Virgin Money: Challenges and Opportunities in the Banking Sector

This report provides an analysis of Virgin Money's operations within the UK banking sector, examining both the internal and external economic environments that influence its business. It delves into microeconomic factors like working systems, innovation, power distribution, workforce, and tools & techniques, as well as macroeconomic factors such as inflation and recession. The report also addresses the challenges Virgin Money faces, including competition, regulatory hurdles, and international banking trends. Furthermore, it explores the global business environment through a PESTEL analysis, covering political, economic, social, technological, and environmental factors. The report concludes that Virgin Money effectively navigates the market while emphasizing the importance of addressing internal environmental factors and adapting to industry regulations.

Virgin Money
Disrupting the UK
Banking Sector

Table of Contents
INTRODUCTION...........................................................................................................................2
MAIN BODY...................................................................................................................................2
Examine the economic environment within which businesses operate..................................2
Challenges faced by banks in external environment:.............................................................3
Examine the global business environment.............................................................................4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7
1

INTRODUCTION
This report contains some information about the economic environment of the bank
which is run by the Virgin Group. There are many subsidiary companies which are run by the
Virgin Group are Virgin Radio, Virgin Rail group, Virgin sports, Virgin money and many more.
This Virgin Group was established in February 1970 based in UK (Chadwick, 2021). This report
specifically tells about the Virgin Money is a bank which is based in UK. The Virgin Money
services are also available in other country like Australia. The Virgin money was firstly known
as Virgin Direct in 1995. The Virgin Money itself was introduced in the year 2000. This Virgin
Money bank is the 6th largest bank in the UK. This report confronts about Internal environment
of the Bank and the impact on the functions of the market economy.
MAIN BODY
Examine the economic environment within which businesses operate.
Internal environment of every business work in the economic environment which are of
two types Microeconomic economic environment and Macroeconomic environment. This Bank
Virgin Money get affected by the Microeconomic environment factors. Some of the factors of
Microeconomic environment which affect the internal environment of the Bank are as follows-
Working System- Every business organisation works to improve the system of the business so
that their customer can be satisfied. The very basic objective of the bank is to provide that kind
of services to their customer which other banks did not provide. Due to this course of action they
can expand their services to the next level (Dookie and Osgood, 2021).
Innovation- Innovation is the next factor which can affect the Internal environment of the Virgin
Money Bank. It means that the bank have to provide their services digitally so that the customer
can easily access their account at their home which also saves their time and money. By the help
of digital system customer can easily transfer their money to other person without going to bank.
Power Distribution- The power and responsibilities in the organisation should not be centralised
to the top level. It should be decentralised from upper to medium and medium to lower which
leads them to save the time in the organisation and also improve the efficiency of their operations
in the organisation.
Work Force- The next factor of microeconomic which affect can the internal environment of the
bank is the work force. It refers to the employees of the organisation. The Banks have to recruit
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effective and efficient employees so that they can do their operational work on time and helps the
bank to achieve the target for the particular period. The bank also have take care of their
employees by providing better working environment or motivation for doing efficient work to
them (Goovaerts and Verbeek, 2018).
Tools and Techniques- In present time where there is a very large competition among the
organisations and banks. There are various tools and techniques by the help of which they
perform their operations on time. There are various kinds of technological system which helps
the banks to keep the records of their customer safely. There are different tools by the help of
which they can asses the threats of economics like inflation, recession, and many more.
There are some external environmental factors which can affects the internal operations
and functions of the banks are inflation, recession, employment rate, tax rate.
Inflation- The very first external factors which can affect the operations and functions of the
bank is inflation. In the case of inflation bank increases their tax rate to tackle the situation by
controlling the supply of money in the market. This situation create some extra pressure in the
internal environment of the banks which leads to fluctuation in the performing the operational
activities of the banks (Laboure and Braunstein, 2019).
Recessions- In this situation the purchasing power of people of the country get decrease with the
income, productions and many more. It is visible in the real GDP of the country. In this situation
bank decrease their interest rate so that the consumer get can some money and helps in
increasing the demand in the market. Due to this situations the employees of the bank have a
large pressure to do some extra effort which leads to decrease in their performance.
Challenges faced by banks in external environment:
Competitor Bank- In banking industry there is a cut throat competition among them. It
is because the rules and regulation for all the banks are same and due to this there is a very low
possibility of innovative ideas. As a result banks have to make their policies in that way so that
they can beat their competitors in the market.
In UK the competition level is not so high because of the rules and regulation barriers. The
process of establishing a bank in UK is very large so that why the competition in banking
industry in UK is low. Virgin Money have many competitors like Lloyds Banking Group,
HSBC, Barclays and NatWest Group.
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Rules and regulation- As it is mentioned above that there are so many rules and
regulation in the banking industry like rule related to interest rates according to the central bank.
Virgin Money Bank also have to follow all the rules and regulation which are made by the
central bank of UK. The rule and regulations related to repo rate, bank rate, CRR,SLR. and
formalities while providing loans to their customers (Lazarevic and Valve, 2020). All these rules,
regulations, and formalities have to be completed by the Virgin Money Bank if they wants to
remain in the banking industry.
International banking trends- If any business get success in their own country and
wants to expand their business to other countries then they have to follow all rules, regulation,
culture, and formalities of the country. Virgin Money bank have also faces the all these challenge
