Analyzing AgriDigital's Growth Potential in Russia: A Case Study

This case study analyzes Russia as an emerging economy, highlighting its growth potential and attractiveness to foreign investment, particularly for companies like AgriDigital. It discusses the characteristics of emerging economies, focusing on Russia's trade openness, foreign investment trends, and challenges. The study emphasizes Russia's strong economic growth since the 1990s, driven by industrial and service sectors, and its increasing influence within the BRICS association. Despite facing geopolitical and inflationary pressures, Russia demonstrates stable trade relations and a growing foreign investment landscape, making it a conducive environment for AgriDigital's expansion. The report recommends increasing trade ties with geographically closer countries and diversifying the export basket to include more agricultural goods. Ultimately, the case study concludes that Russia's emerging economy presents a promising opportunity for AgriDigital to achieve greater returns and contribute to Russia's overall economic development. Desklib provides a platform to access similar solved assignments and study resources.

EMERGING ECONOMIES
Case of Russia

Introduction
 Emerging markets are basically countries that are less
developed when compared to developed countries.
The term implies that these countries are gradually
developing and are in the transition stage of
development.
 The concepts involving emerging economies and their
growth are studied in detail in this report. Further, the
growth of Russia as an emerging market is also
evaluated with the help of features like country
attractiveness to international trade and investment
opportunities within the country. In this aspect the
establishment of the subsidiary of the Australian firm
AgriDigital in Russia is discussed.

Emerging Market Economies
 AgriDigital being an established firm
in an already developed economy
will efficiently be able to bolster the
economic growth in the country that
it expands to and contribute to its
development by increasing the Gross
Domestic Product of the country.

Emerging Market
Economies
 These countries slowly start gaining
importance in the world and
continental platforms. The most
important characteristic of these
economies is that they are able to
develop themselves as emerging
powers in the political and military
contexts as well.

Barriers to Emerging
Economies
 There are several types of barriers
that these countries face. These
include barriers in different contexts
like geography, politics, economy,
military, population, diplomacy,
power and national identity. These
countries have different levels of
potential and different strategies of
growth.

Features of Emerging Economies
 Emerging economies are identified
with low per capita incomes, high
levels of social and political
instability, high levels of
unemployment and low levels of
business and industrial activities
including investment programs
compared to developed economies
of the United States.

Agridigital
 Agridigital is a technological firm primarily
providing easy and the best solutions to the
firms operating in the agricultural sector. The
firm helps in increasing the transparency and
reducing friction in the supply chain in the
agricultural sector firms. The firm uses smart
devices and effective disruptive business
models for this purpose. They help in
upgrading and improving the skills of the
workers operating in the agricultural industry
as well.

Investment in Emerging Economies
 For a firm like AgriDigital that has
been operating efficiently since
many years and managing funds and
investments in the best way
possible, investing in Russia will win
the firm increased amounts of
revenue generation.

Investment in Emerging Economies
 This is compensated by the levels of
higher economic returns and growth
as compared to most other
economies (Xia et al. 2014) This high
rate of growth coupled with high
rates of expansion slowly converts
into high profitability rates and
revenue generation for the corporate
investors.

Russia as an Emerging Economy
 There are five major economies in
the world currently which are
identified for having immense
influence regionally and are now
increasing the amount of global
influence too. Russia is one of these
countries, the other countries being
Brazil, India, China and South Africa.

Russia as an Emerging
Economy
 According to reports, BRICS as an association
has been able to steer up growth from a
percentage of 3.9 in 2015 to 4.6 % in 2016. It is
being estimated that in the year it expanded at
a rate of 5.3% in 2017 (Chkili & Nguyen, 2014).
Russia is one of these countries. Thus, as the
firm operates in the agricultural industry, it is an
added advantage for the firm to expand in
Russia as it is well known or its agricultural
sector and large areas of land mass and natural
resources used for agricultural purposes.

Russia as an Emerging
Economy
 After the 1990s, Russia has grown at
the fastest rate (7%) and is now
increasingly being recognised as the
fastest growing economy.

Russia as an Emerging
Economy
 The biggest sectors of the country
that contribute the maximum to the
gross domestic product of the
country include the industrial and
service sectors and a very small
agricultural sector. The percentage
contributions of the three sectors are
32%, 63% and 4% respectively.

Trade Openness
 Trade openness refers to the total
orientation of the country both
inward and outward in the context of
economy. It specifically emphasizes
on the outward orientation of the
economy to trade with other
countries (Idris, Yusop & Habibullah,
2016).

