Virgin Holidays: Assessing Macroeconomic Factors and Business Outcomes

This report examines the macroeconomic factors influencing Virgin Holidays, a part of the Virgin Group, in the UK. It focuses on inflation and unemployment rates, analyzing their impact on the company's outputs. The report also discusses the effects of the current growth rate of the UK economy on the business, along with the influence of government intervention methods. Furthermore, it identifies existing international challenges faced by Virgin Holidays and provides recommendations for overcoming them in the present economic climate. The analysis includes data and graphs illustrating economic trends, such as inflation and unemployment rates, and their effects on the company's profitability, sales, and overall business operations. The report concludes by emphasizing the importance of understanding and adapting to macroeconomic conditions for Virgin Holidays to maintain its competitiveness and achieve its business objectives.

Influences of
macroeconomic activity

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
TWO MACRO ECONOMIC FACTORS WHICH BUSINESS NEEDS TO CONSIDER
ALONG WITH INFLUENCES IT COULD HAVE ON OUTPUTS OF COMPANY..................1
HOW WILL CURRENT GROWTH RATE OF UK IMPACT OF BUSINESS............................5
HOW CAN GOVERNMENT CURRENT INTERVENTION METHODS AFFECT A
BUSINESS......................................................................................................................................7
WHAT ARE EXISTING INTERNATIONAL CHALLENGES FACING BY THE ENTITY
AND RECOMMENDATIONS ON HOW TO OVERCOME THEM IN PRESENT DURATION
.........................................................................................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
Concept of business environment connotes with extrinsic factors and forces which are
beyond organisational control and impact adversely on business enterprise. Macroeconomic
activity is termed to level of activity, number of transactions, value of all those transactions
along with overall goods that are produced or manufactured in an economy. It tends to influence
wide swaths of people despite of few select populations. Virgin Group is well established
multinational capital conglomerate entity in UK. Virgin Holidays is part of Virgin Group which
offers ample number of holidays globally with destinations such as Canada, the Indian Ocean,
US, the Far East, Africa and so on. It was formed in the year 1985 and has established specialist
cruise and ski programs to offer (Virgin Holidays, 2021). The entity has a duty for preserving the
globe for everyone to enjoy as well as aim for making positive contributions for assisting tourists
and locals enjoy its destinations.
The report covers explanation of two macro-economic factors which the company needs
to consider and influences of factors on output of business. It further highlights impacts of
current growth rate of UK on the entity and how can government existing intervention methods
impacts of the company. It also demonstrates current global challenges facing the organisation
and recommendations for overcoming them presently.
TWO MACRO ECONOMIC FACTORS WHICH BUSINESS NEEDS TO
CONSIDER ALONG WITH INFLUENCES IT COULD HAVE ON
OUTPUTS OF COMPANY
Macroeconomic factors are geopolitical and influential fiscal events that affects a region as
well as national economy. It is a characteristic, pattern and situation which emanates or relates to
wider aspects of an economy despite of specific population. It entails dimensions that influences
direction or course of provided large scale economy (Chen, Lin and Chang, 2017). In context to
Virgin Holidays, considering macro-economic factors is essential so to study wider economic
trends including price levels, changes in unemployment level, economic growth rates and hence
forth with the purpose of evaluating overall performance of economy of UK to make rational
business decisions. Mentioned below are some macro-economic factors which managers of
Virgin Holidays are required to consider and analyse influences it could have of business
outputs:
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Inflation: It is described as progressive enhancement in average cost of commodities and
services within the economy over time. In other terms, it refers to an economic state related to
rising of price level of particular items (Boltaev, 2019). The macroeconomic factor occurs when
there is expansion of money income which is more than proportion to enhancement in earning
practice. It is appreciable as well as persistent rise in general or average price level. Outbreak of
COVID-19 across the world has caused inflation within UK’s economy. Measurement of
inflation as well as prices comprises of consumer price inflation, House Price Index and producer
price inflation. Business concerns such as Virgin Holidays has enhanced prices of holiday
products and services for ensuring to afford for making payments of input elements that are
paying unexpected expenses, salaries to employees and purchasing raw materials. These all
resulted in decreased demand for products and services offered by the company.
