walmart in china business report
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The country China is most attractive and favourable location in the world especially for investors who require and seek for the secure and low-cost investment opportunities.TRANSCRIPT
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Walmart in China Business report
Country background:
China is one of the world fast growing industry. It is considered as one of the
emerging economies which offer a lot of business and market opportunities
to the foreign investments. Because of its favourable economy, most of the
investors in the world in order to earn the high profits and to ensure the
growth and success of their investment make an investment in this country.
The country of China has the massive potential for the economic growth and
development offering the access to the large marketplace and the
considerable saving opportunities in the labour cost. Because of its effective
and low-cost labour force, it becomes one of the markets that offer the low
manufacturing opportunity to the companies (Fogel, 2010).
The country China is most attractive and favourable location in the world
especially for investors who require and seek for the secure and low-cost
investment opportunities. The China economy has grown and developed to
turn into one of the strongest powers and effective market. This rise in the
economy of China boosted the international business in the country. The
China legal system is also effective and improving day by day that foster the
economic and the foreign investment in the country. There are many reasons
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because of which the foreign investors of the world seek investment
opportunities and business in China. Out of all the factors, the three main
things that mainly attract the foreign investors are:
China’s growth and development potential together
The highly low labour cost of the market
Size and potential of the market
From many years reformation, the China economy changed its market from
the centrally planned one of the closed world economy to the manufacturing
and the exporting nation. With the high growth and much reforms in the
market, China becomes the number second largest market in the world place
after the US when its GDP is measured. The China value of the GDP is $23.19
trillion that is higher than all other world countries except the United States.
In the China economy, the GDP growth rate is approximately 7%. The major
sectors that highly contribute to the GDP of China are service and the
manufacturing the least contributing sector is agriculture. The major factors
that help the growth of China economy are effective and low-cost labour
force, highly advanced technologies, effective infrastructure, increase in
productivity and high investment opportunities (Bajpai, 2017).
The studies show that in China because of many factors like the political,
economic, social, and technological and the cultural the doing of the
international business is not much easy. The investors must analyse many
facts about the political, economic, social, and technological and the cultural
condition of China. Like the Walmart that we take in this assignment when
want to start its business must consider and analyse the PEST analysis.
As the Walmart is one of the American based multinational retail company
that operates the chain of departmental discount stores, hypermarkets, and
the grocery stores. The headquartered of the Walmart is located at the
Bentonville, Arkansas. The company Walmart was founded in 162 by the Sam
Walmart. The current chairman of the company is Greg Penner, and the CEO
and President of the Company are Doug Mcmillon. The company is the retail
store that offers the various products like footwear, jewellery, beauty and
health products, pet supplies, electronics, music and movies, furniture and
home appliances, home improvement products, clothing, toys, sporting,
fitness and health goods, craft supplies, grocery, auto, party supplies and
photofinishing etc. its revenue is approximately 500.34 billion USD in 2018
(Walmart, 2018). As they are planning to start their operation in China so
because of its diversified product portfolio and consumer products, it’s
highly essential for them to analyse the China market effectively in order to
reduce the failure chances and to enhance the chances of growth and success
in China market.
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The PEST analysis is one of the important management tools that assess
macro-environment factors. It’s usually conducted in the analyses of the
business success. This analysis supports the decision making process and the
other management procedure. For Walmart the China the major challenge
related to the business are:
Local differentiation
Attaining the strategic goals of the cost reduction
The firming up of the core competencies and expertise in certain
business activities and areas.
Demographic and social factors:
In China, the population is 1,379,302,771 out of this most of the population
means 48.51% population is of 25-54 years of age. The population growth rate
in the country is 0.41%. The literacy rate in China is 96.4%. More population
is female. As in China the population is much high and consist of more
female and youth that enhance the needs of the consumer's products and
beauty, entertainment products etc. so, because of this fact its favourable
market for the Walmart company. China is also the formal member of the
world trade organization (WTO) (Index Mundi, 2018). Therefore, the
entering in China economy is easy and beneficial for the companies like the
Walmart. And this factors helps in boosting the global economic
development and growth in the world market.
Political factors:
In China, the political condition is much stable, and the government also is
much supportive toward the foreign investment. As they offer many tax
benefits to the foreign investors that attract them to make an investment in
the country. Therefore, the political condition is highly favourable for the
investors to make an investment in China, so it’s beneficial for Walmart to
start its operation in China (BBC News, 2018).
Economic factors:
In many past years, the economy of China experienced the significant GDP
rate of growth. Some of the factor help in advancing this GDP growth in
future also. These factors are:
High export business
Skilled and abundant labour force
High saving rate
Potential urban advancement
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The high GDP helps in increasing the consumer’s purchasing power that
make it highly favourable for Walmart because of high purchasing power the
people highly become able to purchase the products of the Walmart. In
China, the labour cost is highly low, so it’s beneficial for the company like
Walmart to hire the employees from China and do business in China because
of this the operation cost reduces. But some factors like the high inflation
rate and the high prices of the property and high investment rate make the
critical so for these factors the effective strategies must be designed to reduce
their influence on business (Economics, 2018)
Cultural factors:
The Chinese welcome and honour others and ensure the team working. The
culture in China is highly friendly they are inveterate the gift giver and this
hope for the good and effective future business of Walmart in China
(Lunicheva, 2014)
Foreign investment:
China is a most attractive country for the foreign investors and multinational
companies from 2016 to 2018 this is mainly because if it’s good economic
position and the government policies regarding the foreign investment. The
government of China reduce the corporate taxes like tax exemption on the
dividend for certain period to attract foreign investment. Additionally, the
foreign direct investment benefits include the packages of the reduced tax on
income, land and resource use fees, export/import duties and funding
support for the set-ups (Nan, 2018).
Retail industry:
In China, the retail industry is considered as one most promising business
field in the near future. The market analysis shows that the increasing trend
in the China GDP will continue in next three year that increases the
purchasing power of people. In China, the contribution of the merchandise
trade is approximately 36%. The reduction in the export and increase in the
domestic market helps in satisfying the domestic need and also boost the
retail market in China. In China, the online consumption of the consumer
good increased from 0.6 to 12.4% in 2017. The retail market in China is highly
competitive and required diversified products. In retail trading, various
products include that are footwear, jewellery, beauty and health products,
pet supplies, electronics, music and movies, furniture and home appliances,
home improvement products, clothing, toys, sporting, fitness and health
goods, craft supplies, grocery, auto, party supplies and photofinishing etc.
The Walmart in China comes in the second with the overall volume of the
retail sale around Yuan 73.5 billion (Statista, 2018)
Country infrastructure:
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The infrastructure in China is highly advanced and developed over time. In
China, it’s the top priority of the government to advance the infrastructure
like having the modern transport, rails, telecommunication and the
electricity. It has the world largest network of the toll roads, and its network
of rail is essential for its transport and infrastructure policy that contributes
to its economic growth highly (KPMG, 2018).
Conclusion:
It is concluded that China is highly favourable market for the foreign retail
investors to invest in China because of its good economic condition, effective
retail market, advanced technology, good infrastructure, high consumer
purchasing power etc.
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