On March 10, 2022, the entire business world woke up to this shocking news from the Federal Deposit Insurance Corporation (FDIC),
“Today, Silicon Valley Bank, located in Santa Clara, California, was shut down by the California Department of Financial Protection and Innovation. The Federal Deposit Insurance Corporation (FDIC) has been designated as the receiver in this case.”
This news sent shockwaves throughout the sector. This was the largest bank to have failed since the 2008 financial crisis & the second largest in the history of the US. This created huge chaos in the financial market because the shutdown of a bank as large as SVB would mean a very large situational crisis for businesses all over the world.
Nestled in the heart of innovation and techie dreams, Silicon Valley Bank stood as the financial bedrock of the world’s most dynamic and groundbreaking industries.
Since its inception in 1983, SVB has been one of the largest banks in the USA with more than $200 billion in assets. Silicon Valley Bank is a venture debt provider that specializes in funding tech startups all over the world.
As the financial pulse of the tech mecca, SVB had greatly adapted to the fast-paced rhythms of Silicon Valley.
This financial powerhouse had been more than a bank to the startups; it was a strategic partner, a mentor to startups, and a catalyst for entrepreneurial success.
With a client list like Tesla, Uber & LinkedIn, SVB had carved a niche as the go-to financial institution for the ever-evolving needs of the tech community. In 2022, Forbes named SVB among America’s best banks.
Largest Bank Failures in the United States, March 2023
Chronology of the Events Leading to the Downfall
Just like the many other important events of the past decade, this too had its genesis in the pandemic. Adding fire to the flame was the Ukraine-Russia war.
Let’s dig deeper into its roots.
The Pandemic
As the pandemic hit and the whole world came to a standstill inside the four walls, the software industry was one among the few others that remained largely unaffected.
This turned the attention of the venture capitalists towards this industry. This resulted in the tech startups raising a huge sum of money in 2021. These venture capital investments nearly doubled year-over-year to around $329 billion in 2021.
This further resulted in banks holding a lot of deposits including the SVB. According to data by Bloomberg, it was estimated that as of March 2021, SVB had jumped to $124 billion from $62 billion in the previous year.
On the other hand, due to the pandemic, the interest rates have gone too low. SVB wanted to make use of this situation & provided high-interest rates to the depositors at around 2.33% while other banks like Bank of America were giving an interest rate of 0.96%.
This also resulted in many big businesses depositing their money with SVB resulting in a huge influx of cash.
As a result, SVB invested heavy sums of money in long-term bonds for its Hold to Maturity (HTM) portfolio with 10 years of maturity.
Everything was smooth until the next major factor came in.
Ukraine-Russia War
The war led to an energy crisis all over the world leading to a high inflation rate. According to the Bureau of Labour Statistics, inflation in the US peaked at 9.1 % in 2022. So, as the usual financial procedure goes, the interest rates skyrocketed to 4.33%.
This led to the lowering of bond values affecting the values of bonds bought by SVB. Also due to high interest rates, businesses, instead of opting for loans for their financial needs, started withdrawing their deposits from the bank. This led to billions of dollars being withdrawn from the bank at the same time.
To address this liquidity crisis, SVB had to sell a $ 21 billion bond portfolio at a $1.8 billion loss.
As the news spread, this led to a situation of bank-run further creating a sense of fear in the whole business world and the stocks of SVB plunged by 60% in a single day. As a result, SVB couldn’t carry on further with its banking activities.
Eventually, the Federal Deposit Insurance Corporation (FDIC) took over and created a new bank called the National Bank of Santa Clara to continue the business activities further.
The Indian Government and the economists had assured that there wouldn’t be much of a contagion effect on the Indian market due to the collapse of SVB.
Sakshi Gupta, Deputy Vice President of HDFC Bank says, “The SVB collapse is unlikely to turn into a systemic risk. India’s banking system exposure to the SVB collapse is low and the health of the banking system remains sound….”
That said, we need to understand that some sectors including our tech-based startups and IT firms will be affected to some extent.
For example, among the startups, specifically those that were funded by the American incubator, YCombinator will have to face the consequences of the collapse. That’s because about 60% of the YCombinator’s startups in India have exposure to SVB.
Also, this collapse might slow down the funding that the whole startup ecosystem has been getting & result in an overall slowdown of the sector.
Another important factor to consider is the decline in overall confidence that the public has in the banking system resulting in a drop in deposits & other banking activities.
As far as SVB’s Indian clients are concerned, their priority should be to determine how exposed they are to the bank and take the necessary precautions to safeguard their assets and enterprises. This may include getting legal help, revisiting loan terms, and looking for other finance and investment options.
Current Status
Currently, Silicon Valley Bank is operating as a division of the First Citizen Bank
Conclusion
The downfall of a bank as big as SVB is a reminder of the significance of prudent risk management and investing methods, particularly in the financial industry. It also emphasizes the importance of policymakers carefully considering how their choices would affect the financial sector and the overall economy.
You can hardly predict some cancers before it grabs the whole body to an extreme stage. Basically, hyperinflation is a wolf under the sheepskin. The news, the experts, the cunning industry, and even the government may hide the truth to protect the aftermath. Many companies employ a widespread technique to convince the consumers that costs are stable, even though you’re paying more for less weight with the same packaging. Hyperinflation is a negative catalyst that may act slowly but steadily to summate long-term accelerating inflation. So, we will go through 7 case studies of hyperinflation-affected countries of all stages (growth, maturity, and decline) in the economic graph.
Hyperinflation is a terrible stage of uncontrolled inflation with a sustainable panic of supply shortage despite paying more. A country has to face the problem when it has enormous national debt, declining foreign reserves, and long-term political uncertainty. In external events, such as war, and lack of global confidence in the economy, worldwide pandemics push the problem to a negative slope. A government will fund its reaction to the crisis by taking on debt, but it can’t afford services and releasing additional money in the market to make up the difference. Twitter co-founder Jack Dorsey’s tweet at the end of October 2021 fuelled the panic of hyperinflation across the US amid the tough time of the pandemic.
Global Inflation Rate from 2016 to 2021
Countries that Faced Hyperinflation
Hyperinflation is a dreadful state of condition for any country. The following are some prominent countries that faced hyperinflation and the reasons behind them:
Russia
The world’s second-largest arms and crude oil exporter, Russia is heading towards significant inflation, possibly a burst into hyperinflation. The economic data coming out during the Ukraine invasion is not very healthy. Apart from the war, the Kremlin is fighting with an internal three-point trap triangle of (hyper) inflation-pandemic sanctions. As per reports, the Russian regulatory bank called CBR raised the interest rate by 20% to save the ruble from the western red eye of sanctions. As a result, the ruble tanked at a record low of 25% this March.
Amid fear of losing oil and arms export hegemony, the country faces isolation from the West and the US. Investors are trying to get into a safe escape. Many billionaires shut down their business operations as a protest. The economy is being drained of cash. One month down the line of conflict, Moscow enrolled with 3.5 lakh Ukrainian refugee shelter houses, and inflation zoomed up 15.66% this March-end, expecting a 20% fear of inflation in this financial year as per a central bank survey. SWIFT system and payment card firms are ceasing operation in Russia, which is a significant setback for the country. The CBR is struggling to control capital outflow( movement of an asset out of a nation), escalated by the record-long shut down of the Moscow exchange.
Moscow’s financial advisors have shown public confidence to revive their internal banks with additional reformation. It will take some time to confirm the post-invasion period Russia copes with the odd or cross the red inflation line to join the hyperinflation club. Though, as per experts, it has intense symptoms of hyperinflation.
Russia’s Ukraine Invasion
Iran
In March 2022, the Statistical Centre of Iran (SCI) reported an annual inflation rate of 40.2%. The Islamic Republic owned 10 % of the world’s oil, 15-17% of its gas reserves, and 7% of its minerals. So then, why is Iran also sinking towards hyperinflation? Literally, Iran has everything for cooking except the cook!
Weak diplomacy also pushed EU and US sanctions on energy, tech, financial service, and foreign trade. Iran’s president asked its central bank to stop releasing data as it is higher than the SCI tally. Diplomatic gaps weaken the trade deficit.
The country is suffering from basic needs like water. Protesters rioted in Tehran’s streets, resulting in deaths and arrests. The country is accused of state-sponsored disinformation, a dangerous trend to hide the disease rather than treat it.
A silver lining of hope is raised after the US Congress gets its new president from the democratic party in January 2021. Iran is trying to get the Indian market oil with a rial-rupee deal. The US-Tehran has shown some positive signals of melting down relations with the nuclear deal ahead of the Russia-Ukraine war.
Turkey
Ankara crossed the 50% inflation red line and entered the hyperinflation zone with a 54% index as of March 2022. Despite president Recep Erdogan’s battle with the recession, the Turkish people have not achieved a new normal since 2018. His equation to fight inflation is lowering the interest rate. Unfortunately, his flawed policy slipped the currency lira to a loss in the last year. The uncontrolled depreciation of the lira has created a hugely detrimental impact on the economy. There has been a certain increase in the exports, but the following adverse consequences are more than the actual gain:
The significant drop in purchasing power is the result of devalued currency; the salary class people need to pay more lira for the same or less product. Therefore, the loss of purchasing power is a severe impediment to economic growth.
To minimize the inflation risk, Turkish banks have stopped encouraging lending to ensure less money in the market. It has no option when they are unable to raise interest. In the long run, it has an even worse effect on increasing the country’s brain drain. Foreign currency is taking a break, and investors are rushing out of the country. This leads to job or employment problems at worst.
The civil war inflicted on Lebanon’s lira is losing the battle and ending in triple-digit inflation of 215% in front of the US currency. It is enough to cripple the retail, health, transport, and fuel sector investment. With 78% poverty, the country is trying to get a good deal from the IMF. But the corruption grappled the country at such a deep level that its central bank had to face inquiry and slap from the lawsuit. The United Nations confirmed that the Ponzi scheme was a major red flag behind the economic meltdown. Beirut tried to reshape its economy with tourists to the Gulf help. But in 2011, the neighbouring Syria unrest put the country in financial collapse again. In the meantime, the Hezbollah-Iran tie miffed some major gulf countries.
The fall of money was fuelled by the central bank’s direct financing of the government’s public deficit during the civil war. As a result, money has entirely lost its essential rules and everything that made it a reliable store of value. The Govt, despite a defaulter of foreign debts trying to survive with the help of the World Bank and IMF. Another good news is, recently, the new Lebanese govt got a ‘positive outcome’ certificate from the Saudi kingdom. Hope it will improve their credit pipeline.
Sudan
After a military coup, riot, and political uncertainty, the East African nation is more chaotic; debt-trapped Sudan announced it would float its currency as economic conditions deteriorated. According to United Nations officials, Sudan’s food crisis is expected to drop due to the African country’s economic collapse, displacement, and ruined harvests. After the military took over the US, IMF and World Bank suspended their million-dollar aid and SDR (special drawing rights of IMF). Another setback is that the separate region of South Sudan holds 75-80% of oil production in the Upper Nile state.
Since 2016, the country has faced a lopsided economic downturn, covid and coup pushed it on the verge of catastrophe. With the shrinking GDP of 2020 by 3.6%, the country summed up the cycle and added a 359% inflation rate. World food program data warned that about 5.8 million people suffer food shortages and malnutrition. In the current scenario, the political paralysis of Sudan is a significant issue of hyperinflation and food shortage. Moreover, it blocked the foreign fund in the African nation.
Inflation among countries
Zimbabwe
Are you fed up with hearing about hyperinflation in different countries? Here is Zimbabwe for you with a ray of hope. The government had robust growth of 838% inflation in July 2020, and now, there is a significant drop at 50% in August 2021. During this challenging time of pandemics, war, and sanctions, it is not easy to revive the economy from hyperinflation in such a short period. Chronic symptoms of hyperinflation are coming out like lower growth, hunger, a debt-driven economy, low income, jobless youth, and collapsing health sector. It was not fun when the African bread bucket turned half of the population into a beggar.
It was a tough time for the drug-addicted, debt-ridden country when it was announced as having the highest inflation rate in 2019. With a fast depreciating currency and hyperinflation nearing 800%, most commoners watched their hard-earned money turned into a paper bunch. The country suffered 90% unemployment which coerced University graduates to sell vegetables in the market. The confused Reserve Bank of the country introduced a bond note with a 1:1 value against the dollar, but the market doubt was fainting its importance rapidly. In 2019, the Reserve Bank announced RTGS$ and banned foreign currency in domestic transactions.
Pandemic norms encourage digital payment worldwide, and it was reshaping the economy of Zimbabwe. It pushed the RTGS to POS transactions. EFT(Electronic Funds Transfer)and the Card payment system showed robust growth in 2021. Thus, it saves money printing the ‘need’ of a hyperinflationary economy. The rural part also enjoyed financial inclusion (finance access to the poor class), and the govt can track them with the tax system. The untapped section is directly under the payment system. Online transaction access to the internet among youth generates various business ideas worldwide. Bitcoin and crypto came to the discussion table of policymakers.
Venezuela Inflation Rate as Compared to Previous Year (by Statista)
The South American Country seems to be the king of the hyperinflation kingdom without any competitors nearby. In 2018, it reported 65,374.08% inflation, which means people need to carry money in a car dicky for daily retail shopping. A bunch of cash becomes useless in the economy. In the same year, 48k teachers left the country (remember, they are not sacked) to relocate to neighbour-based countries for livelihood.
There was a mass exodus in the middle of 2018. About 4 lakh people left the country, and it was not for armed conflict but terrible hyperinflation. Among the country’s top human resources, doctors, professors, and IT professionals were fleeing the country, leaving unfilled posts. The country faced mass blackouts, and people used candlelight or cell phones during an emergency. The country dried out of medical supplies and doctors; patients had to wait for half a year for an emergency operation.
Critics blame policies of socialism. Experts accused the country of suffering from printing money and a fiscal deficit. Once known as the giant supplier of crude oil, the comfort of the oil zone hit back Venezuela in 2014 after oil prices fell continuously. Since 2014 the country has shown a significant drop in GDP in negative growth.
There is a thin sign of revival in 2021; Venezuela reported a surge of the foreign reserve by $5.1 billion. The country’s central bank claimed to curb inflation by ‘only’ 686% for the same year, a great short-term relief.
Conclusion
Here we did not consider the crisis-hit Sri Lanka or war-torn Ukraine. Moreover, since August 2021, Afghanistan has been out of the internal statistical audit.
Therefore, there is a high possibility that the hyperinflation club will get new members. On the other hand, controlling hyperinflation is far more difficult due to the enormous political cost of the typical solutions. In reality, one reason that can turn inflation hyperinflationary is the populist administrations, which are being trapped in a situation where they cannot make practical efforts to reduce inflation.
It is better to control it in the inflation stage. So, the policymakers or government need to take some bold and reformative steps to prevent the money flow in the economy. It also needs diplomatic efforts, so that the countries can avoid printing $100 trillion notes like Zimbabwe.
FAQs
What is hyperinflation?
Hyperinflation is extremely high and rapidly increasing inflation. It is said to have occurred in an economy when the prices rise over 50% in one month due to economic disturbances and depression.
What causes hyperinflation?
The main causes of hyperinflation include:
High National Debt
Price control that leads to an increased shortage
Economic output decline
Lack of faith in government
Which countries are facing hyperinflation?
Venezuela
Sudan
Lebanon
Iran
Zimbabwe
What is a healthy inflation rate?
A healthy inflation rate is 2% which is considered good for economic growth as in this situation, people are more likely to make purchases in the present rather than wait when they expect prices to rise.
McDonald’s is a name that is universally known for its golden arches and tasty burgers. It had made its mark in Russia too, without any exception to such an extent that the sales in Russia and Ukraine constituted 9% of their global revenue. However, The American fast-food giant has withdrawn its operations in Russia.
After closing down its restaurants on March 14, 2022, on May 16, McDonald’s announced that it will leave the Russian market citing humanitarian concerns in the backdrop of the Russian war over Ukraine.
They had established their first outlet in Moscow in 1990 just before the disintegration of the Soviet Union. The launch of McDonald’s outlet came as an ice breaker during the cold war tensions.
After that, Russia opened up its economy to the west which lead to further expansion of the food chain. As of 2022, McDonald’s had directly owned 850 restaurants across the length and breadth of Russia.