Figure 1: Inflation rates in UK. 2021
(Source: Inflation rates in UK. 2021)
The presented graph shows inflation rates in UK between 1986 to 2020, with estimations
till 2026. In this, inflation rate is computed through using price increase of particular product
basket which entails commodities and services on which average consumers make spending of
money throughout the year. Moreover, it includes expenses for rent, power, recreational
activities, groceries, raw materials and telecommunications. In the year 2020, average inflation
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rate within UK was nearby 0.58 percent in comparison to past year (Inflation rates in UK,
2021).
Inflation is a macroeconomic factor that stimulates businesses to rapidly rise product
prices. In context to Virgin Holidays, the company fails to pass high production costs into its
customers. Due to this, the factor has great possibilities to cause conflict related situations among
the enterprise and its customers. Rising product prices of an entity leads to customer switching to
other businesses that are offering similar benefits at lower prices. This negatively influences
output of Virgin Holidays as increase in hotel room rates, rising accommodation charges and so
on resulted in loss of customers and clients that makes the venture to suffer consistent losses due
to decline in purchasing of products by customers.
Inflation in UK has changed purchasing power of businesses for existing resources. There
are various businesses such as Virgin holidays that have large amount of reserves and profits.
However, inflation has erodes purchasing power of currency because of rise in prices across an
economy. Inflation has declined ability of Virgin holidays to pay or invest more in acquisition of
resources as managers are required to manage spending on more expenses. Due to this, Virgin
Holidays has ended in making payments to human resources and acquiring necessity inputs
which adversely impact on its value.
Unemployment rate: It is a macro-economic factor that is said to percentage of total labor
force which is unemployed and are actually looking for employment and have willingness to
work (Kisten, 2020). It is calculated through expressing number of unemployed individuals as
percentage of total population of labour forces. it includes unemployed share of labour force in a
country which is calculated along with stated as percentage.
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Figure 2: Unemployment rate in the United Kingdom in June 2021, by region. 2021
(Source: Unemployment rate in the United Kingdom in June 2021, by region. 2021)
The above image shows that unemployment rate of UK in the month of June 2021 as per
region. In this, London had highest unemployment rate in UK in last three months to June 2021
at 6.4 percent. As a whole, unemployment rate of UK in June 2021 is recorded was 4.7 percent
(Unemployment rate in the United Kingdom in June 2021, by region, 2021).
Higher unemployment rate reflects that there are various households having less income.
For business such as Virgin Holidays. It impacts negatively as higher unemployment rate leads
to lower sales because people or consumers makes less spending. Virgin Holidays is huge
impacted as its clients and customers significantly declined. Due to Covid-19 pandemic, people
across the country are facing struggle to afford basic products. In essence, they are maintaining
distance from travel and recreational practices that impacts adversely on sales of holiday
packages of the company leading to declined output.
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It is determined that high unemployment rate resulted in decline of number of companies
in tourism and conglomerate industry (Lebedev, Budovich and Tskhadadze, 2017). For Virgin
Holidays, it impacts positively on its outputs as it reduces level of rivalry among employees. The
company retains best talents and recruit candidates by offering suitable compensation. New
employment opportunities give chance top under employed or previously employed talents to
meet financial obligations. Moreover, when Virgin Holidays makes additional hiring it enhances
money circulation in market that results in healthier overall economy together with permit the
company to thrive huge outputs.
HOW WILL CURRENT GROWTH RATE OF UK IMPACT OF BUSINESS
Economic growth rate could be defined as percentage change in value of all products and
services that are produced or manufactured in a nation during particular time in comparison to
earlier period (Hechavarría and Ingram, 2019). It creates huge profit for a company as it
encourages firms for investment to meet upcoming demand of its offering. Higher investment
enhances scope for future economic growth that creates virtuous economic or investment cycle.
In aspect to Virgin Holidays, high economic growth rate results in enhancement of profitability
which enables more spending on activities of research and development. In essence, sustained
economic growth fosters level of confidence addition to encourage the venture for innovation.
