Business Environment Analysis and Virgin Money Case Study - UK Report

This case study examines the business environment of Virgin Money, a financial and banking company operating in the UK, analyzing both domestic and global factors. The report delves into the economic environment of the UK, supported by theories such as Keynesian, Neoclassical, and Marxian economics, and explores the impact of events like Brexit and the COVID-19 pandemic. A PESTLE analysis is used to assess the global business environment, covering political, economic, social, technological, environmental, and legal factors. The study highlights the challenges faced by Virgin Money and other businesses in the UK, as well as the strategies employed to navigate these complexities, including ESG initiatives and technological advancements. The analysis underscores the importance of continuous evaluation of these factors for effective operations and profitability. This case study provides a comprehensive overview of the challenges and opportunities faced by businesses in the UK's dynamic environment.

BUSINESS ENVIRONMENT
- INDIVIDUAL CASE
STUDY

Table of Contents.
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Examining the economic environment in UK with support of theories......................................3
Global business environment analysis:........................................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................1

INTRODUCTION
The report of business environment will comprehensively analyse the business
environment both domestic and global ion which the company operates. Also, the impact of such
environmental factors on the businesses in the UK will be explained. For this purpose, the report
will use various theories and models like pestle analysis and classical economics and Keynesian
economics etc. to understand the environment in a structured way (Bhagra and Sharma, 2018).
The company taken for this purpose is Virgin money. It is a financial and banking company
operating in United Kingdom. It has operations globally and is the 6th largest bank in UK. The
company has revolutionized the baking sector in UK.
MAIN BODY
Examining the economic environment in UK with support of theories
The British economy is one of the highly developed economy and according to the
nominal Gross Domestic Product (GDP) criteria the economy of UK has ranked sixth largest
national worldwide. UK comprised of England, Ireland, Wales and Scotland which made it a
globalized economy. The financial sector plays a key important role and London is one of the
biggest financial centre around the world. The finance industry contributing gross value of
£116.4 billion towards the economy. London has around 500 banks operating and is the leading
centre for the foreign exchange trading, banking, insurance and bonds. Economic environment
witness drastic change over the time. Financial crisis of 1997 and 2009 had badly impacted the
global economy and after 2015, UK has slowly implemented plan to recover from the recession
which was the result of these crises. Many British companies had to made unfavourable changes
during the recession such as cutting investment, reducing production and losing jobs so that they
could survive in the market.
The case study would elaborate about the Virgin Company which was established in
1995 by Richard Branson being started by offering personal equity plans. Meantime, the
company had acquired many small financial institutions and got the licence from British
government to operate as a bank providing a wide range of services such as saving & investment,
insurance, pensions, mortgages, credit card facility, current accounts etc. (Whitfield, 2021). The
economy growth of the British government has slowed after leaving the European Union i.e.
Brexit and the Covid-19 pandemic outbreak had worsened the situation in UK. The fall in the

GDP evidentially speak the fiscal condition of the country. Apart from the recrudescence of the
Brexit and pandemic, the British empire hit by labour shortage and supply constraints. The
government took important measures to combat the financial problems which was being faced by
the country. There are many schemes, grants, programmes being run by the government so that
businesses in UK could overcome from the negative impacts. There was a time when to pursue
any kind of business, UK was one of the best geographical place to start with. Due to this reason,
there are many small and medium businesses running in the country which had a big contribution
to the GDP of the country. The drastic change in the economic environment had affected the core
of these businesses which results in shutting down of business. The government has made plans
to boost up the businesses and the role of financial institutions has played an important role. The
ESG strategy of Virgin Money helps to gain momentum developing and maintaining the link of
loan and mortgage. Partnership with the Future-Fit Foundation and Life Moments has launched
new app tp assist the businesses to be more sustainable (Clarkson, 2021). The company provide
the impact and advise the business's environmental, social and governance. To examine the
economic environment there are primarily 3 major theories such as:
 Keynesian's theory: The meaning of this model is completely based on the two main
aspects i.e. firstly the reason for recession is that the aggregate demand is more than the
aggregate supply and secondly unemployment could be the another result of the
economic downturn due to the sticky wage and price (Marshall and Rochon, 2019). This
theory helps the British government to enhance the spending during the tough time while
restraining the government to cut the deficits resulting in preparing for the next recession
cycle. According to this theory, it is mainly dependent on the four components such as
net exports, government purchase, investment and consumption. According to the
Keynes, aggregate demand is one of the most important driving force in the country's
economy.
 Neoclassical theory: This model is the extended theory of classical theory which focus
on the demand & supply rather than production, consumption and pricing (Allan, 2019).
The given theory was founded in the year 1956 which states that the growth of the
economy is highly dependent on the three elements i.e. capital, labour and technology.
Considering the UK government situation they had limited resources in regard to the
labour & capital due to pandemic & Brexit problem but the technological element has a

