Please respond to class mate’s post in 15o words. The issue with Russia and the invasion of Ukraine is a disaster and even more of a disaster than it is happening in the 21st century. The news report posted for this assignment was extremely interesting and is an example of the impact a company can have when it takes a stance on an international and political issue. Although McDonald’s is stopping operations in Russia, it will continue to pay the Russian employees. Closing over 800 shops across the country will be detrimental, especially if employees lose their jobs. McDonald’s stance is interesting because it is not leaving its employees hanging trying to figure out how to provide for their families. Instead, they are allowing Russia a chance to stop and let the 62 thousand employees find other jobs.
The industry I chose is the payment service companies such as visa, master card, discover. These companies have all cut ties with Russia with the recent invasion of Ukraine. Interestingly, issues in 2014 led some of these companies to cut ties with Russia leaving the country with some hardships. Russia had then decided to create its own card payment system MIR, which was live in 2015. Although MIR is functioning, Visa and Mastercard where both companies generated 4% of its net revenue due to business with Russia. Both companies have communicated that they blocked Russian financial institutions from the payment network, and cards issued in Russia will not be supported. (Mccrank, 2022)
Sources in Russia mentioned that cards issued in Russia would continue to function until they expire. Other sources said that cards issues outside Russia would not function in Russia. (Mukul, 2022)
Part (b)
It is extremely important to note that visa and MasterCard are global companies. The issues that arose in Russia and led to Visa and MasterCard cutting ties in 2014 showed Russia that there is a weakness in the system and allowed them to find different solutions to mitigate the situation if this ever happens again. Interestingly, now that this happened again but Russia has MIR. Businesses inside Russia are transferring salaries and pensions to the new MIR payment system. The MIR bank cards can be used in ten other countries, such as Turkey. To focus on the question laid out in the discussion question. Had Russia been self-sufficient, they may have had previously established more robust payment services. There are always also two sides to loss. As mentioned earlier, 4% of the Visa and MasterCard’s revenue was due to business with Russia. This means that this decision by both companies will lead to a potential loss in revenue for both companies. (Bunina, 2022)
Interestingly in 2021, an article mentioned that over two-thirds of international companies were planning to expand their operation into the Russian market (Ivlev, 2021). This article discusses this expansion in the middle of the COVI-19 pandemic. This shows that although there was a global pandemic, there was interest in expanding international businesses in Russia, thus creating product and service viability in Russia. This is huge in terms of growth. Unfortunately, with the Ukraine invasion, many companies are cutting ties leading the country to move backward in terms of foreign goods and services offering less variability to its population.
References:
Bunina, M. (2022, March 10). What is Russia’s ‘Mir’ payment system? Retrieved March 14, 2022, from https://www.rbth.com/business/334833-russian-mir-payment-system-card
Ivlev, A. (2021, October 18). International Business in Russia: A course for a sustainable future. Retrieved March 14, 2022, from https://www.ey.com/en_ru/attractiveness/21/ey-foreign-investment-in-russia-2021
Mccrank, J. (2022, March 06). Visa, MasterCard suspend operations in Russia over Ukraine invasion. Retrieved March 14, 2022, from https://www.reuters.com/business/finance/visa-suspends-operations-russia-over-ukraine-invasion-2022-03-05/
Mukul, P. (2022, March 08). Explained: What is the impact of Visa, Mastercard and American Express Block in Russia? Retrieved March 14, 2022, from https://indianexpress.com/article/explained/explained-impact-of-visa-mastercard-american-express-ban-russia-ukraine-crisis-7804526/
