Cross Border Alliances and SME: Pricing
Name
Institution
Cross Border Alliances and SME: Pricing
Prices of products have a direct impact on the economy because the financial position of the businesses in different countries is affected (Bowler, 2015). Principally, firms make profits through a difference in the value of the product from acquisition and sale. Therefore, a huge margin between the purchases and the revenues results in larger gains. However, it may be different in some sectors because clients are aware of the drop in the worth of products. Resultantly, the customers expect an immediate decline in the charge of the products so that they can consume more of a product. In such cases, companies, especially the SMEs find it hard to take their businesses due to their limited operational capital. On one hand, SMEs may have purchased the products in huge amounts and spent huge amounts of cash. However, a gap in the pricing could lead to losses since they will have to sell the merchandise at a lower when compared to the original value when bought. Thus, this paper will focus on the effects of the reduction of oil prices and its important impact on the companies in the sector.
New York times “Oil Prices Fall to Lowest Since 2009”
According to the New York Times, the oil prices recorded a reduction to levels that were previously experienced in the recession of 2009 (Krauss, 2015). Clearly, international banks noted that the value could record a further reduction since many organizations are involved in the global supply of oil. In fact, analysts in the oil field indicate that the world has a surplus of between one and two million barrels, and thus, could affect the global value for a long period. For example, the production of the product in the United States has increased by over a million barrels per day’s production, and this could rise due to the massive investment in the segment. However, creation and exportation records a steady rise as many other countries expand their operations to advance their risks. For example Iraq is involved in the upgrade, and this means that states involved in the drilling continue to bring capital in the sector (Krauss, 2015). Contrarily, experts say that stability of the worth at the lower levels could be harmful to the USA due to the huge loans facilities that small and medium sized entrepreneurs have borrowed. Therefore, the reduction of oil prices is on one hand a relief to buyers, but it is an economic hurdle to the investors since the returns on capital are insignificant.
Analysis
According to the BBC, the fall in the global oil prices in the past seven months has led to a significant drop in the revenues of different stakeholders especially in the energy field. Actually, many individuals may record gains but a significant percentage will have loses due to the situation. Particularly, the rise in the number of participants has increased the supply, and the reduction in demand due to financial difficulties has exacerbated the demand. Briefly, the organization of petroleum exporting countries has insinuated that it may not start a cut in the production of oil as a solution to the present case. Thus, the affected parties have to look for alternative rectifiers since the situation may not be solved by the regulator. On one side, the World Bank has stated that Russia’s economy may drop by 0.7% since the country losses an estimated $2 billion for every dollar decrease in oil prices (Bowler, 2015). Although the state is affected by the circumstance, sources assert that there will be not cuts in production as this can affect the place market. To contain the impact of the situation, the country has decided to limit the expansion plans for 2015 because predictions show that the economy will recess (Dowling, Festing and Engle, 2008). However, specialists indicate that capital controls and policy measures can be incepted to control the consequences of the issue. On the opposite, specialists state that the consumers are gainers since they will spend less on the products. Thus, the producers and the distributors may be negatively affected since they have huge investments in the segment.
Personal Perspective
The drop in oil prices is an issue that affects different sectors of the economy although with special impacts. On one side, some individuals may benefit but the negative impacts are felt by other firms especially the companies that have huge investments (Krauss, 2015). First, many entrepreneurs are involved in the oil business due to the high returns. Clearly, most of the people may not be willing to continue investments in the sector due to the low rates of returns after a price reduction. Secondly, the low prices lead to low income, and this affects the repayment of loans especially businesses with massive credit. For illustration, the firms will have to sell large quantities to increase a stated amount of cash that was collected in the previous period through sale of a specified quantity. Also, the circumstance will affect bank deposits and international trade due to the amount of money that circulates in the field. Thirdly, low oil prices can have an ultimate impact on the exporters as they may be driven out of the segment, especially states that are dependent on revenue from petroleum sales to other countries. Contrarily, the consumers will gain because the prices of most products will reduce due to a reduction in the cost of production. However, the advantages of the decrease in the oil prices are insignificant as compared to the disadvantages when the prices rise. Finally, the situation has a greater negative impact in various sectors although consumers are the primary beneficiaries.
References
Dowling, P., Festing, M., & Engle, A. D. (2008). International human resource management: Managing people in a multinational context. London: Thomson Learning.
Bowler T. (7 January 2015). Falling oil prices: Who are the winners and losers? London: BBC News.
Krauss, C. (JAN. 12, 2015). Oil Prices Fall to Lowest Since 2009. New York: The New York Times. Retrieved from: http://www.nytimes.com/2015/01/13/business/energy-environment/oil-prices-fall-to-their-lowest-since-2009-recession.html
Last Completed Projects
| topic title | academic level | Writer | delivered |
|---|
Are you looking for a similar paper or any other quality academic essay? Then look no further. Our research paper writing service is what you require. Our team of experienced writers is on standby to deliver to you an original paper as per your specified instructions with zero plagiarism guaranteed. This is the perfect way you can prepare your own unique academic paper and score the grades you deserve.
Use the order calculator below and get started! Contact our live support team for any assistance or inquiry.
[order_calculator]