Case Study: Economic Environment Impact on Virgin Money Bank

This case study examines the significant impact of the economic environment on the banking sector, using Virgin Money Bank as a focal point. It explores how economic factors such as inflation, employment rates, government policies, and global business trends influence the bank's operations and strategic decisions. The analysis delves into the role of government through fiscal and monetary policies, and discusses key economic indicators like GDP and the Consumer Price Index. Furthermore, the study highlights the effects of globalization and employs PESTEL analysis to dissect political, economic, social, technological, environmental, and legal factors influencing the bank. The report concludes by summarizing the positive and negative impacts of the economic environment and global business, emphasizing the importance of adapting to economic changes and adhering to legal frameworks to maintain stability and growth in the banking sector.

Individual Case Study

Table of Contents
INTRODUCTION......................................................................................................................3
The economic environment in which the bank operates........................................................3
Global business environment and its impact on the country..................................................4
CONCLUSION..........................................................................................................................6
REFERENCES...........................................................................................................................8

INTRODUCTION
The environment in which the banking sector operates has influence of the external
environment. As based on the economic environment the decisions are made by the banks.
Based on the economic changes it has huge impact on the demand and supply of money in
the market. The rates are changed according to the influence of the market. Virgin Money
Bank provides banking and financial services (Virgin Money UK PLC, 2022). The future plan
of the bank is to digitalise all its services. And provide services to the unprivileged workers
and people. Through this report it can be examined that how the economic environment
effects the banking sectors. Examining the business environment and its impact on the
country. Analysing with the help of relevant theories and models. As the banking sector is
mainly affected with the countries economic conditions. Based on it the government take
decisions.
The economic environment in which the bank operates
The government plays a major role in the environment. As if the economy of the state
is strong then it indicates that the standard of living of the people is good. This increases the
growth of the country and the banking sector. The banks are affected by the economic
development of the country which is caused by the government which is elected by the
public. The economy is affected by the inflation, employment and the policy made by the
government.
The government follows different policies like the rate of inflation is not affected
majorly. As the prices are inflated slowly (Friedline, Chen and Morrow, 2021). Increase the
employment in the country so the economic development is increased. Apart from all these
objectives if the country have favourable balance then it can grow. It regulate the taxes and
rules and regulations which are to be strictly followed otherwise the country may suffer.
To control the economic environment government uses fiscal and monetary policy.
Due to this policies the government make the budget which includes all the spendings of the
government. Which is collected by taxes and borrowing funds. It can be either deficit or
surplus. The surplus fund is good for the economy as it can be used for further development
in the infrastructure of the country (Jemielity, 2018). With the help of monetary policy the
government control over the circulation of the money in the economy.
Based on the economy’s condition the government take major steps to control the
money circulation. On the basis of this it increases or decreases the interest rates. Even the

central bank prints the money to increase the spending power of the people. To control the
economy it take the money out of the system.
As Consumer Price Index is the most common measure used to calculate the prices
and inflation rates changes which are caused. Based on the national income of the country
and its employment status the economic environment changes (Schryen, Kliewer and Fink,
2020). One of the factor is Gross Domestic Product (GDP) of the country. Which means the
goods and services produced in any country during particular year. It only includes the
domestic product and not the national products.
When the GDP is growing then the economy is good but when it is decreasing then it
may even lead to recession (Safari, 2018). Which is not good for the country. So banks
control the flow of the money in the environment so that there is not excess inflation. There
are many indicators which are given below:
As employment have huge impact on the economy as the unemployed percentage is
more than the economy is affected largely as the revenue earned is less among all. Even the
industrial production affect the economy if the production is low as it increases the imports
and reduces the exports in the country (Becchetti, Corazzini and Pelligra, 2021.). Which can
increase its debts and payment liability. This in turn can even cause inflation.
When the government make budgets then sometimes due to overspending of the
reserves deficit can be caused. This is a indicator of poor performance or the impact on the
economy development. According to the condition of the economy major decisions are taken
by the banks and central bank. As banks can only get back to the situation of the country.
Otherwise the economy is affected majorly. The government take assistance in case the
economy is highly affected from other countries. As to restore its position it is necessary.
As the growth of GDP is good so the country’s economic condition is well. As the
percentage of unemployed is less so it indicates that the performance of the economy is good.
And the indicators like it have surplus reserves which is good for the economy. And can be
used in case of assistance or development of the country (Dawid and Arifovic). The
industries are also performing well and the domestic sales of goods and services is also good.
Global business environment and its impact on the country
Global business environment refers to the globalisation. In which the business is
expanded all over the world means globally. It gives access to whole market in the world
which help to grow the business. Globalisation help to increase the growth of the business
and its customer base all across the world. Due to this competition has increased in the world.

