How business strategy is influenced by economic policy?

US military industry is a big player in shaping and tweaking economic policy of America. Their business strategist understands the direct and indirect effects of even an iota of change in state policy in terms of profit growth and turnover levels. This example forces every firm to calibrate its business strategy to get the max. 

To begin with, fundamental areas of economic policy can be departmentalized as fiscal, monetary and development areas. Generally speaking fiscal policy has the highest influence out of all three departments in running a country and by extension running a business. 

Public expenditure is in the driving seat when it comes to fiscal policy. The parameters of this policy includes the quantum & percentage that is distributed amongst the vital and pressing needs of a country. Recurrent expenditure is the one that accounts for significant portion here. Salaries, pension and various other payments made to public servants swallow vast amount of treasury a state bears at any time. To put it other way the more a country allocates for public expenditure the more money is available leading to the enhancement buying power.

In business strategy, the equation always runs as ends-means-goals. Simply stated “means” matter a lot. Business organizations have means that are used to create value, deliver value and capture value back from the customers; in simplest terms income is generated for the business. For the income to be generated there must be people out there who have the buying capacity prepped by the receipt of money in their hands in the form of salaries & wages.

In country where public sector is the engine of growth, business strategy must be attuned to satisfy the needs & wants of public servants so that there is a ready source for value creation & capture. This is valid in in countries with large population. Even in America public sector is too large and unwieldy so that the salary bill is huge despite anomalies therein!

 

Cheers!

 

Muthu Ashraff

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

 

Gas to Ruble business strategy, how Putin checkmated West

It was a twin move by the West as Russians entered into Ukraine. Cutting Russia off from the SWIFT and banning Russia using US Dollars & Euro. In the wake of these, 18 Russian financial institutions & banks were sanctioned. Russia made a counter move: the two bank system that checkmated the West. Read for more:

The sanctioned banks and financial institutions include Alfa-Bank, Central Bank of the Russian Federation and Credit Bank of Moscow. However, in order to facilitate import of gas EU spared few banks to operate in member countries including Sberbank and Gazprombank which are the only channels through which transactions were allowed.

Putin introduced a counter business strategy of two-way bank system: commonly titled “Gas to Ruble”. The system unveiled requires foreign importers to open two accounts in banks that are allowed to operate within EU jurisdiction. One for depositing Euro/Dollar. The other is to receive the converted Dollar/Euro into Ruble. Thereafter the bank make a credit transfer out of the second account and the proceeds are cabled to a Russian bank operating within Russia that may or may not be under sanctions. In order to bypass SWIFT the remitting bank uses Russia patented “System for Transfer of Financial Messages (STFM)”.

Expectedly, this ground breaking business strategy achieved the following goals with least effort on the part of Russia:

• Gave plentiful Rubles for Russia and not to be saddled with Dollars or Euro which are now useless for her.  Furthermore, Ruble has gone up in stature as the best performing currency in the world today. At the time of writing the US Dollar–Ruble conversion rate is one Dollar to 62 Rubles whereas in the beginning of Ukr operations it was as high as 78 Rubles for one Dollar.
• Gave fillip to the Russian drive for de-dollarization. Russia got the beating when her dollar reserves amounting to US$ 250 billion was frozen by America. She does not to want to be saddled with further Dollars that  are now useless for Russia as international currency
• The bonanza is curtain going up for STFM as one of the International financial payment system.
• Russian economy got a big boost as trade surplus is soaring. Current trend indicates that end 2022 It would surpass US $ 250 Billion almost a 15% YoY compared to 2021
• Finally it was a classic checkmate the Judo master administered on the West!

 

Cheers!

 

Muthu Ashraff

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

 

Snake Island Russian counter attack, changed the course of war

Contemporary military historians would record Snake Island counter attack by Russia as the watershed event that changed the course of Ukraine war. As a, colossal failure on the part of Ukraine it gave moral boost to Russia and sapped morale of Ukros. Moreover, it made the Island doubly significant. Details here:

A key salience of Russian special military operation was the capture of Snake Island known as “Zmiiyi” on 24 February, a day after it began earnestly. Memorably, it was the last engagement of flag ship Moskva before it sank in the Black Sea. Located about 30 miles away from the coast line of Rumania and Ukraine this inconsequent and insignificant 42 acres rock outcrop turned out as an “unsinkable destroyer” for Russia with heavy strategic importance.

Under advice by British Intelligence, Zelensky despite objections from the Ukro general command attempted a doomed retake on May 9 that resulted in massive losses for Ukraine in terms of men and military assets. A cocktail of 14 planes, 10 helis, 3 landing crafts & 20 drones out of which Turkish made Byraktar numbering 9 were dusted along with about 50 Ukro commandos. What is surprising is that this Russian counter attack was accomplished by Kalibr missiles launched from Crimea.

Major General Igor Komshenkov Russian military spokesperson dubbed the Ukro retake offensive as “a senseless PR action mindless from the military standpoint”. I beg to differ from the Major General. I think Zelensky did the right thing by ordering the retake of Zmiiyi. My analysis of the strategy and tactical manoeuvre is spelled out in the following bullet points:

• Snake Island lends strategic significance to Russian armed forces who can oversea the entire stretch of Black Sea with special focus over North & West
• Russia can easily interdict naval crafts sallying forth towards both Ukraine and Rumania where NATO has its air base in Mihail Kogᾰlniceanu.  Besides Odessa in Ukraine and Constanta in Rumania come under Russian surveillance
• Snake Island is just crows flying distance away from the mouth of Danube River that not only delineates the border between these two countries but economically vital for them. 
• Finally as and when Russia locates S-500 missiles in Zmiiyi, it is game over for America led western armed forces in the Black Sea. 
  

 

Cheers!

 

Muthu Ashraff

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist