Analysis Of External Factors Affecting Moscow Stock Exchange

PESTLE Analysis

1.Consider the external macro-environment of the Moscow Exchange using any framework(s) you think are appropriate. Given this, how should the company position itself strategically over the next 10 years? What major strategic priorities can you identify?

2.Identify the main capability gaps of the Moscow Exchange vs. other worldwide stock exchanges. How should they fill these gaps in order to increase their future performance domestically?

3.Assume that Moscow Exchange wishes to grow internationally – which markets would be more promising for this endeavour and how exactly should they expand over the next 10 years?

The report helps in analyzing the different external factors that creates huge effect on the Moscow Stock Exchange. The different SWOT, PESTEL and Porter’s Five Forces analysis has to be done, as this will help the company in understanding the different issues. The challenges or the capability gaps have to be discussed in order to implement strategies that will improve their condition.

The main aim and purpose of the report is to identify the different strategies that will be implemented in order to improve the challenges that have been faced by them. The strategies have to be implemented in such a manner that will help in solving such issues in an effective manner.

Moscow Stock Exchange provides convenient and exhaustive access in the entire market of Russia. The market helps in offering different opportunities of trading to the clients in such a manner that this includes diversified range of assets with best post trade services.  Kit has implemented different reforms that help in simplifying process of listing and brought it fully in line with the different international standards

PESTLE Analysis can be described as a strategic management tool, which is used to research and analyze the various factors of the external market. The PESTLE Analysis involves an analysis into the Political, Economical, Social, Technological, Legal and Environmental factors (Hill, Jones and Schilling 2014). The precise categorizations of the various factors is not important but the identification of the various influence to both the firm`s current and future methods is important.

• Political – The government of the Moscow Stock Exchange is the Russian government. The Russian government has its own political system, which has its own convention and situation. The primary advantage of having a stock exchange in Russia is that the country takes charge of all the roles of the Soviet Union. Although the country is a federation, the central government of the country is greatly involved with management (Barney 2014). Vladimir Putin is the Prime Minister of the country. Russia functions in an open foreign relationship strategy. They have various companies in their exchange and have an official relationship with around 191 countries and 144 embassies. This provides with good opportunities for trade and development (Moscow Exchange 2018). As Russia tries to maintain a peaceful relationship with other countries, it helps the country to attract more investment.
• Economical- Russia depends mainly on natural resources for the welfare of its economy. The country is abundant in oil and gas, which is reflected greatly in the companies, which are present in its stock exchange market (Eden and Ackermann 2013). However, the economic condition of the country is not as good as that of other countries in Europe. Hence, its exchange does not perform as well as others.
• Socio-Economical- The social structure of the Russian society has converted from autocratic to democratic structure. The given change has resulted in great gaps between the rich and the poor people of the society. The society is greatly dominated by those with high income. The general attitude of the people towards investment plays a great role in determining the condition of the stock exchange (Wheelen et al. 2017). People invest moderately into the exchange.
• Technological environment- The system in which the stock exchange used to function earlier is different from the way in which functions now. Technology has advanced greatly and this has lead to the change in the whole system the market functions right now. All the aspects have become digitalized and this has lead to a change in the players and investors as well.
• Legal- The corruption rate in the Moscow Exchange has reportedly been at a high. Though the systems have changed right now, there still exist certain limitations as to how the exchange functions with respect to transparency (Ravi 2014).
• Environmental- The given component includes the factors affected by the environment or natural environmental. Very often companies suffer because of their ability to not abide by these environmental laws and hence, their value in the exchange falls down significantly.

SWOT Analysis

The SWOT analysis helps in drawing the different strengths, weaknesses, opportunities and threats from the audit that is strategic in nature. The entire audit contains wealth of data of differing reliability and importance. A SWOT analysis is carried out for product, industry and place, however in this particular case, the entire analysis is done on the markets of the Russian cities and Finnish market.  The analysis helps in identification of the data to show the critical items that is relating to internal and external audit. Proper setting of the objective has to be done after the preparation of the SWOT analysis.