Trade Openness and Russia
The graph portrays how the total
amount of exports every year from
2012 to 2015 has always remained
higher as compared to the amount of
imports even though the total amount
of trade has declined slightly between
these years. Thus, the balance of
trade has always remained stable
irrespective of the fluctuations in the
amount of exports and imports in
between these years (Makhmudova &
Koroleva, 2016).
The total amount of
exports and imports of
Russia as a percentage of
the total amount of Gross
Domestic Product is used
to find out the openness to
trade in case of Russia.
This again forms a very
option for Agridigital to
operate and expand in the
Russian cities where

Trade Openness and
Russia
In the period between the
years 1989 and 2015, the
average rate of trade
openness for Russia has
been at 54.53% with a
maximum of 110.58% in
the year 1992 and a
minimum of 26.26% in the
year 1991.
This shows that Russia is
undoubtedly one of the
emerging economies with a
stable level of trade openness.
This means that even though
the country faces a lot of risks, it
is still gradually becoming one
of the most important countries
for attracting immense amounts
It can also be asserted from
these data that the foreign
trade relations of Russia with
the foreign countries is quite
stable in nature and there has
been a positive balance in the
operations at the global level
over the last few years. The
trade relations of this country
with countries situated far
abroad has been more

Challenges facing Russia
The primary challenges facing Russia in the
context of trade openness are stated as follows:
 Very small participation rate in the industrial
international value chains
 Very small share of market in the CIS countries
 Mediocre levels of machinery in the total export
basket of the country
 Detrimental effects facing the agricultural
regulations and food security
 Maximum concentration on minerals and oil in
the export basket of the country

Foreign Investments in Russia
 The attractiveness of the region to
foreign direct investments is because
of the large endowment of natural
resources in the country, a market
with increasing potential and skilled
and educated labour force.
The net amount of foreign direct
investments has exceeded $20-25 billion.
Even though the Russian economy has
faced a lot of geopolitical turbulences, the
firms that had invested during that period
are being successful in gaining large

Foreign Investments in Russia
 Since the year 1999, this country has
been able to increase the reserves of
foreign currency by about thirty
times. Over the last eighteen years,
Russia has been able to reduce the
total amount of public debt from
92% to 17.2%.

Foreign Investments in
Russia
This graph shows that although there has been some rate of
foreign direct investment flow in the economy of Russia, it has
fluctuated a lot in the different halves of the very same year.
Other reports suggest that the
position occupied by Russia in the
field of foreign direct investments
has gone up by one spot in the year
2016 as compared to 2015. Russia
has left behind Belgium in the net

Foreign Investments in
Russia
 Increasingly investor firms from the
United States and Germany are
bolstering their positions in Russia
currently. These two countries are
proving to be the major contributors
of growth and FDI projects in Russia.
The employment generation in the country as a
result of the total foreign direct investment flows has
been at a rate of 6% increase. In the year 2015, the
total number of jobs created as a part of foreign
direct investment projects was 14,172 ("EY - Russia
ranked seventh among European countries by FDI
projects", 2018).

Foreign Investments in
Russia
In the year 2016, the number of
German FDI projects in Russia
increased from 36 to 43 and the
number of US FDI projects in the
country rose from 31 to 38. Asian
FDI inflows to Russia had also
increased in 2016 but varied
amongst the various countries
with the number of Japanese
projects increasingly from 10 to
12 and the number of Chinese
projects falling from 12 to 9 (Jost,
2015).
Reports also assert that the total
flow of money in Russia in the
form of foreign direct investments
as compared to 2017 has
increased in 2018 by twenty-five
percentage which is a total sum of
US$25 billion ("The Russian

Foreign Investments in
Russia
 Russia as an economy has improved at an
unprecedented scale. It has been able to
capture the thirty-fifth position leaving behind
190 countries and is making stronger efforts
to match the domestic demand and supply
levels as well as handling international trade.
However, the Australian economy has not
been able to gain out of the situation existing
in Russia and so it is a very good opportunity
and option for the firm to try expanding and
investing into the Russian economy.

Recommendations
 The country should increase its trade
ties with the foreign countries
situated closer to Russia
geographically.
 Agridigital should essentially be able
to make use of the existing situation
and make digital marketing the only
option of reaching out to people in
Russia as that will reduce the costs
incurred by the firm.

Recommendations
 The country should also increase the
amount of diversity in the export
basket of goods. Instead of
depending only on minerals and oil
as major export goods, the country
should increase the quantity of other
goods exported and especially focus
on agricultural goods.

Conclusion
It can be asserted that Russia being one of the
countries of BRICS is definitely full of potential and
is emerging in leaps and bounds each year since
the last few years. Even in the face of geopolitical
and inflationary pressures, the country is
improving the level of growth and economic
development. Hence, the business and trade
environment existing in Russia is very conducive to
the growth of Agridigital. This Australian firm
should make use of this situation and expand into
this economy to earn greater returns both for
themselves and for Russia as a whole.

References
 Acharya, V., Cecchetti, S. G., De Gregorio, J., Kalemli-Özcan,
Ş., Lane, P. R., & Panizza, U. (2015). Corporate debt in
emerging economies: A threat to financial stability?.
 Ahmed, S., & Zlate, A. (2014). Capital flows to emerging
market economies: a brave new world?. Journal of
International Money and Finance, 48, 221-248.
 Chkili, W., & Nguyen, D. K. (2014). Exchange rate
movements and stock market returns in a regime-switching
environment: Evidence for BRICS countries. Research in
International Business and Finance, 31, 46-56.
 Cousins, B., Borras Jr, S. M., Sauer, S., & Ye, J. (2018). BRICS,
middle-income countries (MICs), and global agrarian
transformations: internal dynamics, regional trends, and
international implications. Globalizations, 15(1), 1-11.