Assignment 1- PEST Analysis: Business Environment in Russia
(982 words)
Pest Analysis: Business Environment in Russia
Introduction
Russia, with a wide base of natural resources and one of the BRIC countries is seen as an attractive market to gain a toehold in by global investors including the United Kingdom’s retail industry. This report aims to analyze the business environment in Russia for British retailers using the PEST analysis. The PEST analysis will focus on four different aspects of the business environment which are the political, economic, sociocultural and technological factors.
Political
The political factor will consider the level of corruption in Russia and how it affects the retail industry seeking expansion.
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The World Bank stated that ‘Russia is likely to grow by 4.2 percent in 2010, followed by 4.5 percent in 2011 and 3.5 percent in 2012’ (The World Bank, 2010, pp. 2). They went on to claim that Russia would increase in world growth by 3.5% in 2010, followed by 3.2 % in 2011 and 3.6 % in 2012 (ibid.).
Furthermore, Russia has the 7th largest labour force in the world. The unemployment rate has also improved from 8.4% in 2009 to 7.6% in 2010 (CIA, 2011). These statistics signify that the Russian economy is moving in an upward trend.
Based on the Global Retail Development Index (GRDI) carried out by management consulting firm A.T. Kearney (2011), Russia managed to clinch the 2nd spot in 2009 but dropped to the 10th spot in 2010. Although Russia fell to tenth on the GRDI, it still remains as one of the most high priority market for retailers.
Besides that, Russia’s Federal State Statistics Service (2011) showed that the retail trade turnover Russia has also increased from 3693,2 billion rubles in 2009 to 4191,0 rubles in 2010 proving that the retail market there is very profitable.
Social
The sociocultural factors on the other hand will consider the perceptions of Russian consumers in addition to their population growth, income distribution and living standards. According to the research carried out by Huddleston et al. (2011, pp.179), Russians ‘do perceive differences in product quality
The Russian Revolution led to many improvements in production and education, allowing industrialization, but at the cost of many Russian lives. Russia advanced rapidly during the revolution. The question is were the Russian people better off after the Russian revolution? I believe so because of the improvements in education and production. Without the deaths of the Russian people they wouldn’t of been able to do this.
Russia’s economy is very complex and also very terrible at the same time. Many other economy’s are also like this but Russia’s is a very interesting thing to learn about. Russia’s economy has many things wrong with it that in the long run could probably affected it in a negative way. But it also has many positive things about it.The negatives and the positives are, in my opinion, are equal in Russia economy.
Another repercussion of the Soviet Union’s collapse was the failure of the economies of almost every new post-Soviet country. Most of the economies of the new Republics were left in shambles after the collapse. In Russia, people were not ready for the new economic freedom that resulted from the fall of Communism. Their unpreparedness led to inflation. “Inflation caused prices to go up three hundred percent in the first month, and 2,591 percent by the end of 1992.”( Russian Economy in the Aftermath of the Collapse of the Soviet Union) Just three years after the Soviet Union’s fall, Russia’s inflation rate had skyrocketed to 2591 percent, evidencing that Russians were not prepared for such a rapid evolution, going from a communist economy into a capitalist economy. All post-Soviet countries had the same economic fate as Russia, plunging into worse economic conditions than the United States suffered during its Great Depression. For example, in 1992, the Ukraine had almost a fifteen percent drop in its gross domestic production and Latvia suffered a 33 percent drop. (GDP growth) Many of these countries’ economies are still suffering as a result of the rapid evolution
The economic downfall was also due to many sanctions placed on Russia post the annexation of Crimea. New opportunities will arise for Russia as they move from a natural resource country to a greener country, Russia has a plan to stimulate growth with green energy which will create jobs. They also have a $10 billon fund for research which they are hoping will stimulate future economic growth.