Citing the withdrawal of McDonald’s from Russia, CEO Chris Kempczinski said the “dedication and loyalty to McDonald’s employees and hundreds of Russian suppliers made it a difficult decision to leave. However, we have a commitment to our global community and must remain steadfast in our values. And our commitment to our values means that we can no longer keep the arches shining there.” The pull-out of Mcdonald’s adding to the western sanctions imposed on Russia implies the global isolationism that the country is facing.
All the restaurants that were hitherto operated by McDonald’s were rebranded. Alexander Govor who was in charge of the operations of over 25 outlets took over the restaurants and staff.
On 12th June, one of the McDonald’s outlets was reopened to the Russians under Russian leadership as “Vkusno – i tochka” which is translated as “Tasty and That’s it”. Just like how it had symbolically cooled off cold war tensions, the current rebranding is representative of the new world order.
Although anything symbolising the brand was removed and rebranded, the machinery and other equipment remain the same. The prices are much lesser than before and as per the responses, the taste remained the same. However, Vkusno- i tochka will not provide the classic big Mac.
Oleg Paroev, chief executive of Vkusno- i tochka has revealed that the firm plans to reopen at least 200 outlets by the end of June and 850 by the end of summer. Alexander Govor, the current owner of the food chain has said that they will invest 5 billion Roubles this year which will employ at least 51,000 people. Earlier, McDonald’s had employed nearly 62,000 people.
Who Is the Current Owner of McDonald’s Now?
Through the firm Gid LLC, the Siberian businessman Alexander Govor has taken over the business of all the McDonald’s outlets. He has been a McDonald’s licensee since 2015 and has played a significant role in the expansion of McDonald’s outlets into the inner and remote regions of Siberia.
McDonald’s Russia’s new owner – Alexander Govor
Russian authorities have announced that the American food chain will also have an option to buy back its restaurants in the next 15 years. The money involved in the deal has not been revealed by the firm till now although it is speculated to cross $1.4 billion. Notwithstanding the change of ownership, Govor is expected to retain all the employees and pay them salaries for two years at least.
The New Name of McDonald’s in Russia
As a part of stripping the new outlets of anything that remotely resembled the old food chain, they have revamped their logo too. The new logo stands in front of a green background representing the letter M made by two fries and a hamburger.
Vkusno – i Tochka Logo
The green background, according to their press office represents “the quality of products and service that guests are accustomed to.” The name and the logo were revealed only a few hours before they opened up for the public.
Opening of New Vkusno – i Tochka Outlets
Queue Outside McDonald’s new Rebranded Restaurant Vkusno – i tochka
The first outlet was opened in Pushkinskaya Square, Moscow. It was also the first in the restaurant of McDonald’s in Russia in 1990. The firm claims to have sold 30,000 burgers.
The outlet had to remain open for long hours to serve the large crowd. However, the popular commentary has been that the queues outside the outlet were much shorter than what it was thirty years ago. 15 more outlets are to be opened in the capital soon before it reopens the other centres by the end of summer.
Menu of Vkusno – i Tochka
Along with the Big Mac, burgers and desserts including McFlurry have been omitted from the menu. Cheeseburgers among others have seen a decline in prices from 160 rubles to 129 roubles and fish burgers from 190 Roubles to 169 Roubles.
The menu as a whole is much smaller than the older one. Most of the ingredients are sourced from within Russia. However, the firm faces some logistical issues with regard to the availability of certain things. For instance, Vkusno – i tochka is in search of new suppliers for soft drinks as Coco-Cola has suspended its operations in the country.
The withdrawal of McDonald’s from the Russian market and its complete rebranding in the country is a test of time for the country to prove its vigour and efficiency. With the global situation turning hostile towards Russia, the possibilities of the return of the American food conglomerate seem rather bleak. Hence the new firm has to step in more responsibly to retain business.
Chief Executive Oleg Paroev has already said that their primary goal is to ensure that the customers do not feel any differences at all in terms of the taste and quality of the food. It is interesting to note that the interiors of these outlets are kept the same as before.
As western sanctions keep mounting on the Russian economy, it is time for the country to be self-sufficient and sustain itself amidst the global hostility. The efficient management and expansion of the old McDonald’s outlets in the name Vkusno- i tochka will be a competitive test which can be determinants of change that marks the future of the Russian economy that has unfortunately earned the hatred of the world. Now it is for the rebranded firm under the leadership of Alexander Govor and Oleg Paroev to retain the legacy left by McDonald’s.
FAQs
Is McDonald’s back in Russia?
No, Alexander Gorov, a Siberian businessman bought all the McDonald’s in Russia and rebranded them. The rebranded outlets are now called Vkusno-i tochka.
Who bought McDonald’s in Russia?
Alexander Gorov, a Siberian businessman bought all the McDonald’s in Russia.
A business can be spread when it will be able to entice the audience which will result in potential customers becoming actual customers. A business grows only when its customers indulge themselves with it. Every company has some social responsibility that they need to fulfil, towards the world, nature and its people.
The world is seeing some of the greatest humanitarian crises in the last few weeks, once again. The conflict between Russia and Ukraine has intensified when the latter declared war. Some of the most famous brands from different sectors, realising the depth of the issue started pulling out from Russia and freezing their activities there.
All the major companies seem to condemn the invasion of Russia and the violence that its people are facing in Ukraine and they have done that by suspending their operation in the country. This is mainly done to create pressure in the Russian economy so that they can back off from this disaster called war.
In this article, we will talk about the major firms that have ceased their operations in Russia due to the country’s invasion of Ukraine. Let’s take a look at the list of the companies leaving Russia.
