Walmart in China Business Report
Marketing assignment Deliverable
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 favorable 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. This country has the massive potential for the economic growth and development offering the access to the large marketplace and the considerable saving opportunities in the labor cost. Because of its effective and low-cost labor 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 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, its 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.
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.
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).
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
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)
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)
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).
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)
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).
It is concluded that China is highly favorable 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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