Russia has built a strong, but stagnating economy on several natural resources to include the refinery and export of natural gas and oil. According to the Jim Picht (2014) exportation of natural gas and oil to Eastern Europe account for 70 percent of Russia’s exports and 53 percent of the government’s revenue. Along with exporting oil to Eastern Europe, Russia also exports too many countries to include China and Belarus. Europe fueled majority by Russian supplied natural gas and oil, the dependency of Europe’s need for this natural resource is the reason Russia’s economy is so strong. In 2014, when Russia decided to invade the neighboring country of Ukraine has led Europe to begin searching for other suppliers of their natural resources. If Europe finds other countries to supply the natural resources
Between 2000 and 2012, Russia's energy exports fueled a rapid growth in living standards, with disposable income rising by 160%. However, these gains are unevenly distributed as 110 of the wealthiest people in the country were found to own 35% of all financial assets held by Russian households. Moscow has been named the "billionaire capital of the world" by Forbes since 2008. Russia also has the second largest volume of illicit money outflows, having lost over $880 billion between 2002 and 2011. The Russian Economy consists of high-income mixed with state ownership in strategic areas of the economy. In the 1990’s market, reforms privatized much of Russian industry and agriculture, with notable exceptions in the energy and defense-related sectors. Russia is among one of the major economies in the world because it relies on energy revenues to drive economic growth. The country has an abundance of natural resources such as oil, natural gas and precious metals, which make up most of Russia's exports. In 2012 as surveyed was done and found out that the oil and gas sector of Russia accounted for 16% of the GDP, 52% of federal budget revenues and over 70% of total exports. Russia has a very sophisticated and large arms industry, capable of designing and manufacturing high-tech military equipment, such as fifth-generation fighter jets. The value of Russian arms exports totaled $15.7 billion in 2013 second only to
To this day Russia remains to be one of the bigger threats to our military with about 1.5 million personnel in their armed forces combined. This number includes ground forces, navel force, air force and ada forces. They remain one of the stronger forces due to their allotments to their ministry of defense with over 19 billion yearly in maintenance and salary of their forces. The country covers more than 17 million square kilometers with 10 percent of that being swamp lands and 45 percent being Forrest. Still with unemployment rates right around 8 percent Russia remains self-sufficient from a fuel and energy standpoint with their production of coal, natural gas, oil fuels. Coal makes up more than 18 percent of their main electric needs for their country. Transportation in the country continue to be a ever growing thing with over 900 thousand kilometers of roadways, eighty thousand kilometers of railways and over twenty five hundred airports in the country. With many religions as expected with such a big country the predominate on considers themselves as Russian orthodox which makes up about 75 percent, 19 percent consider themselves to be Muslim and 7 percent fall under other.
Russia has a lot of work to do in order to succeed as a nation compared to the rest of
There are several aspects of Russian society that can threaten businesses operating in this nation. Russian participation in the European Social Survey determined they are individuals characterized by a high degree of caution and more pronounced need to be protected by a strong state (Magun & Rudnev, 2010). The strong state applies to multiple facets of Russian society that leads to concerns about property rights and the protection of other assets. There is pervasive government intrusion into business that affects leaders of Russian companies. Economic advisors warned of a danger to economic growth comes from creation of state corporations with a difficulty facing business leaders being uncertainties from a powerful, hostile Russian government (McCarthy, Puffer, May, Ledgerwood, & Stewart, 2008). In certain areas the state hinders economic
Industry had also reformed during this period. Russia was ranked the 5th largest industrial power in the world, with a growth rate of 8% per annum. Heavy industry expanded and a consumer market developed. Imports and exports had increased from the year 1900. Imports had risen
The period 1995 to mid-1997 was boom time for Russia’s financial markets. The value of the Russian bonds and stocks soared, with the participation of foreigners in these asset markets increasing rapidly. International investors’ optimism about the country’s future was lifted by stabilization policy that followed the advice of Western institutions.
One country is comparable to the United States of America in terms of world power and prominence. Russia makes their name known beginning in World War 2 (WW2), later in the Korean War, Cold War, and today’s proxy war in the Syria. Russia’s culture, environment, politics, military, and economy do not just make Russia a regional powerhouse, but slowly becoming a region of influential power to surrounding countries with the end state of a global superpower. All the factors that make Russia the powerhouse that it is slowly becoming, highlights the impressive trend that supersedes the previous Soviet Union and past leaders.
Russia is an independent and strong power. She has the right and the strength not to want to be the eternal handmaiden of states which are more developed economically…She is proud by her great might, by which she jealously guards not only the political but also the economic independence of her empire. She wants to be a metropolis herself. (Witte, 9)
No special studies and assessments of the market in Moscow stores to date has not been - in the
Russia, officially known as the Russian Federation, has a total area of 17,098,242 sq km (“The World Factbook”) and is the largest country in the world. It is about 1.8 times the size of the United States (“The World Factbook”). Most of Russia is either large stretches of plains or areas with a lot of forests and mountains, with the exception of the Siberian Tundra. It is difficult to perfectly describe Russia’s climate because of it’s large size. However, in general, the country only has two seasons, summer and winter. In the summer they have very warm, continental weather and they have very harsh winters with a lot of snow. Russia is plentiful in natural resources. They are particularly