“You only have to do a few things right in your life so long as you don’t do too many things wrong.” – Warren Buffett
List of all the major firms that suspended operations in Russia
This American multinational tech giant Apple stopped the sales of their popular products like iPhone, Ipad and others in Russia and started restricting most of the services like Apple pay that the company used to provide to the people of Russia. Apart from that, they have also blocked the access of the app store in the country. Although there is no physical stores of Apple in the country but the products used to get sold through third-party retailers.
Microsoft
Like its above acquaintance, the American multinational technology company Microsoft chose the same path and suspended all their activities in Russia. It includes their new products and services sale in the country. The company is also closely monitoring the situation and is on the lookout for the safety of its employees in Ukraine.
Dell
Texas-based technology company, Dell took a step forward and halted the sales of their products in both the countries Russia and Ukraine.
Google
The largest company that provides internet-related services in response to Russia’s behaviour towards Ukraine took down RT News and Sputnik from the Google Play Store in Europe. Google has also decided to stop monetizing any Russia funded media present on their platform
YouTube
The online video streaming platform, YouTube decided to block Russian channels from monetizing and the company said in a statement they are taking a number of actions against Russia.
Mastercard
After the devastating effects of the war on Ukraine by Russia, Mastercard Inc. one of the most popular financial service corporations, has suspended all its activities and has frozen every kind of transaction. The company stated that any cards issued by Russian banks will not be supported.
H&M Group
Clothing brand H&M halt their sales in Russia and said that the brand will refrain from doing any activities till the situation is resolved.
Visa
Another major financial corporation Visa stopped its operations and has decided to cease all their transaction in the coming days in Russia following its war against Ukraine.
Meta
Meta formerly known as Facebook decided to stop all the advertising in Russia, they have already blocked the advertisement and Russia owned media channels on their owned platforms like Facebook and Instagram.
PayPal
The major financial technology company PayPal especially dealing with online money transfers has halted their services in Russia and has also barred Russian users to use their services.
Airbus
The multinational aerospace corporation of Europe known for making products related to aerospace, Airbus has decided to stop functioning in the country. Airbus has been a companion of Russia for 30 years but the violence against Ukraine by the country has forced Airbus to pull out from the country. It was a big blow to the aviation industry in Russia.
Samsung
The tech giant Samsung famous for its electronic products has decided to stop the shipment of its products to Russia. Any kind of products like smartphones, semiconductors and other consumers electronics will no longer be shipped to Russia due to the current situation.
Puma
German multinational athletic sportswear brand stopped all its activities in Russia and has shown solidarity to Ukraine, Puma has over 100 stores in Russia. This decision has led to the suspension of that store and its products.
Nike
The athletic sportswear brand from America, Nike has decided to follow the steps of all other big western brands and halted its activities in Russia and closed all its stores.
Disney
American multinational entertainment company, Disney decided to halt all their theatre release and production in Russia amidst the Russian invasion of Ukraine, they are the first ones to do that. Disney also stated that its future business in the country will depend on the situation.
Netflix
Streaming platform giant Netflix has stopped all its services in Russia after their invasion of Ukraine. It has decided to part away from all the future projects and collaboration scheduled to happen with the country. The shooting of Russian shows under Netflix has been put on hold due to the situation.
Ford Motor
Ford Motor has decided to stop its activities in Russia. The popular multinational automobile manufacturer was been a partner of Russia for a long time but the invasion has resulted in the ceasing of all operations in the country. Ford has also decided to donate money that will use for the Ukrainian refugees.
Adidas
The German multinational athletic sportswear brand has decided to suspend all its activities. They stopped all their online shop in Russia, apart from that, all the physical stores got shut down as well. Although the company is closed until further notice, Adidas claimed they will continue paying the employees there.
Adobe
One of the most prominent multinational software companies of America, Adobe has also decided to cut ties with Russia and has decided to stop all their sales in the country. They have also stopped Russia’s access to Adobe Creative Cloud and said that it will refrain from providing any service to Russia now.
The biggest cloud computing and e-commerce company in the world, Amazon also decided to stop all its activities in Russia and Belarus, it has stopped accepting customers from the two and has decided to not provide its web services to these two countries.
BMW
The Russian invasion of Ukraine has led to the decision of luxury car brand BMW to put a halt to their sales in the country. They have also stopped manufacturing products in the country and stopped their shipments as well.
Accenture
The Ireland-based multinational company, Accenture which deals with IT Services and consulting has decided to cut ties with Russia and stopped their services after Russia’s violence against Ukraine.
Spotify
Music streaming platform, Spotify has ceased all its services in Russia, after the country invaded Ukraine.
McDonald’s
Global fast-food chain brand McDonald’s has suspended their operation temporarily in Russia and has decided to close its outlets. It has over 850 stores in Russia.
Intel and AMD
Intel and AMD stopped their shipments of industrial chips in Russia, it has happened after the US Government lodged new export restrictions after Russia’s invasion continues.
PepsiCo
PepsiCo has suspended their sales and production of soft drinks in Russia amidst the Russia-Ukraine crisis.
Coca-Cola
Following the steps of its competitor, Coca-Cola has stopped selling their soda in Russia. The company also showed support to the people of Ukraine.
Starbucks
Starbucks, one of the world’s biggest chains of coffee houses has decided to stop its activities in Russia.
Oracle
The American multinational company that deals with computer technology has decided to stop all their operation and has suspended their sales in Russia and showed their solidarity to Ukraine.
SAP
The software and technology company that deals with software for developing enterprises have decided to stop their all activities and function in Russia.
Electronic Arts (EA)
The American Video Game company has cut their ties with Russia and has decided to stop selling its games and content in the country.