As the customer have various options and choices which are to be chosen by them. As
there is huge varieties of products available at different prices. Due to this the business can
even get economies of scale as the cost is reduced in relation to its revenue and sales all over
the world (Kundnani and Hayes, 2018.). Due to globalisation the customer can easily find the
goods required by them.
As the company can even use new technology and automation to increase its sale.
Few goods and services can be imported or exported to increase the efficiency. It can use cost
effective techniques to increase the profit margins. The brand value of the company is
increased in all over the world. Due to this the target customers are satisfied. The
employment opportunities also increases due to expansion of the company.
With the use of the internet the expenses related to the marketing have reduced as
through digital marketing the customers can be targeted easily. More talented people can
apply and due to this the company can grow its business on even more large scale. Apart
from positive impact it also have negative impact on the country.
Due to globalisation the competition is increased and the traditional things are not
used by the people. Even due to this the weather is affected extremely. The small enterprises
have to shut their company as the competition is huge (Zajda and Majhanovich, 2021). Due
to more variety of products the customer purchase more from the outside country if it is at
low price. Due to this the customer base is affected. The revenue is reduced. Even due to
globalisation the culture environment of the country is affected.
With the help of PESTEL Analysis it can be analysed how the external environment impact
the country. As PESTEL analysis focus on the external factors which influence the company
and has impact on the business in the long run. It is elucidated below:
Political factors- It plays a vital role in case of banks as Virgin Money have impact of the
politics which is caused in the environment. As the decisions are changed on this basis as if
the political party is stable then the economy is also stable. Otherwise, it have huge impact
over the economy (Yusop, 2018). As in politics the level of corruption has also increased due
to which the large companies are positively impacted in spite of small business. The
government also interfere in the banks to keep the economy stable and change certain things
based on that.
Economic factor- The major thing which is caused due this factor is increase in inflation rate,
interest rate and even the exchanges. Due to increase in inflation rate the money circulation is
restricted in the country. In this the government can intervene easily as it has control over the

market and the economy of the country. As it can also have impact on the interest rates,
exchange rates and even the unemployment rates.
Social factor- This factor influence the culture of the country. As based on this Virgin Money
can market the usefulness of the bank. As in near future the bank wants to convert it into
digital banking. So the culture of the society and the needs of the customer plays a vital role.
As it increase the standard of living of the people (Pan, Chen and Zhan, 2019). Because they
have increase in the purchasing power and even they increase the investments in the banks.
Technological factor- This is one of the most important factor in the evolving environment.
As the technology has great impact on the growth of the company and even the country as a
whole. It keeps on changing rapidly so the decision making should be such that it can be
implemented on time. Otherwise, the technology will be of no need as the other company can
take first mover advantage. The profitability also increases with the rapid growth and the
technology used by the organisation. Safe and secure technologies should be used by Virgin
Money bank as it has very important data of the customers so security of it is must.
Environmental factor- In this it can be seen that the environment also impact the banks. The
profitability in the market is affected by this factor. As there may be different environmental
factors which are to be kept in control following various laws, rules and regulations. If new
entrants want to enter in the market then it has to follow the environmental standards so that
it can achieve customer satisfaction. The organisation has to follow the rules. The bank has to
take several majors to keep the environment clean (Mair). Like managing the waste in
financial sectors, using less use of papers to save papers. It can even use environment
pollution laws to regulate the environment and the climatic changes.
Legal factor- These are related to the laws, rules and regulations, acts and the legal
framework which is applicable to the banking sector. Virgin Money should make sure that
they comply with the legal rules and regulations imposed by the central bank. Central bank is
the one who has the authority, responsibility towards and control over the banking sector or
industry. As complying with the legal factor is must. The bank has to follow the Anti-trust
law, discrimination law, consumer protection and e-commerce law. As these help the banking
sector to increase its market share. More customers open their account when they feel that
their money is safe and secure. For protection of the customers the security is increased as the
outsider cannot demand for the documents without the permission of the account holder.
With the Anti-Trust law the bank can make its customer believe that they are safe with
regarding their deposits. As in this the market power of the bank is limited.

CONCLUSION
In this report it can be concluded that the economic environment plays an important
role in the operation of the bank. As it only examine the economy and accordingly take the
decisions to keep it with the economy. To develop the economy it is necessary to keep eye on
the economic changes which can cause the country’s economy. In this report it can be further
concluded that the global business has positive as well as the negative impact on the country.
As due to globalisation the business is increased and the market share is increased in turn of
it. Which increases the revenue and the satisfaction of the customers. But it should be in
limited manner as it can negatively impact the company and the country. As the culture of
one country is affected by the other due to this.

REFERENCES
Books and Journals
Friedline, T., Chen, Z. and Morrow, S.P., 2021. Families’ financial stress & well-being: The
importance of the economy and economic environments. Journal of Family and
Economic Issues. 42(1). pp.34-51.
Jemielity, D., 2018. Translation in intercultural business and economic environments. In The
Routledge handbook of translation and culture (pp. 533-557). Routledge.
Schryen, G., Kliewer, N. and Fink, A., 2020. Interview with Utz-Uwe Haus on “High
Performance Computing in Economic Environments: Opportunities and
Challenges”. Business & Information Systems Engineering. 62(1). pp.21-23.
Safari, A., 2018. Venture capital and intellectual property rights effects on innovation in
different socio-economic environments: a systematic review and exploration of various
contradictive studies. International Journal of Economics and Business
Research. 15(3). pp.373-397.
Becchetti, L., Corazzini, L. and Pelligra, V., 2021. Trust and trustworthiness in corrupted
economic environments. Games. 12(1). p.16.
Dawid, H. and Arifovic, J., Dynamic Analysis in Complex Economic Environments.
Mair, C., The Reliability of Naturalistic Observations of Social, Physical and Economic
Environments of Bars.
Pan, W., Chen, L. and Zhan, W., 2019. PESTEL analysis of construction productivity
enhancement strategies: A case study of three economies. Journal of Management in
Engineering. 35(1). p.05018013.
Yusop, Z.B.M., 2018. PESTEL analysis. COMRAP 2018, p.34.
Zajda, J.I. and Majhanovich, S. eds., 2021. Globalisation, cultural identity and nation-
building: The changing paradigms (Vol. 5). Dordrecht: Springer.
Kundnani, A. and Hayes, B., 2018. The globalisation of countering violent extremism
policies. Undermining Human Rights, Instrumentalising Civil Society. Amsterdam:
Transnational Institute.
Online
Virgin Money UK PLC. 2022 [Online]. Available Through: <
https://www.virginmoneyukplc.com/>. [Accessed 18 July 2022]