business. References Abdoh, H., 2022. Putting Bloomberg into Action for an Investment Class.Available at SSRN 4003753. Carrasco, H., Jawara, H. and Meyer, M., 2022.The Effects Of Fiscal Policy On Inequality And Poverty In The Gambia(No. 117). Tulane University, Department of Economics. Clancy,D.andRicci,L.,2022.Economicsentimentsandinternationalrisk sharing.International Economics. Erer, E. and Erer, D., 2022. Stock Market Responses to Monetary and Fiscal Policies: Case Studing China, India, Indonesia, and Malaysia. InHandbook of Research on Current Trends in Asian Economics, Business, and Administration(pp. 266-282). IGI Global. Islam, M.S., and et. al., 2022. Investigating the effect of climate change on food loss and food security in Bangladesh.SN Business & Economics,2(1). pp.1-24. Novales, A., Fernández, E. and Ruiz, J., 2022. Growth in Monetary Economies: Steady-State Analysis of Monetary Policy. InEconomic Growth(pp. 411-460). Springer, Berlin, Heidelberg. Rajaeifar, M.A., and et. al., 2022. Challenges and recent developments in supply and value chains of electric vehicle batteries: A sustainability perspective.Resources, Conservation and Recycling,180, p.106144. 9
Ramlee, A.A., 2022. Early Internationalizing of Small-Medium Firms: A Conceptualization on Internationalisation of International New Ventures (INVs). InMultidisciplinary Perspectives on Cross-Border Trade and Business(pp. 46-63). IGI Global. Ren, Z., and et. al., 2022. Stocks and flows of sand, gravel, and crushed stone in China (1978–2018): Evidence of the peaking and structural transformation of supply and demand.Resources, Conservation and Recycling,180, p.106173. Shalyari, F., Arman, S.A. and Salahmanesh, A., 2022. investigate the effect of exchange rate uncertainty on inflation and interest rate uncertainties and the role of monetary and fiscal credibility on it: Application of VECH and BEKK and VAR methods.Journal of Applied Economics Studies in Iran. Shamdasani, P.N., 2022.Intel: Reinventing a Technology Brand. SAGE Publications: SAGE Business Cases Originals. Shi, X., Zhuang, M. and King, C., 2022. Getting implicit incentives right in SOEs: research on executive perks in China’s anticorruption movement.Applied Economics, pp.1-14. Uzel, G., and et. al., 2022. Land use preferences considering resource economics: case of organic versus conventional wheat production in Turkey.Environment, Development and Sustainability, pp.1-18. 10