Carlsberg
Danish Brewer Carlsberg has decided to stop every kind of investment in Russia and has decided to provide aid to Ukraine at the time of the crisis. They halted and stopped all their exports of beverages in Russia.
SONY
Sony has made its decision to not launch its latest game Gran Turismo 7 in Russia, which was said to release worldwide but was suspended after its conflict with Ukraine intensified.
TikTok
One of the most popular videos sharing sites, TikTok has limited its services in Russia and banned content creation in Russia following its war with Ukraine.
Warner Bros
The multinational entertainment conglomerate Warner Bros has decided to stop all their theatrical release of their films in Russia.
Snapchat
Snapchat another popular social media platform has temporarily disabled its service called heatmap in Russia due to the ongoing war with Ukraine.
FIFA
The international governing body of the Football Association has kicked out Russia from World Cup. They got disqualified after the country launched a war against Ukraine.
UEFA
The Union of European Football Association has banned Russia from all international football competitions.
American Express
The multinational payment card service provider, AmEx has joined the list of companies and has shut down all its activities in Russia.
Uber
Uber after the escalation of the war on Ukraine by Russia has cut ties with a Russian ride-sharing service named Yandex.
KPMG
The Global network of professional firms for audit, Tax and other services has decided to end their services in Russia to show support against the war going on in Ukraine.
FedEx
The global express delivery service FedEx has informed that they are halting their shipment service in Russia as a result of the ongoing geopolitical conflict between Russia and Ukraine.
Airbnb
Airbnb, an American company that provides services for tourism activities like homestay, food and lodging has suspended all its services in Russia.
Harley-Davidson
The luxury bike brand Harley-Davidson has suspended its business in Russia after Russia invaded Ukraine.
Shell
One of the major oil companies, Shell has decided to stop buying crude from Russia as a result of the ongoing war with Ukraine.
ExxonMobil
Another oil company ExxonMobil decided to leave Russia and stop all the activities of oil production there.
General Motors
General Motors, the multinational automotive manufacturing company has stopped their activities in Russia and has suspended its business in the country as of now.
Porsche
The invasion of Ukraine by Russia has also caused one of the leading luxury car brands, Porsche to halt their production in the territory of Russia.
Toyota
Toyota has stopped their production in Russia and has informed their staff to return to Japan as Russia’s war intensifies with Ukraine.
Mercedes-Benz
Luxury car manufacturing company, Mercedes Benz has stopped their activities including the production of cars in Russia following its conflict with Ukraine.
Infosys
The Indian multinational company Infosys, which is the second-largest IT company in the country has decided to shut down their office in Russia.
Tata Steel
One of the biggest steel manufacturing plants Tata Steel has decided to stop doing business in Russia. They have decided to suspend and end ties with the country.
The war invasion by Russia has led to some of the biggest companies and brands backing out from the country, most of the brands are American and European and this has been done to create a financial strain in the country. The future of all these companies in Russia depends on the situation now.
FAQs
Is McDonald’s closing stores in Russia?
Yes, McDonald’s has suspended its operations in Russia and temporarily closed its 850 restaurants.
Is Coca-Cola still operating in Russia?
Coca Cola has ceased operations in Russia amidst Russia’s invasion of Ukraine.
What are some of the major companies that are leaving Russia?
Mcdonalds, Pepsi, Coca-Cola, Starbucks, Nike, Puma, Adidas, Accenture, KPMG, Ford, Mercedes Benz, Shell, Harley Davidson, Mobil, General Motors, Airbnb, Toyota, Porsche, EA, Oracle, AmEx, Uber, TikTok, Intel, AMD, Amazon, Netflix, PayPal, H&M, Disney, Visa, Mastercard, Samsung, Apple, Adobe, BMW, Spotify, Shell, Google, Microsoft, Dell, Airbus, Meta, Sony, FIFA, UEFA, Carlsberg, and Warner Bros are some of the major companies that suspended their operation in Russia.
As humans, our main source of entertainment has always been movies and series. Two decades ago, television was the main form through which we used to get our daily dose of entertainment. Flash Forward to two decades later, Streaming services have taken the place of television. People are now more into OTT platforms for their dose of entertainment and these streaming services are also serving them with regular movies, series, reality shows and everything that can entertain them.
Topping the list of streaming platforms is Netflix. Netflix was founded in the year 1997 by Ted Sarados and Reed Hastings. It started offering streaming services in 2007 and since then it hasn’t looked back. There is hardly anyone who doesn’t know about Netflix and hasn’t used it to watch a movie or a series at least once. According to Netflix, they have over 222 million subscribers from all over the world. Therefore, it is not wrong to say that it is the most popular streaming service.
However, recently the biggest streaming platform has encountered some pretty big roadblocks and somehow they are the only one who is responsible for this. Netflix was eyeing to add 2.5 million new subscribers in the first quarter. However, the opposite happened, Netflix has lost over 200k subscribers in a couple of months and 37% of its shares plummeted in a single day. In this article, we will talk about what has gone wrong with Netflix, why it is losing its subscribers and why its shares dropped for the first time in a decade. So, without any further ado, let’s get started.
Netflix Share Drop
“There is a revolution happening, and within two years I think that Wi-Fi and Netflix will be built into all the televisions.” -Reed Hastings
What Reasons Is Netflix Giving for Share Price Fall?
After the drop in the share prices, Netflix has given three reasons for the loss of its subscribers and they are:
Increase in Price
Netflix Subscription Plans
Netflix has increased their monthly subscription price in recent times. UK subscribers are said to be paying three times more for what they used to pay two years ago for the same service. This has created quite a stir amongst the subscribers. Although Netflix said that the increase of the price is to provide more quality content and experience to their customers, the sudden hike in the prices in the UK and Ireland was frowned upon by the public.