GDP is defined to total of money value of all finished products and services that are produced
within borders of a country at specific time. It provides snapshot of economic growth of a
country and is used for estimation of size and growth rate of an economy
Figure 3: Annual growth of gross domestic product in the United Kingdom from 1949 to 2020.
2021
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(Source: Annual growth of gross domestic product in the United Kingdom from 1949 to 2020.
2021)
The above graph shows that in the year 2020, UK’s economy shrank by record of 9.8
percent because of economic fallout that caused by Covid-19 pandemic. In the duration of 1949
and 2000, biggest annual fall in GDP prior 2020 occurred in 2009 at the time when economy of
UK contracted by 4.1 percent at highest international financial crisis (Annual growth of gross
domestic product in the United Kingdom from 1949 to 2020. 2021). In aspect to Virgin Holidays,
economic growth impacts positively as it results in enhancement of profitability and revenue
through creating great opportunities. It is because, the business earns more customers in
economic growth situation that can help on increasing efficiency and experiencing greater
opportunities for further expansion.
Economic life cycle is also named as boom-must cycle that is economy wide fluctuations
in trade, manufacturing, production along with general economic activity. It includes periods of
contraction and fluctuation in level of activities of an economy around long term growth trend. It
includes expansion, peak, contraction and trough stages. The first stage is expansion which is
featured as maximum allowable output. In this stage, positive economic indicators including
production, profits, demand and supply, income and employment increases. Also, debtors make
timely payment, investments and speed of money supply is high. The another stage is peak in
which economy attains growth at saturation point. Herein, maximum growth limit is reached and
economic indicators stop growing as well as are at highest level. Next economic growth cycle
stage is contraction in which economic factors slow down and eventually turns to negative
growth. The last stage is trough which is depression stage as economic growth rate crack
negatively.
UK has been experiencing expansionary stage over last decade. Furthermore, Covid-19
pandemic crisis has presented huge challenges to economy of UK in current scenario. The
pandemic has dragged United Kingdom’s economy into its worst period in decades. The
situation continues to cause chaos within economic, technological, political and social system of
the country. Though, impacts of Covid-19 pandemic has probable chances to impact adversely
on economic life cycle of the nation. In essence, UK continues to work at expansionary stage of
economic cycle. It is determined that economic rate of UK rise by 7.2% in last two years that is
fastest growth since the duration of 1941, after contraction of 9.8% in 2020 that is worst in
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around 300 years (Wearden, 2021). In the country, unemployment rate continues to rise and
increasing unemployment adversely impacts on business operations.
As the economy of UK is expanding, its normal maintenance is busy as well as turn down
jobs as it lacks potentiality for performing all the tasks offered. Expansion economic growth
impacts on a business, such as Virgin Holidays as the company is making new investment for
keeping up with demand of hospitality services. In the economic situation, consumers are willing
for making payment than usual so to get working completed. It presents ample range of
opportunities for the entity through providing a platform to carry out operations appropriately.
When company uses positive economic growth then it reflects towards optimum utilisation of
resources to attain business objectives or desired outputs.
HOW CAN GOVERNMENT CURRENT INTERVENTION METHODS
AFFECT A BUSINESS
In an economy, government intervention methods are those approaches that are adopted by a
government to intervene deeply in transaction conflicts among market players or mobilise
resources with the intention to control prices or solve disputes (Katırcıoglu, Ozatac and Taspınar,
2020). At present, government of a nation makes attempts for combating market inequities with
the help of subsidies, regulation and taxation. Due to occurrence of Covid-19, economy of UK is
affected drastically. In this situation, government intervene in economy so to promote general
economic fairness and other goals such as national unity together with advancement. In UK,
there are certain measures or methods opted by government for protecting the economy that
causes huge impacts on businesses, such as Virgin Holidays. Some of government intervention
methods in UK that impacts Virgin Holidays are as follows:
Fiscal and monetary policy: In present situation, government of UK intervene to mitigate
or limit adverse effects of Covid-19 on market through fiscal and monetary policy. The term
fiscal policy is a way in which adjustment in spending level and rates of taxes of government are
made for influencing national economy. Within UK, use of fiscal policy is to reduce
unemployment through enhancing spending of government or lowering taxes. Reduction in
taxation means that individuals have more disposable income that fosters demand of products of
an organisation. It impacts positively on working of company, for example, Virgin Holidays as it
enhances production so to meet demand for its offerings. The company works for creating more
job opportunities in the process (Anh, 2019). Moreover, the company sees huge investment
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opportunities from spending of the government. It arises in an expansionary policy in which
huge money is flowing in economy from sources of government and low taxation. At the time,
when Virgin Holidays met balance among price and demand, it can expect thrive addition to
growth.
