Business and Financial Environment

EXECUTIVE SUMMARY

The main cause of the current "credit crunch" is attributed to the sub-prime mortgage sector in the USA. Based on the analysis carried out in the process of completing this task, we can make the following conclusion: the main macroeconomic factors of the current "credit crunch" were the surplus of liquidity in the economy of the USA and policy of low interest rates, investments in the USA securities by the countries which accumulate currency reserves and oil funds.

Keynesianism and Monetarism are two basic economic theories which are used by different governments to regulate the economy. The instruments of these economic schools can be used in order to minimize crisis consequences. The Russian government excessively used monetarist tools in the period of 2000-2008. The first anti-recessionary measures of the Russian government were directed towards the strengthening of the Russian financial system. Though, these measures began to realize only in October, but the first indicators of the credit crunch appeared early. Besides, the IMF projects that Russia's real GDP will decline over 6% in 2009, the level of unemployed achieved 9.5%, and inflation in 2009 is expected to exceed 12 %. To achieve sustainable growth Russia must reduce its dependence on exports of oil and gas, and diversify into more stable production. The exit from crisis for Russia is economic growth against the background of moderate inflation.

Due to the "credit crunch" Russian banks had to decrease the financing volume for the real economic sector and increase interest rates. Government measures of supporting real sector were basically aimed at helping primary industry and large companies, which are included in the strategic list. Small and medium businesses didn't receive any government support in 2008 and were severely hit by consequences of the financial crisis. One of these companies is named "Germes". The primary activity of the company is sales of premium class products manufactured in Germany and Italy. These products are: ceramics, sanitary accessories, furniture, kitchens etc.

The following anti-crisis measures the company can undertake in order to attract assets and minimize the influence of low credit assets availability: 1.Sales promotion and as a result an increase in the speed of short-term assets turnover; 2. Decrease in turnover rate of short-term liabilities and use of non-bank financing (assets of suppliers, customers and non-bank institutions); 3. Sales of non-core, loss-making and low profitable assets; 4. Cost saving; 5. Increase of employees' motivation; 6. Minimization of risks connected with crisis consequences:

These measures will not only minimize the negative effect of credit shortage, but also improve the market power of the "Germes" company.

1. The macroeconomic factors of a "credit crunch"

The main cause of the current "credit crunch" is attributed to the sub-prime mortgage sector in the USA. However, George