Netflix Exit From Russia
Just like many other companies Netflix also suspended their operation in the country because of the ongoing conflict between Russia and Ukraine The Russia-Ukraine war is another major cause of the subscriber’s loss of the platform. Netflix stopped all their services in Russia after the country declared war on Ukraine. Over this course, Netflix has lost over 700k subscribers because of the escalation of the war.
Sharing of Passwords
Netflix said that the sharing of passwords with other households is also the reason for the loss of subscribers. According to reports, 100 million households are enjoying the streaming service free of cost, with the help of password sharing. As mentioned above Netflix has over 222 million subscribers and these people are sharing their passwords with their friends, extended family and relatives.
Where Netflix Went Wrong?
While in this situation, some of the decision by Netflix has backfired and are constantly frowned upon by the customers. Those decisions are:
Advertisement on the Platform
From its very existence, Netflix as a platform never included ads in their services and the brand value has always been about improving the customer experience. Unlike other streaming services, Netflix avoided advertising and believed that it could do better business without it. In a sudden shift in the platform’s belief, the CEO of the streaming giant revealed that they are planning to introduce advertising on the platform in one or two years. Contrary to their previous statement where they said they will not use advertisement and. This is going opposite of their brand values as they have always focused on improving the customer experience. This decision came after Netflix was reported of losing over 2 Lakhs subscribers. According to them, it is to lower the price of the subscription.
Sharing Password Crackdown
This is probably the biggest blunder the streaming giant has done. As mentioned above, there are over 200 million subscribers of Netflix in the world but along with that 100 million households are sharing the passwords of their accounts with others. Password sharing was never a problem and one of the reasons the streaming platform was popular because of this and how consumer-friendly it was, until now. Netflix reasons that the increase in their price structure of the subscription is because of password sharing, so to decrease the subscription cost they have decided to stop password sharing.
Being Insensitive
The worst thing, a business can do is treat their customers as criminals. As mentioned above, Netflix is on the verge of banning password sharing among households in America. However, before that Netflix is reported to fine accounts in Costa Rica, Peru and Chile who share their password with others. This somehow is quite triggering and seems unfair to certain cultures of the world and is tarnishing the image of the brand.
Bad PR
It takes a lot of time to build the reputation of a brand but it takes a second to get it crumbled. Netflix as a brand always focused on customer experience and entertainment. However, the recent news of cracking down on passwords, increasing the subscription price and introducing ads on the platform shows that they have become money-hungry and are not that consumer-friendly anymore. This way, the damage has already been done and the PR of the company hasn’t even done their job properly, which has resulted in such a stir. As they are now changing their core strategy, customers are finding it infuriating.
Cease to Innovate
Netflix has been famous for its great and unique content. However, in recent times, people believe that the streaming service has stopped making unique and innovative content. They are creating content that are mundane and repetitive. This way they are forgetting the basic thing that made them successful.
What Will Netflix Do Now?
Netflix is right now in deep trouble. There is still no definite answer as to when Netflix will stop losing subscribers. It is the first time in a decade that the streaming giant has received such a blow. In fact, the worse is still not over as Netflix has already said that it will lose more subscribers with the current scenario. By the next quarter, it is predicted to lose 2 million more subscribers. Netflix is currently gearing up to follow its decision of introducing ads on the platform and banning password sharing. However, it is not clear if these two decisions will be able to revive Netflix or it will make it fall more into the abyss.
Conclusion
Netflix is submitting itself to the current Global financial situation and thus it has seen a drop in its shares and such a big one for the first time in a decade. Their way of handling the situation and lack of proper PR seems like they are only thinking about their revenue. So their decision of introducing ads and password crackdown make them look like they are shifting from being a customer-centric company to just a money-hungry organization. If proper steps are not taken any sooner, Netflix will lose more subscribers and maybe its USP as well.
FAQs
Why did Netflix lose 200k Subscribers?
Netflix is losing its subscribers because it recently has decided to put a ban on sharing the account passwords by consumers.
Who is the founder of Netflix?
Reed Hastings and Marc Randolph are the founders of Netflix.
When was Netflix founded?
Netflix was founded in the year 1997 and started its streaming service in 2007.
On the 24th of February 2022, Russian President Vladimir Putin shocked the world when he had announced the decision to launch a “special military invasion” in the eastern parts of neighbouring Ukraine in order to “protect the Russian-speaking people” there.
While there are various reasons speculated for the war, such as Ukraine wanting to join the North Atlantic Treaty Organization (NATO) or Putin’s vision of bringing back the old erstwhile Soviet Union, the economic effects of the war have been brutal for the world.
While the catastrophic effects of the invasion on the energy sector have been well-documented, given that Russia is one of the largest exporters of petroleum and natural gas and the subsequent oil embargo it has faced at the hand of the United States, this war also has effects on other sectors of the economy. One such sector is the agricultural sector, especially wheat production.
Russia is the largest exporter of wheat in the world, and Ukraine is the fourth largest exporter of the same commodity. Together they combine for a whopping 30% of the worldwide wheat production. But now, due to the various instability issues in the supply chain, there is a need for other countries to fill the void. India can be one of those countries.
And in India, one of the largest wheat exporters is the agribusiness section of ITC Ltd (formerly known as the Indian Tobacco Company). The agribusiness section of ITC accounts for about 21.88% of their revenue as per FY21 (Fiscal Year ranging from 1 April 2020 to 31 March 2021).