Monetary policy is another method used by government for intervention purposes in the
economy. It is said to control of quantity of money available in economy and channels through
which new funds are supplied. With the help of managing money supply, central bank of a nation
aims to influence various economic factors comprising consumption rate, inflation, growth of
economy and overall liquidity. Open market operations is one of tool of monetary policy that is
used by government for intervention in economy for management of pandemic crisis. It is buying
and selling of securities by central banks. In this, purchase of securities and bonds by
government entails enhancement of money flow into UK’s economy. It ensures that there is
sufficient money available for people to make spending (Singh and Nadkarni, 2020). Purchase of
securities by government and making payment further ensure that sufficient money is available
in economy for supporting other sectors or industry of the nation. In aspect to Virgin Holidays,
adding money to economy impacts widely on business operations as it successfully lowers
inflation rate that causes more money available for expansion of business and spending of
consumers on offerings of company. Moreover, various people and companies that involve in
transactions of buying securities or bonds have great chances to carry out business deals with
Virgin Holidays. With this, the company improves its operational performance and achieve
profitable returns.
Furlough scheme: As nation after nation goes into pandemic, entire sectors have ground
to sudden halt. In the covid-19 pandemic, retail, hospitality along with travel sectors are hit hard
as an outcome. In this situation, government of UK has intervened in the economy with furlough
scheme in order to mitigate adverse influences of the pandemic. The tactic entails covering 80%
of waged that are earned by more than 7.5 million people in UK (Khyareh, Khairandish and
Torabi, 2019). With the scheme, government ensures that it covers all regions, industries and
markets of the country. State wage subsidies has supported more than 11.6 million jobs and
around £ 70 Billion. The scheme of government has impacted operations of Virgin Holidays as it
encouraged the company to keep workforce on payroll despite of making them redundant. The
company provided wages to its staff that acts as increasing disposable income among population.
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Managers of the business used increased income as resource and target talents along with
provided them necessary product and services. It improves sales volume of the organisation that
improved business efficiency and reputation in industry in the pandemic situation.
In the economy of UK, Furlough scheme has played huge role in decline of
unemployment rates which impacted favourably on the company. It is because managers of
Virgin Holidays operated practices as per guidance of the measure and maintained crucial
attachment with workforce by motivating them to work hard. Employee motivation at Virgin
Holidays has resulted in more outputs and making offerings better. All the human resources of
the company in the adverse situation were highly focused on offerings that enabled them to
improve their key practice areas and drive innovation that resulted in positive impacts on
business (Behrendt and Schmidt, 2018).
WHAT ARE EXISTING INTERNATIONAL CHALLENGES FACING BY
THE ENTITY AND RECOMMENDATIONS ON HOW TO OVERCOME
THEM IN PRESENT DURATION
While performing business practices at international level, there are certain challenges or
issues that are faced by an establishment. In context to Virgin Holidays, mentioned below are
some challenges that the entity is facing at international level:
Talent acquisition: One of challenge that business faces while operating internationally
is acquisition of talents (Upadhyay, Banerjee and Panigrahi, 2020). For Virgin Holidays,
managers face the challenge as hiring process is different in other nations. It puts huge stress of
human resource management to hire skilled workforce and select them at vacant position. While
sourcing global candidates, managers faces complexities in finding right talent who is willing for
relocating, understand visa requirements, understanding needs and offering support of foreign
employee along with culture shock.