sound role in the development of UK's economic environment. The neoclassical approach
highly affected by three factors such as organisational behaviour, human relation
movement and Hawthorne experiment.
 Marxian theory: This theory has developed by Adam Smith with a view of rejecting the
classical views of economics. The given model believed the approach of free market
which refers to the circumstance of demand & supply in the economy where the control
from the side of the government is minimal and the businesses main onus is to
maximizing the profit as well as benefiting the society (Guogang, 2021). The model is
based on the various fundamental principles such as stage of economic & historical
development, value of labour by providing sufficient wage rate. This theory believes in
the distribution of surplus product and value. Marxian theory has core elements i.e. the
power of the government, ownership of the public and management of democratic aspect
within the society. This theory has played a key role in managing the economic
environmental factor in the UK and also helped the financial institutions in recovering
from the debts.
Global business environment analysis:
Businesses are highly affected by the environment or surroundings they are operating in.
it is the reason why business needs to keep a continuous track of the factors that drives the
environment. For an organization like virgin money which operates globally it is of utmost
importance to closely analyse the environment and stay up to date for planning and operating.
PESTLE analysis consist of the 6 important factors which determines the international business
environment. Let's discuss 6 factors in detail.
Political factors: This factor includes various political scenarios on global level, specifically
those countries in which the business operates. Such scenarios are free trade, trade disputes,
corporate taxation, anti trust and corruption issues etc. Virgin money plc is exposed to the
political environment of different countries globally, Which makes it important for company to
know the political stability of the country.
Recent exit of UK from European union which is also called Brexit has impacted the
operation in Europe (Kasemsap, 2018). The way banking sector works in each nation of
operation and what kind of impact can it make on the company's financials such as revenues,

assets, profitability etc. the political support and friendly banking environment is really important
for the smooth working of the organization.
Economical factors: Economic factors deal with the international and national economic
developments which affects organization in direct and indirect manner. When pandemic hit the
world in 2019 it wrecked the global economy affecting each and every business. Virgin money
also faced a set back as operation went down and due to the pandemic inflation rates are all time
high in UK as well as and this has weakened the purchasing power of the individual thus cards
and various payment facilities are not used by the customers. Such economic slow down forced
virgin money to shut down some of its stores.
Hence, impacting the profitability and revenue which is essential for the business.
Further, exchange rate prevailing in different countries also affects the business at virgin money,
as this is a major driving force behind interest rates in banking industry.
Social factors: when a company operates globally it becomes of utmost importance to know the
social factors like taste, preference, beliefs, culture, lifestyle habits, in order to develop the
business strategy accordingly. Virgin money determines the social cultural aspects and attitude
of the population it is targeting (Kolev, 2021).
These factors have the direct impact in development of the business and making of
strategy in some countries where virgin money operates has high cost of working because the
labour and worker supply is less than the demand for it. Such factors increase the cost of
operations. Also, the level of education determines the kind of products and services that can be
placed for the target audience. Therefore, the social factors directly impacts the core business
planning of the bank.
Technological factors: technological changes and advancements are the driving forces of
banking industry. This industry has been revolutionized by the digitalization of the baking
methods. Technological factor includes environmental and ecological aspects such as
automation, technical incentives, research and development activities, rate of technical changes
etc. as these factors can determine barriers of entry and outsourcing decisions in the company.
For virgin money it is important to know the technological advancement happening and
keeping up to date systems of working to beat the competition and providing customer
satisfaction. Another technological aspect is the kind of cyber threats prevail in the country of its
operation, to keep the banking systems and customer informations safe with the company