With ITC’s agribusiness section being one of the major contributors to India’s wheat exports, this article would discuss how they can benefit from this war, like, for example, the geographical conditions which help India’s aims, unlike exporters. We would also briefly discuss how ITC procures wheat from its farmers.
ITC procures wheat through their e-Choupal initiative. Launched in June 2000, it has provided computer and Internet by e-Choupal kiosks access to the rural regions across multiple agricultural regions in the country.
Through e-Choupals, farmers can negotiate with the representatives of ITC, eliminating the need for a third party. They also help farmers place orders for basic agricultural needs like seeds and fertilizers, which enhances their productivity.
In 2020, ITC launched e-Choupal 4.0 which gives farmers information on weather and markets on a real-time basis. Today, around 4 million farmers growing a wide variety of crops like soybean, coffee, wheat, rice, pulses, and shrimp in over 35000 villages, are connected with ITC through 6100 e-kiosks. These farmers are spread across 10 states (Madhya Pradesh, Haryana, Uttarakhand, Uttar Pradesh, Rajasthan, Karnataka, Kerala, Maharashtra, Andhra Pradesh, and Tamil Nadu).
How Much Wheat Does ITC Export?
As per a March 2022 Business Standard report, out of the nearly 7.25 million tonnes of wheat exported in FY 2022, ITC is responsible for about a whopping 50% of it. With the Indian government targeting a record 10 million tonnes of wheat export for FY 2023, it is reasonable to expect that ITC would be a major contributor to it.
According to domestic brokerage firm Edelweiss, the poor production of wheat in Russia and Ukraine in the third quarter of FY 2022 (July 2021- September 2021), was a major reason for a 100% YoY (year-on-year) increase in ITC’s agribusiness division revenue as they slowly started to fill the void. They were also aided by other factors, such as a growth in demand for spices and leaf tobacco.
The Opportunity That Beckons
The invasion of Russia on Ukraine has further exacerbated the issue regarding the poor yield of wheat exports.
In the case of Russia, it is because of the various sanctions the Western World has imposed on them due to the invasion. These sanctions also affect other Russian exports like petroleum and potash. In fact, Russia has even temporarily stopped exports to ex-Soviet countries in Belarus and Kazakhstan for the time being.
In the case of Ukraine, it is mainly due to the Russian airstrikes on all their major port cities on the Black sea like Odessa and Chornomorsk. This has led to supply chain disruptions worldwide.
So if we consider these two factors, then it should be no surprise that wheat prices have touched a record high of around $13.50 per bushel (roughly around $500 per tonne). This had led to a huge void in the market, especially with countries dependent on wheat imports like Egypt struggling right now, given its ever-increasing population at a rate of 1.9% per year.
How Can ITC Exploit This Opportunity?
Given that wheat is a crop that is mainly harvested in the months of April and May, it looks like India is at the right time to help the world overcome the consequences of the Russian invasion of Ukraine as there has never been a demand for wheat higher than what it stands right now.
Another thing that needs to be considered as per the Edelweiss report mentioned before, the wheat produced in India is comparable in all parameters to Russian Red Sea Wheat, be it in quality, taste, or texture. Thus, all these factors help us conclude that the wheat produced in India is primed to fill in this huge void of wheat exported by Russia and Ukraine.
And who else is better positioned than ITC here? ITC already has a strong market in Bangladesh, the Middle East, and countries based in southeast Asia like South Korea and the Philippines.
Top Wheat Export to Countries From India
No wonder it has started taking steps to exploit this advantage, such as scaling up its wheat development program and introducing location-specific superior seed varieties. It has also started exporting its wheat to countries like Lebanon as well.
Even the current Prime Minister of India, Narendra Modi, has acknowledged this need to fill this void and recently said that India should seize this opportunity of exporting the best quality of wheat the exporters can.
The government has also decided to aid these companies so that India’s exports can be further boosted as per the directive of our Prime Minister. They have started establishing laboratories at a faster rate for quicker testing. They have also told port authorities to give priority to wheat exports.
Admittedly, a major issue that still persists that the exporters continue to raise is state-specific taxes. For example, in Punjab, they have to pay 3% taxes as per the fee they have paid to the market and 1% service charges. Exporters have appealed to the respective state governments to give tax relief, which would ease their business a lot.
Conclusion
Thus, in this article, we have talked about why there is a huge gap in the wheat exports market due to the Russian invasion of Ukraine and how ITC can exploit this gap. This gap is something that not only ITC but other exporters like Cargill or Olam Agro can take advantage of. And thankfully, it seems all of them are.
As per various reports, India could potentially export 4 million tonnes of wheat (around 55% of what it used to export annually) within the next two months, so it can be seen that Indian exporters are seizing this moment. This bodes well for the Indian economy and, thus, the country as a whole.
FAQs
Was Russia a major exporter of grain?
Yes, Russia is one of the largest exporters of wheat in the world and accounts for 16.5% of wheat production in the world. The country exported 37 million tonnes of wheat in 2020.
Does Ukraine produce a lot of wheat?
Yes, Ukraine accounts for 11.5% of wheat production in the world. It exported 18 million tonnes of wheat in 2020.
Who does Ukraine export wheat to?
Egypt, Indonesia, Turkey, Pakistan, and Morocco are some of the top countries to which Ukraine exported wheat.
Who does Russia export wheat to?
Egypt, Turkey, Nigeria, Bangladesh, and Pakistan are some of the top countries to which Russia exported wheat.
How can ITC benefit from the Russia Ukraine crisis?
As the Russia Ukraine war has caused a huge shortage of wheat in the world, ITC can seize this opportunity by providing the wheat to the countries that Russia Ukraine exported to.
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