Walmart has recently announced plans for expansion to China. Already a retail giant in the U.S., they now hope to tap into a growing and potentially lucrative new market. However, such expansion is not without risks. Doing business in China is a much different environment than doing business in the U.S. Furthermore the Chinese government has announced plans for a series of ambitious new reforms that add to the level of uncertainty and may change the business environment for international firms.
Case Assignment
Read the following two articles and do some of your own additional research on Walmart and the new enviornment in China:
Roberts, M. (October 24, 2013). Walmart China Expansion Aims to Tap Urbanization, Business Week, http://www.businessweek.com/articles/2013-10-24/walmarts-china-expansion-aims-to-tap-urbanization
Yao, K., Blanchard, B. (November 15, 2013) China unveils boldest reforms in decades, shows Xi in command, Reuters, http://www.reuters.com/article/2013/11/15/us-china-reform-idUSBRE9AE0BL20131115
After researching these issues, write a four paper answering the following question:
How will economic reform in China impact the success of Walmart’s expansion plans?
In your answer, consider the following issues:
A. The risks involved in expanding to China
B. How specific aspects of China’s economic reform will impact the business enviornment that Walmart will face
C. The potential benefit of Walmart’s expansion to China
Helpful Tips:
Please first read in-depth the background materials for module 1.
Identify key concepts in the background materials write a list, and study them
Read the case in-depth and conduct additional research, if necessary
Develop arguments by applying the concepts of international business from the background materials to Walmart’s expansion plan in China
1. Why do companies expand globally & why do nations want their business?
Nations need jobs and they want to develop their economies and enhance their standards of living. Companies need to expand globally to remain competitive. Expanding globally enables companies:
to increase profits,
to gain new market share
to create new markets
to locate new technologies and products for domestic markets
to find new suppliers
to increase shareholder wealth
2. Entry decisions?
Where
When?
How?
3. Entry modes?
Independent agents can agree to represent a foreign country in their home country’s business community.
With franchising or licensing, a company can enter a foreign economy by granting the permission to produce their product or patent and develop it as their own, in exchange for a fee and often ongoing royalties.
Joint ventures are a coalescence of two or more companies, that form a jointly held company operating within the foreign market. Using a foreign alliance in this manner is often called a strategic alliance.
Mergers imply that two previously independent companies combined into one company.
Acquisitions mean that a parent company purchases another one, in order to gain access to other markets and/or products.
With the various options spelled out in the next module, we will embark on truly transnational business strategies and forms.
Required Background Reading:
Ball, D., Geringer, J., McNett, J., Minor, M. (2013)Chapter 1: Challenging World of International Business, International Business: The Challenge of Global Competition, 13th Edition, McGraw Hill, http://highered.mcgraw-hill.com/sites/dl/free/0078029376/889427/Chapter01.pdf
Rao, P. (2010) Chapter 1: International Business: Nature, Theories and Competitive Advantages, Introduction to International Business, Himalaya Publishing House [available in Ebrary]
Rao, P. (2010) Unit 2: International Business Environment, International Business Environment, Global Media [available in Ebrary]
Required Case Assignment Reading:
Roberts, M. (October 24, 2013). Walmart China Expansion Aims to Tap Urbanization, Business Week, http://www.businessweek.com/articles/2013-10-24/walmarts-china-expansion-aims-to-tap-urbanization
Yao, K., Blanchard, B. (November 15, 2013) China unveils boldest reforms in decades, shows Xi in command, Reuters, http://www.reuters.com/article/2013/11/15/us-china-reform-idUSBRE9AE0BL20131115
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