(Marshall and et.al., 2018). As cyber attacks on banking system, can damage the reputation of
the company in long term.
Environmental factors: This factors includes many climatic and environmental changes that
alter the operations of the industry. In the recent years almost all nations have shifted their focus
on having corporate social responsibility in terms of environmental friendly practices and
organizations need to keep up with the responsibilities. Virgin money has huge sets of data to
maintain and recording of the transactions which leaves the carbon footprints and many countries
have made it mandatory for the organization to take initiative to reduce the carbon footprints
online. Other environmental friendly practices expected by different counties of operations needs
to be taken care of as this can build a good brand image of the company (Vázquez‐Ordás and
García‐Olalla, 2020).
Legal factors: Legal factors depict the legislative changes happening in the global environment.
Let's say if a country has implemented any laws on the industry then all the businesses falling
under that industry needs to abide by those laws to have smooth working operations. Therefore,
virgin money constantly needs to evaluate the legal environment of the country to know the
development of any regulations which can impact the working of the organization.
Discrimination law, consumer law falls under this category as various labour laws
prevailing in country decides the salaries needs to be paid by the company and this defines the
cost of operations of virgin money. Hence, legal factors should always be analysed to evaluate
the effects on business.
From the above detailed analysis of global business environment, it can be said that
virgin money plc has a multi level operations running across the globe and company and is
almost affected by all major factors in terms of labour laws, consumer rights, climate regulations,
lifestyle habits, cultural beliefs, technological advancements, corporate taxation etc. (Wei,
Thurasamy and Popa, 2018), this generates the need for a continuous evaluation of the factors to
keep the operations and profitability at effective rate.
CONCLUSION
The case study has been concluded by examining the economic environment which had
affected the businesses in UK. Brexit, pandemic and major hindrance in the labour law was the
main reason of the drastic change in the fiscal effects. Financial institutions was also badly

affected due to the high number of bad debts and rise in the inflation rate across the world. The
research has been analysed the fiscal environment on the basis of Keynesian's, Neoclassical and
Marxian theories. The project discussed the political, economical, social, technological, legal and
environmental factors which affects the Virgin Money Plc growth and success resulted in
continuous track of the major fiscal changes across the globe and within the country. Therefore,
it has been summarized as the quoted company was a multi level financial institution being
evaluated the factors so to maintain the profitability at an effective level.

REFERENCES
Books and journals
Allan, B. B., 2019. Paradigm and nexus: neoclassical economics and the growth imperative in
the World Bank, 1948–2000. Review of International Political Economy. 26(1). pp.183-
206.
Bhagra, A. and Sharma, D. K., 2018. Changing paradigm of employability skills in the global
business world: A review. IUP Journal of Soft Skills. 12(2).
Guogang, W., 2021. Marx's Theory of Banking and Its Practical Value. Teaching and
Research. 55(8). p.14.
Kasemsap, K., 2018. Mastering business process management and business intelligence in global
business. In Global Business Expansion: Concepts, Methodologies, Tools, and
Applications (pp. 76-96). IGI Global.
Kolev, M., 2021. 12 Reverse Stress Testing with Strategic Management Tools. Reverse Stress
Testing in Banking: A Comprehensive Guide. p.269.
Marshall, N. and et.al., 2018. Geographies of corporate philanthropy: The Northern Rock
Foundation. Environment and Planning A: Economy and Space. 50(2). pp.266-287.
Marshall, W. C. and Rochon, L. P., 2019. Public Banking and Post-Keynesian Economic
Theory. International Journal of Political Economy. 48(1). pp.60-75.
Vázquez‐Ordás, C. J. and García‐Olalla, M., 2020. The Differential Impact of Brexit on
Banking: UK vs. Europe. Global Policy. 11(5). pp.569-577.
Wei, L. H., Thurasamy, R. and Popa, S., 2018. Managing virtual teams for open innovation in
Global Business Services industry. Management Decision.
Online references
Clarkson, N., 2021. Virgin Money launches app to help businesses improve their sustainability
[Online]. Available through <https://www.virgin.com/about-virgin/latest/virgin-money-
launches-app-to-help-businesses-improve-their-sustainability>
Whitfield, G., 2021. Virgin Money returns to profit but remains cautious on UK economy
[Online]. Available through
<https://www.insider.co.uk/company-results-forecasts/virgin-money-returns-profit-
remains-24040597>
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