• Strengths
• The first and most thing for strength of Moscow Stock Exchange is ability to provide high return
• The regulatory body of Moscow stock exchange helps in protecting the interest of the investors in an effective manner
• There are different kind of securities that helps in providing medium for investment
• There are large number of brokers that plays role of facilitator for the entire investment
• There are more than 3000 companies from different 60 countries listed on the exchange
• It helps in offering wider array of different financial instruments to the different investors
• Weaknesses
• The main weakness of Moscow stock exchange is the volatility of the market
• It is some kind of gambling wherein there is no guarantee of the return and it depends on luck as well
• A technical glitch smaller in nature can create major impact on the finance of the nation
• The large kind of institutions require lot of manpower along with manual interference to sustain business model
• Opportunities
• It helped in growth by expanding the participating organizations
• There is diversification of risk at a scale that is global in nature through expansion that is strategic in nature
• It helps in providing money to the money lenders and seekers for money to utilize and invest money for the plan
• Threats
• There are different competitors in the market such as public provident fund and fixed deposits that helps in providing fixed and assured returns
• The changes in the economic condition
• The capital market instrument is risky in nature than the money market
• The changes in the government rules and regulations
• It is highly impacted by legal and regulatory changes due to cascading the effect of market performance that is financial in nature

SWOT Analysis

Porter’s Five Forces Analysis

The Porter’s Framework analysis is a tool for analysis of the different competition of the business. The different forces are used in order to determine the entire competitive industry in terms of the profitability in the entire market.

The Porter’s Give Forces Analysis is as follows:

• The threat of substitute services or products is one of the factors wherein the Moscow stock exchange needs to distance themselves from the substitute products through differentiation of product or performance that is better in nature. The stock exchange needs to follow the same or else this can make them suffer from growth potential
• The threat of increased competition from rivals in the market is the other element wherein rivalry is destructive in nature and it can takes place in different forms that is familiar in nature that includes huge competition in the prices in different kind of segments (Vasenev et al. 2018)
• The threat of new entrants into the market is the third element wherein Moscow Stock Exchange needs to be aware about the other stock markets in the entire society. There is less chances in the entire stock market wherein the small players can grow and this will cause huge danger respective stock exchange
• The bargaining power of suppliers is another component wherein the company needs to capture the value for themselves by charging prices that is higher in nature. This limits the quality or the different kind of services and this can affect the price in a huge manner (Mouna and Jarboui 2015)
• The bargaining power of the customers is essential in nature as stock market is the place wherein the bargaining power of the suppliers takes a huge place. The services provided by Moscow Stock Exchange is essential in nature as this will help in standardizing the services provided to the clients (Ezangina et al. 2016

SMART Analysis

The Moscow Stock Exchange should take the given steps to position it strategically:

S.M.A.R.T is an acronym, which is used to help in the development of the measurable goals for an organization. It states that each objective should be:

• Specific
• Measurable
• Achievable
• Relevant
• Time-Oriented

Specific

The Moscow Stock Exchange needs to be extremely specific about its goals and objectives. It needs to have a clear picture in mind about which companies are most profitable and which companies are not. Depending on that, it needs to take specific measures.

Measurable w/Measurement

Measurable refers to how the company will be able to meet the expectations. The exchange wants to receive good investment and profitable companies; hence, it should conduct a proper analysis of companies before making them a part of the organization (Morschett, Schramm-Klein and Zentes 2015).

Achievable

However, the standards, which will be set by the company, must not be very high. They should understand the economic condition of the country and only then, it should take a step ahead to make the necessary changes.

Relevant

The relevance of the various companies with respect to their participation must be taken into consideration. The impact of the involvement of the different companies should be measured in order to understand their relevance.

Time-oriented

If the Moscow stock exchange is aiming at making its exchange one of the most profitable ventures around the world then it should keep a time-oriented goal. The exchange should see the performance of the company within a specific period and decide their fate.

2.Capability gaps are defined as the inability to execute the specified course of action and the gap may be result of no such capability that is existing in nature. The capability gaps have to be reduced to a huge extent by implementation of different sufficiency in order to remove such gaps. In Moscow Stock Exchange, the capability gaps that has been identified is relating to the opening of the current bars above high or below the low of the bar that is previous in nature. The gaps are accompanied by increase in the volume.