when they open their branches in Australia and South Africa they have to follow their rules and
regulations and also have to accepts all the international terms and conditions of both countries.
The Virgin Money Bank in Australia and South Africa have different banking policy then U.K
because in other they have to do their operations according to their conditions. The Virgin
Money Bank also have to respect their traditional culture and activities (McLaughlin and Fearon,
2022).
Examine the global business environment
It include a complete evaluation of global marketing conditions. Organisations have to
analyse the determinants of international market which are political, legal, social, economical,
technical, and environmental. The analysis of all these determinant are very important for the
organisation by the help of this analysis the organisation can easily estimate the threats in the
market. Virgin Group is providing their various services in 131 countries. This Group is
successfully running their operations in these countries only because of deep PESTEL analysis.
The explanations of all these of these determinants are as follows-
Political- This factors play a vital role in identifying the determinants that can affect the Virgin
Money PLC long term profitability. The Virgin Money Bank have started their operations in
more then dozen of countries and experience the political environment of each countries. The
Virgin Money get success in all these countries only because of then systematic political risk
which taken by them. This bank also analyse the following factors before starting the business in
other countries which are political balance and role of banks in the country, Corruption level,
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Tariff and custom duties, Tax rate and rule related to tax, Anti-trust law related to bank,
Favoured Trading partners, Compulsory Employee Benefits and many more.
Economical- Macro-economical factors includes inflation rate, interest rate, foreign exchange
rate, and many more. While micro environment factors include competition norms affect the
competitive benefits of the firm (Rathbone, 2021). Virgin Money Bank can utilise the nation's
economic factors for example development rate, inflation, and economic indicator of economy
like bank sector development rate, expenditure of consumer and many more. Supply of labour in
the economy can impact the bank in case of availability of skilled workers, it is beneficial for the
company to upsurge the risk of business failure in a specific economy.
Social- Business organisations incurs a deep impact associated with cultural and social trends
and customs. Marketing and promotional strategies are affected greatly by this component only.
Determining selected audience trust and intellect is very crucial. The data obtained from the
social and cultural trends and working culture can be utilised by the virgin money to make its
marketing strategy. Behaviour of customer and spending power of the audience assist to estimate
profitability of the product and services offered. It is required to determine the general attitude of
consumer regarding such services and also their needs to make available services and offer
products. Market segmentation and targeting the niche market is crucial for locating the brand
value in the mind of the people which is probably only after studying the social component
(Schweigl, 2021).
Technological Factors: The fast technical development in the economy can assist the virgin
money in different ways such as upgrading profitability, increasing creativity, assisting artificial
intelligence and improving operational activity. Social media marketing can assists the bank to
upgrading its identity between its users, to get identified by the targeted audience. This can be
successful stage as it is very crucial for the organisation to get determined in the economy it is
working. A market where technology is not at the top level, the bank can utilise its technological
capability to upgrade its market share and profitability in that area. On the other hand, in the
market where high technology is already existing the organisation utilises that resources for
benefits of the product and services. Research and development plays an important role in
improving the supply chain management and improvised product and services. After BREXIT
virgin provides digitally emphasised product and services more to the citizens (Silahtaroğlu and
et.al., 2021).
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Environmental Factor: The presence of organisation across the world needs the study of climatic
condition, waste management, renewable techniques, full utilisation of resources, preference
towards eco-friendly products. After COVID it is very important for a company to take care of
the environment and take into consideration all the natural resources conservation for creating a
balance in the ecosystem (Uddin, 2022).
CONCLUSION
From the above report it is concluded that the Virgin Money Bank is doing their
operation the market effectively and efficiently. They have to tackle down those factors which
can affect the internal environment of the banks. From the above report it can be observed that
the rules and regulation in the baking industry are so much that's why the competition in banking
industry of U.K. Is low. The challenges which are faced by most bank in the external
environment are also discussed above in the report. All these challenges can affect the operations
of the bank. The Virgin Money Bank need to follow or face all the challenges. Beside all these
points the support which U.K. government provide to the all small enterprises during the period
of Covid19 by the by the help of banks are also mentioned above in the report.
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REFERENCES
Books and Journals
Chadwick, A., 2021. Afterword: Poverty and human rights. In Poverty and Human Rights. (pp.
188-198). Edward Elgar Publishing.
Dookie, D.S. and Osgood, D.E., 2021. Widening the Scope of Disaster Preparedness in the
Caribbean: Building Resilience Through Improving Climate Information. Small Island
Developing States. pp.81-111.
Goovaerts, L. and Verbeek, A., 2018. Sustainable banking: finance in the circular economy.
In Investing in Resource Efficiency. (pp. 191-209). Springer, Cham.
Laboure, M. and Braunstein, J., 2019. A Migrant Flow Pension Model for Small Open
Economies. The Journal of Retirement. 7(1), pp.8-23.
Lazarevic, D. and Valve, H., 2020. Niche politics: biogas, technological flexibility and the
economisation of resource recovery. Environmental Innovation and Societal
Transitions. 35, pp.45-59.
McLaughlin, H. and Fearon, C., 2022. Labor in the aviation industry: wages, disputes, and
shocks. In The Air Transportation Industry (pp. 55-76). Elsevier.
Rathbone, M., 2021. Laughter in the economic philosophy of Adam Smith. South African
Journal of Philosophy. 40(3), pp.242-253.
Schweigl, J., 2021. Extraterritorial Effects of EU Financial Markets Laws. In Extraterritoriality
of EU Economic Law. (pp. 251-267). Springer, Cham.
Silahtaroğlu, G. and et.al., 2021. Identifying Indicators of Global Financial Crisis with Fuzzy
Logic and Data Science: A Comparative Analysis Between Developing and Developed
Economies. In Data Science and Multiple Criteria Decision Making Approaches in
Finance. (pp. 17-53). Springer, Cham.
Uddin, K.M.N., 2022. On Cryptocurrencies: An Assessment of Bitcoin’s Prospect As Legal
Medium of Exchange. Advances in Management and Applied Economics. 12(5).
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