BMP4003 Business Environment: Macro-economic Impact on Virgin Holidays

This report analyzes the impact of macro-economic factors on Virgin Holidays Ltd, focusing on unemployment and inflation rates, the UK's current growth rate, and government interventions. It discusses the influence of these factors on Virgin Holidays' business outputs, particularly in light of the COVID-19 pandemic and Brexit. The report also examines current global challenges faced by the company and offers recommendations for overcoming them, such as leveraging government schemes and adapting to changing economic conditions to ensure business sustainability and growth. The analysis considers fiscal and monetary policies, the furlough scheme, and strategies for managing costs and retaining employees in a competitive environment.

Business Management
BMP4003 Business Environment
Assessment 2
Influences of Macro-economic
Activity
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Contents
Introduction..............................................................................................................................2
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.................................2
How will the UK current growth rate impact on the chosen business................................4
How can the government current intervention methods affect the selected busines?.......5
What are the current global challenges facing by the chosen business and
recommendations on how to overcome them in this current time?.....................................5
Conclusion.................................................................................................................................6
References.................................................................................................................................7
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Introduction
Organizations performs their roles and responsibilities in a business environment that
is inclusive of external and internal forces and has a tendency to affect decision-making,
growth, and profitability in the particular industry. To stay competitive in a business
environment organization needs to analyze the extent of the impact of internal and external
factors on organization objectives and goals (Bisciari, 2019). This will help them to
undertake advantage of growth opportunities and further maximize overall competitiveness in
the industry. The macroeconomic environment indicates how macroeconomic conditions
affect organization performance. This mainly deals with spending, aggregate production, and
price level market as opposed to individual and industry. An organization needs to analyze
macro-environment business and have a clear understanding of the elements prevailing in this
environment to focus on issues such as unemployment, inflation, etc.
The Present report is conducted on Virgin holidays limited which is owned by the
virgin group that offers holidays worldwide including with destinations. The organization
was founded in the year 1985 and operates its roles and responsibilities in the tour operator
industry. The present includes a discussion on macro-economic factors which is essential for
an organization to consider to determine their influence on business output. In addition to this
how UK’s current growth rate impacts current business is also included in this report. The
government’s current intervention that affects the organization’s addition to this, presents
global challenges that the selected organization is facing in addition to certain
recommendations being discussed in the present report.
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
Unemployment rates
The employment rate is mainly termed as the percentage of employed individuals in
context to the compatible total population. While the unemployment rate is mainly calculated
by expressing the number of unemployed individuals as a percentage of the total number of
individuals in the labor force (Mayhew and Anand, 2020). It has been evaluated that to
conduct roles and responsibilities in the industry it is essential for an organization to
appropriately calculate the rate of employment rate, as it not only affects their overall labor
growth but also creates challenges in front of them to survive in this competitive industry. In
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context to the Virgin holidays, it has been analyzed that after the outbreak of COVID-19 the
rate of unemployment dramatically increased which affects the overall business operations.
This is one of the most important macroeconomic factors which is essential for the respective
business to consider, as its influence on the overall business output. It has been analyzed that
there is a significant relationship between unemployment and the market if the economy
slows down the demand for services and products declines which towards businesses to lay
off employees (Conway and Hemphill, 2019). This has happened in the case of Virgin
holidays, as due to Covid-19 government-imposed lockdown and strict measures which lead
Virgin holidays to lay off a large number of employees which further reduces the overall
revenue of the business. In addition to this, Virgin holidays need to consider the
unemployment rate, as a low employment rate affects business in terms of inflation of wages
and decrease in productivity. In this, organizations need to invest in employees and build a
positive work environment.
Inflation rates
Inflation directly affects working professionally as it leads towards decreasing their
ability to save and spend. Inflation mainly causes the purchasing power of a currency to
decline, which increases the cost of supplies and services to conduct business roles and
responsibilities and creates challenges in front of organizations such as enhancing their
overall budget to run business. Virgin holidays is operating its roles and responsibilities in a
highly fluctuating and competitive tour operating industry in which it has been experienced
that after the Covid-19 outbreak the prices increased which lead business organizations to
experience an increase in manufacturing raw materials and overhead costs (Daab, 2022). In
this customer spending also decrease due to the low-income level. In this, an organization
needs to consider inflation, to conduct their operations at low cost to avoid losing consumers
which affects the overall revenue of the business. During this Virgin holidays with the help of
evaluating their product mix and with help of innovation can avoid negativity associated with
the simple price increase on existing products. Organizations can also overcome the inflation
rates with the help of intelligently communicating price increases to customers by
establishing a positive brand image.
According to the above analysis it has been stated that it is important for Virgin
holidays to consider the unemployment rate as well as inflation rate while performing roles
and responsibilities in the tour operating industry. With the help of considering these
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elements the company can identify their impact and can further undertake the use of
strategies to overcome them to maintain their business positioning in the industry.