 The capability gaps can be assessed in nature, as this will help the company in determining the gaps wherein it will help in meeting the gaps and the business requirements. The Ruble index is up to 10% in the year 2015 after gaining more than 13% in the year 2014. The main capability gaps are as follows:

• There is manipulation of the prices wherein it has been observed that there are different profitable organizations that has been increased and it hampered the smooth operations of the stock market (Sozinova et al. 2016)
• The improper financial statement is another capability gaps in Moscow Stock Exchange wherein they do not focus on the real position of the company. The audit firms involve the corruption while preparation of the financial statements. Due to this, the shareholders along with the investors do not have any idea regarding position of the market (Barbero et al. 2015)
• The selection of the membership is other factor wherein there are different members who are directors of the company look for their own interest with the usage of the internal information of share market (Verma and Rani 2016)
• There are ir-regulations in the dividends wherein some companies do not hold annual general meeting and declare the dividends that will confuse the shareholders about the financial position of the respective company in comparison to different other companies in the same field

Porter’s Five Forces Analysis

There can be different measures that can be taken by Moscow Stock Exchange in order to reduce the capability gaps are as follows:

• They can introduce the automated system of monitoring that will help them in controlling the manipulation of price along with inside trading (Teplova and Rodina 2016)
• They can introduce the full computerized system for different settlement of transactions
• They can take remedial actions against the different kind of issues of the certificates that is fake in nature (Charles et al. 2016)
• They can make the arrangements in order to set up different merchant banks, investment banks and other mutual funds in the private sectors (Volkova et al. 2015)
• The stock market in Moscow Exchange are finalizing the offers of IPO in the market
• The pharmaceutical along with API are enjoying benefit of WTO is growing in a rapid speed

These different programs can be adopted by Moscow Stock exchange in order to improve their capability gaps in comparison to other stock exchange markets in the competitive industry. The Moscow Stock Exchange needs to introduce the automated monitoring system in such a manner that this will help them in controlling the manipulation in the prices. The remedial actions has to be taken by the respective stock exchange in such a manner that this will help them in solving the different issues and implement strategies that can help them in becoming more competitive in nature.

According to, India is a promising market for any kind of investment. The economic condition of the country has even increasingly considerably which makes it one of the best companies to invest in.

The reasons why India promises a profitable investment have been given below:

Reforms Matter

India has been under a great economic as well as social reform in the past decade. With the entrance of the new government headed by the Prime Minister Narendra Modi, the foreign direct investment policy of the country has been relaxed. Sectors such as Land Acquisition, coal and power sector, streamlined tax regimes and direct transfer regimes, the country is an extremely attractive country to expand its operations to (Rothaermel  2015).

China-style GDP Growth.

The country has been experiencing an extremely high growth rate of nearly 7.5% to 8%.It has been estimated that by the next year the growth rate of India will be crossing 8 %. Various business enterprises in the country have crossed the billion clubs and according to experts, the country is a bull market for the next few years (Pinto 2015). Hence, if the Moscow Stock Exchange aims to expand its operations and grow its business, it is suggested that it should be investing in the high growing economy to fasten the success rate of its exchange.

Monetary Policy of India

The current monetary policy of India is extremely attractive and cost saving. With the implementation of GDP, it is suggested that the companies in the country will benefit largely if they adopt the given regime. Hence, if the exchange plans to increase its operations, it must take an effort and make sure that it is investing in the right number of companies and considering the right path.

S.M.A.R.T Goals

Corporate Earnings.

The corporate earnings growth rate of India is expected to grow tremendously and hence, it is an average 7% this year and is expected to increase even more (Barney and Hesterly 2015).  The given index shall increase even more which makes the county a profitable venture to invest in.

After analysis, the external environment of the business and identifying the capability gaps of the exchange it can be recommended that:

• The company must set a particular standard below which it should not allow the companies to involve themselves in the exchange.
• If it is looking for expansion, it should expand its operations to a growing and emerging market like India. This will help the company to make sure that it is adapting to the needs of the current environment.
• It should keep in mind the external environmental factors before taking in any decisions.
• It should include an automated controlling system for price control measures

References

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