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Current Developments of the Business and Economic Environments Essay

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Updated: Oct 5th, 2019

Introduction

The evident current developments in economy, business trends, and financial markets have had significant effects on people’s jobs. The writer of this article was formerly a manager in one of Russia’s exporting companies specialising in the export of grains from the Russian market to the global market. The company specialised in the export of wheat from the Russian market to other countries of the world, which would buy the wheat through contracts with the Russian government.

The Writer’s Job Description

The writer worked as a manager in one of the companies involved in the exporting of wheat form the Russian market to the global market. The job of the manager involved running the day-to-day activities of the company in such a manner that would ensure it meets its objectives while at the same time remaining profitable.

The work of the manager involves coordinating the marketing activities of the company in terms of finding a market for the products of the company, signing of sales agreements, coordinating the shipment of wheat to the customers abroad, and following up payment for the exported products.

The manager’s duties also include coordinating the acquisition of wheat from the government stores from which the company is a sales agent. The facilitation involves a procurement process that the manager should make sure that it secures the best prices from the government, which in the end will enable the company to sell products at a profit. It is the manager’s duty to ensure that the quality of the products meets the local and international standards.

The Economic Conditions of the Country

Russia’s economy is one of the biggest in the world, coming up at ninth with regards to the nominal value thus making it one of the countries that make up the G20 group of countries in terms of the economic muscle. Other than having wheat as one of its massive exports to the world, it is also endowed with other mineral resources like gas, oil, precious metals as well as coal.

In the past twenty years, Russia’s economy has moved from a centrally planned economy that was used to run the country during the Soviet Union to a more liberalised and capitalistic economy at the present (Wegren 2009, p. 471). A centrally planned economy involved all the economic decisions being made by one government agency that would be guided by socialist policies that ran the whole government.

This design led to Russia working only with countries, which were allied to its socialist policy thus locking out other capitalist nations from its economy. Currently, Russia operates on a capitalist economic position, which has allowed it to adopt the open market policy, which in turn has enabled the government to liberalise the planning of the nation in terms of production.

It has also allowed the nation to access markets that were previously hostile to the Russian market. This condition has enabled the Russian wheat industry to prosper due to factors of production that have made it cheap in the world market thus being competitive.

The current economic condition of the country can be described as stable with most of the population heading towards the middle class thus making them a good market for products due to their purchasing power.

Effects of the Current Economic Conditions

In the year 2010, Russia faced a heat wave that adversely affected its agricultural sector in terms of production thus lowering the projected amount of wheat that was to be produced. This situation has had negative effects on the industry due to the mode of operation that the industry has adopted.

In most cases, buyers of wheat would pay for it upfront at a negotiated price even before the wheat has been produced. The heat wave had an adverse effect on the production of wheat thus forcing the government to prohibit the export of the product.

In fact, Wright and Cafiero (2011) posit, “This was ostensibly made as a regulation measure that would secure the country’s wheat needs so that the local market does not suffer at the expense of the international market (p. 64). Such a ban has a domino effect on the whole industry and thus a monumental challenge to a manager.

In the first place, the manager would have to call the buyers to inform them of the new developments, which come at a certain expense because it will mean cancelling orders that had been made and paid for thus refunding the money that is already in the bank. Failing to fulfil contractual obligations especially in the international market leads to an automatic fine for the company that is trading and hence a further loss to the company.

In preparation for exporting the ordered batches of goods, the company always incurs other expenses that are part of the preparation for exporting the goods. At times, these expenses can never be recovered because they are not refundable. On the other hand, the company will lose the markets it had worked so hard to acquire due to its inability to deliver.

When the Russian government banned wheat exports, countries like the United States of America, Canada, and Australia who are the other leading exporters of wheat took advantage of the situation to take over the Russian wheat market at higher prices in relation to what the Russian exporters would have given. Therefore, the work of a manager at this point will be to work hard to recover the lost clients or secure their clients before they are misled by offering alternatives.

Effects on the Company

The condition will also lead financial losses for the company, which might lead to steps like restructuring and job losses. If the company is not in sound financial position, it might as well lead to the collapsing of the company. The ban of wheat exports led to a rise in the prices of wheat products such as bread both locally and internationally.

In eastern European countries that depended on the Russian wheat, the prices of wheat products had a rise of up to 16% (Wegren 2011, p. 145). Following the recurrence of the heat wave, the wheat export industry has been adversely affected due to the unpredictable nature of climatic changes.

Managers in this sector have had to come up with contingency measures that would secure their companies from harsh financial effects from such a move. Some of the measures include entering contracts that have friendly financial terms in case of disruptions. This approach will involve the manager negotiating for the best terms for the business so that the business does not suffer a lot.

Conclusion

In conclusion, the current developments in the wheat business and the economic environment in Russia cannot be viewed as dire because as much as wheat production has been affected, its production is still good. The government had to take a decision to ban its export as a control measure. In 2012, the government lifted the ban despite the production remaining low thus a good indicator.

References

Wegren, S 2009, ‘Russian agriculture in 2009: continuity or change?’, Eurasia Geography and Economics, vol. 50 no. 4, pp. 464-479.

Wegren, S 2011, ‘Food security and Russia’s 2010 Drought’, Eurasia Geography and Economics, vol. 52 no. 1, pp. 140-156.

Wright, B & Cafiero, C 2011, ‘Grain Reserves and Food Security in the Middle East and North Africa’, Food Security, vol. 3 no. 1, pp. 61-76.

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