How will the UK current growth rate impact on the chosen business
Unemployment rate
It has been analyzed that the unemployment rate in the provinces of the United
Kingdom falls to 3.7% in the quarter of 2022 (UK economy latest. 2022). This number is
because of the outbreak of the Covid-19 crisis. It has been analyzed that Virgin holidays need
to undertake the use of many strategies and practices to develop policies to have a structural
employment system. This business organization with the help of providing professional
training to employees with educational opportunities can retain them for a longer period. An
increase in labor turnover not only affects Virgin holiday’s overall growth and profitability
but also created challenges in front of them to provide training to new employees (Kovačević,
2020). The increase in the unemployment rate in the United Kingdom after the Covid-19
crisis and Brexit offer organizations a significant opportunity to hire employees at a low cost
and further reduce the overall operating cost of business to ensure maximum growth and
profitability.
GDP
Gross domestic product is a monetary measure of the market value of the final
services as well as goods produced in a specific period by a country. In context with the
United Kingdom, it has been evaluated that GDP is the main measure of the selected
country’s economic growth which is based on the value of services and goods produced
during the period. It has been evaluated that the GDP of the country fell by 0.3% in April
2022 and increased by 0.2% in the 3 months to April 2022 (Gross Domestic Product (GDP).
2022). Along with this, it has been evaluated that business organization continues to face the
impact of the increase in price as well as supply chain shortage which affects production that
fails by 0.6% in April 2022. After the outbreak of COVID-19 and Brexit GDP of the United
Kingdom is currently facing many challenges which can create a negative impact on Virgin
holidays. In this, the organization needs to minimize its liquid saving and develop market
strategies while managing staff and expanding the network by developing innovative
practices. This will assure the organization to measure significant foreign investments.
Economic life cycle
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Currently, the United Kingdom is having £2.4 trillion GDP with a significant increase
of £170.1 billion as compared with last year May 2019. In addition to this United Kingdom is
also measuring a significant increase of £595.9 billion as compared when pre coronavirus in
May 2019 (UK economy latest. 2022). This states that in income level of individuals is
significantly rising which provides a significant opportunity for Virgin holidays to expand
their business operations activities and with the help of innovation and uniqueness attract a
large number of customers. With the help of taking increase in the economic life cycle and
standard of the United Kingdom the selected business organization can influence a large
number of customers and can enhance overall business growth.
To sustain the business environment and assure maximum competitive rivalry, Virgin
holidays need to analyze the United Kingdom’s current growth rate and further implement
strategies accordingly, to take opportunities by overcoming negative aspects.
How can the government current intervention methods affect the selected
businesses?
Fiscal and monetary policies:
Monetary policy is mainly termed as a monetary policy that has been set by the
central bank and on the other hand, fiscal policy is mainly implemented by the government.
In context with monetary policy, this policy has been set up by the bank of England in which
the United Kingdom is currently taking four physical rules. In context with the United
Kingdom, it has been analyzed that fiscal policy affects aggregate demand via changes in
government taxation and spending. These include factors such as household and employment
income that impact customer spending as well as investments. While in terms of monetary
policy affects the money supply in the economy (Sariişik and Boğan, 2021). In context to the
provinces of the UK, it has been analyzed that several tax rates have been increased and
implemented by the government which affects the Virgin holiday group. It has been analyzed
that to conserve energy and have a positive environmental impact and health and safety
policies, taxations have been set by the government of the United Kingdom which increases
the overall tax liability of the Virgin holiday. The selected organization needs to have a
proper understanding of fiscal and monitoring policy to further implement all the practices in
a systematic structure to avoid any financial challenges and liabilities. After the outbreak of
COVID-19, the UK government implemented various monetary policies in which
organizations have several tax benefits. With the help of this government intervention, the
company can assure a decrease in their operation cost.
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Furlough scheme:
This is mainly defined as a mandatory temporary leave of absence form in which the
worker is expected to return to work or to be restored from a reduced work schedule. During
the outbreak of Covid-19, many organizations lay off a wider best of employees which not
only created unemployment but also affected employees’ income levels. This government of
the United Kingdom imposed a scheme in which employers can for low employees for any
amount of time and any work pattern, According to this scheme employers have the
opportunity to have government grant to cover the majority of wages for employees who are
not working during the time due to covid-19 restriction. With the help of taking advantage of
this government intervention, Virgin holidays can take advantage of providing viruses to
employees and can provide them effective support.
According to the above-mentioned analysis, it has been stated that with the help of
making use of the current intervention methods such as fiscal and monitoring policies such as
relaxation in taxation and providing wages with the help of the furlough scheme Virgin
holidays can effectively conduct their operations.