Intense competition: Developed economies dominate international market, that cause
challenge of intense competition for a business. In context to Virgin Holidays, there are huge
players performing in the industry at international level. Some of the companies which offer
similar benefits to customers at international market are Luxury Airport Shuttles, Goway and
Bookit. It is analysed that competition at global level come from anywhere as it can be from
equal competitors or from developing nations.
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Legal issues and consideration: While conducting trade in other nation, it is essential for
a company to be familiar with laws and regulations of that country (Cloyne, Dimsdale and
Postel-Vinay, 2018). For Virgin Holidays, legal complexities are challenging as lack of proper
advice or knowledge could lead subject to penalties and fines.
To overcome the mentioned challenges, below are some recommendations to managers
of Virgin Holidays:
Develop and offer compelling USP: To overcome the challenge of fierce competition, it
is recommended to the manager of company to establish unique selling proposition. For Virgin
Holidays, developing and offering compelling unique selling proposition will explain the reason
why product or service of the company is better and different against competing alternatives.
With this, marketing team of the company will able genuinely convey values to prospects at
international market.
Job portals: There are various online job portals that could be employed by businesses to
deal with challenge of talent acquisition. In association to Virgin Holidays, use of online job
portals will make working easier for human resource management to hire staff and verify job
applications online. Also, it will help managers to understand needs of candidates, visa
requirements and many others aspects associated to hiring people at global level.
PEST Analysis:
A tool used to identify and analyse macro-environmental factors affecting business
operations is termed as PEST Analysis (Le and Nguyen, 2019). With application of the model,
external factors are evaluated which affects functioning of an organisation. Managers of Virgin
Holidays apply the tool to observe trade dynamics and helps company in upgrading its business.
PEST Analysis of Virgin Holidays is as follows:
Political factor: Factors affecting industry with government's legislations termed as political
Factors. In UK, it is analysed that political system has strong stability power and because of this,
it provides opportunities to Virgin Holidays to trade freely at global level and brings positive
impact on it. However, government changes trade restriction policy by which company is
affected. Increment of tax rates puts burden on taxpayers which declines its operations ultimately
and brings negative impact on company.
Economical factor: Those factors which affects economy or an industry are termed as
economic factors. UK economy is well defined and market oriented that impacts positively on
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company such as Virgin Holidays as it helps in enlarging its business worldwide which increases
its operations volume. Contrary to it, UK is facing inflationary crisis because of which
employment rate of Virgin Holidays diminishes but company is still hiring workers to obtain
profit and by doing so it gets its task completed by managing employment rate.
Social factors: When social environment is affected by certain factors like cultural norms
and expectations, health and safety, then it refers to social factors. It includes concepts of
demographics along with target customers (Anguera-Torrell, Aznar-Alarcón and Vives-Perez,
2020). Social sector of UK is well known and has a strong society. Virgin Holidays provides its
employees a higher level of job satisfaction and enjoyment which brings positive impact on
company. However, due to pandemic situation, people are avoiding travelling because of
spreading of viruses. In this situation, company is facing adverse effect as it decreases its
operations volume.
Technological factors: Factors which are related to innovations, development and existence
in technology affecting operations of industry are termed as technological factors. UK is
advanced in its technological sector therefore it brings positive impact on Virgin Holidays as it
works on latest technology which takes less time than manpower. Opposing to it, investment in
these technologies like Artificial Intelligence takes huge amount which decreases revenue
margin in its financial statements of company and due to this it brings negative impacts on
profitability of the company.
CONCLUSION
From the individual report, it is concluded that understanding macro environment help
businesses to generate awareness about factors and dimensions that influences its operations and
strategies. Unemployment rates and inflation are two macro-economic factors which influences
outputs of an establishment. With the help of methods such as furlough scheme, fiscal and
monetary policies, government of a nation intervene in any economy to mitigate or control crises
that impacts favourably to the company. Current global challenges that a business is facing
includes talent acquisition, intense competition, legal issues and consideration.
on opecompany.
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