What are the current global challenges facing by the chosen business and
recommendations on how to overcome them in this current time?
The current global challenges which are faced by virgin holidays are the outbreak of COVID-
19 and Brexit. It has been analyzed that before COVID-19 tour operator industry contributed
majorly to the world economy and offers several job opportunities on a wider scale. The
Covid-19 crisis severely affected the tourism industry. In addition to this, the travel industry
was perhaps the earliest area to be profoundly influenced by the pandemic, as measures
acquainted with containing the infection prompted a close total suspension of the travel
industry exercises all over the planet. The area likewise chances to be among one of the last
to recuperate, with the continuous travel limitations and the worldwide downturn. This has
outcomes past the travel industry economy, with the numerous different areas that help, and
are upheld by, the travel industry likewise fundamentally influenced. It has been analyzed
that organization in the hospitality and tourism sector was among the hardest-hit industries
around the globe. The global pandemic of the covid-19 crisis not only reduces the ability to
serve customers but also created challenges in front for organizations such as providing job
opportunities to individuals and conducting their business organization (Keogh-Brown,
Edmunds, and Smith, 2020). Due to Covid-19 governments across the globe imposed strict
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measures and lockdown which halted activities of Virgin holidays another organization in the
same sector. Along with this, it has been underlined that after the covid-19 crisis,
development challenges create many challenges in front of the organization as this crisis
significantly change the manner of consumer spending and purchasing. Brexit and Covid-19
affected Virgin holiday’s operations and affected their ability to provide jobs conduct roles
and responsibilities etc. In this organizations need to restore traveler confidence by
supporting tourism business to adopt and survive. In this company is recommended to
promote domestic tourism and support safe and secure travel facilities to customers. In
addition to this it is also recommended to organizations to evolve according to the current
business trends in which it is recommended to organization to emphasize digitalization and
implement various technologies such as artificial intelligence, cloud computing, virtual
reality, and others to conduct their operations at low cost. Along with this the company also
recommended supporting low carbon transition and promoting structural transformation to be
more sustainable and build a stronger economy. With the help of these recommended
practices, an organization can overcome the current global challenges and can offer a wide
range of services and facilities to customers by assuring growth and sustainability in the
industry.
Conclusion
According to the above report, it has been concluded that to stay competitive in any
business environment and conduct roles and responsibilities by overcoming challenges a
business organization needs to analyze elements and factors prevailing in the external and
external environment. There is a number of challenges that the selected business organization
is facing due to the Covid-19 crisis and issues like Brexit. In this with the help of analyzing
macro-economic factors such as unemployment rate, inflation, etc. organizations can
undertake advantage of current opportunities like the growing economic life cycle. Along
with this with the help by taking advantage of shifting operations with the help of technology,
innovation, and digital measures company can reduce its operating costs and can maximize
its overall profitability.
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References
Books and Journals
Bisciari, P., 2019. A survey of the long-term impact of Brexit on the UK and the EU27
economies.
Conway, T. and Hemphill, T., 2019. Growth hacking as an approach to producing growth
amongst UK technology start-ups: an evaluation. Journal of Research in Marketing
and Entrepreneurship.
Daab, T.M., 2022. The impact of COVID-19 on the economy and management of
international companies. Economics, Finance and Management Review, (1), pp.4-
17.
Keogh-Brown, M.R., Jensen, H.T., Edmunds, W.J. and Smith, R.D., 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.
Kovačević, D., 2020. Economic Impact of COVID-19 on the European Tourism Sector with
Special View on Croatian Tourism. Modern Economy, 11(10), p.1652.
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Mayhew, K. and Anand, P., 2020. COVID-19 and the UK labour market. Oxford Review of
Economic Policy, 36(Supplement_1), pp.S215-S224.
Ruan, X. and Tian, Y., 2019. The importance of risk and decision making in hospitality and
tourism industry. Frontiers in Educational Research, 2(6).
Sariişik, M., Türkay, O., Şengül, S., Bicil, İ.M. and Boğan, E., 2021. Covid-19 Shock to
Tourism Industry: Possible Scenarios for Predicted Losses Between 2020-
2024. Anais Brasileiros de Estudos Turísticos.
Vickerman, R., 2021. Will Covid-19 put the public back in public transport? A UK
perspective. Transport Policy, 103, pp.95-102.
Online
UK economy latest. 2022. [Online]. Available
through<https://www.ons.gov.uk/economy/economicoutputandproductivity/output/
articles/ukeconomylatest/2021-01-25#:~:text=Currently%20standing%20at
%20%C2%A32.4,with%20pre%2Dcoronavirus%20May%202019>
Gross Domestic Product (GDP). 2022. [Online]. Available
throughhttps://www.ons.gov.uk/economy/grossdomesticproductgdp
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