CASE- 1 THE LEGAL AND POLITICAL ENVIRONMENT OF INTERNATIONAL BUSINESS - Essay Example

Reforms in China impact the success of Walmarts expansion Affiliation Reforms in China Impact the Success of Walmarts Expansion Introduction China has been going through tremendous development in the last two decades, especially after the market-oriented transformation of the economy and entry into the world trade organization. Coupled with the trend of business globally, many multinational company views china as the best favoured market with greater opportunities and potentials. The development of Chinese wholesale and retail market started since the 1980s when china started to a market-based economy.

This transition of economic growth has led to the stimulation of the Chinese tertiary industry, as evidenced by the profound revolution in the wholesale and retail industry since 1990s. In 1992 foreign capitals were allowed to enter the Chinese retail sector. Although there were several strict regulations in place to restrict the work of foreign investors and retailers at that time, some of the regulations were flexed and the local authorities disbanded most of these regulations to encourage foreign retailers.

A large number of renowned international supermarkets such as Wal-mart, Carrefour and Makro appeared in china (Reuvid, 2005). The Chinese market is dynamic in nature and has got a lot of competition among many business firms, Wal-mart, therefore, must employ a different strategy when entering and operating in China. It is possibly because both Wal-mart and other companies have their own distinctive methods and sets of strategies in overcoming the challenges in the same environmental setting. However, it is not so obvious to say that there is a particular strategy that is better than the other, since the business strategy must relate to a company specific market condition and resources.

Before any company starts a business in a foreign country, there are some risks that the firm must take into account. One of the risks is political risk. A political risk is a risk of personnel, strategic or financial loss for the company because of the non- market factors as social policies and macroeconomics. It can be simplified as the events or changes in the legal, political and social factors that would cause indirect or direct loss to the firm. China political environment can influence Wal-mart ability to run business smoothly.

Such political problems may include civil unrest for instance, and this may deter many companies from expanding their business or investing in host nation with such common problem. However, the political reforms in the country have made several firms opt and invest in the china, Wal-mart being one of them. Countries, whether they are repressive or benevolent are in a position of having control over distribution so costs and benefits and, therefore, holds a certain level of power that can in turn lead to corruption.

Thus, corruption is a widely distributed phenomenon in different societies. It has been stressed that corruption is rampant in China since its economic reforms launched in 1978. The government has admitted that the vice of corruption has spread to politics, business, ideology and culture. And the wide so spread corruption has led to economic consequences to china and her investors. Wal-mart may get it hard to conquer some of the regions to open business in china because of corruption; this can be majorly attributed to the leaders in such regional hubs wanting bribes to allow certain companies to establish in their jurisdiction.

It is imperative to note that the Chinese government launched proper reforms in the country to curb corruption as it was one vice that deterred several investors. The crackdown and reforms brought change in china investor numbers that rose dramatically. It is, therefore, such opportunities that Wal-mart shall take to try and expand its business in china by opening several branches in the country. It will see the firm growing tremendously and becoming a giant in retail in china (Brink, 2011). Measures to deal with unemployment, slow growth and other dislocation arising from the economic crisis globally are now at the top economic policy agenda of the republic of china.

Even though the crisis may complicate some of the regulatory reforms in the short term, it does not diminish the long-term needs for the reforms nor change the key priorities to boost china economy. As Chinas government have emphasised, sustaining open market and avoiding protectionism shall be very essential to avoid the vicious cycle of economic contraction and protectionism. This has led to china opening its market and improves competition over the past few decades. Wal-mat company among other firms can maximise the opportunity on these reforms that the government has put to maximise its economy.

The firm, therefore, can expand and start several branches in the competitive China’s market. To remain very competitive in a dynamic market, Wal-mat should diversify many of its products and open more stores in three to four-tier cities since they have a big number of populations thus increasing high chances of increased sales. The company should also improve the quality of older stores through robust remodelling program. Remodelling of the stores to become mode3nised will increase the store operations and boost the customers in store experience.

Some of remodelling can include; improving parking space, optimizing the sales floors and increasing the energy efficiencies of the facilities. All these will have a common goal of increasing sales of goods in china thus allowing the firm to expand more (Reuvid, 2005). In every state, there are rules that regulate foreign investments in the country. Business regulations and laws in china have occasionally been viewed as retrogressive and oppressive to some foreign investors. In essence, most of the stringer rules govern the acquisition of a licence to open a business in china.

However, the Government of the people of China has lowered the cost and made some laws flexible to attract foreign investors to china. It has led to several firms opting to expand into the lucrative state of China. Wal–mat that started investing in china by early 90s should continue to take the opportunity and invest in as many cities in china as possible. As such reforms business reforms occasionally lower the starting expenditure and helps companies to open several branches of business (Zhang, 2007).

It is with no doubt that China provides one of the best hubs for business globally. The economy of China has steadily grown; there are political reforms in the country and the fight against corruption is immense. These qualities and the effort by the government make China the best place to do business. Wal-mat can benefit a lot in china since it can open several branches in the provinces and increase its sales. The advantage of investing in a country whose economy is steadily increasing provides far much economic advantage, this is because the firms will enjoy the strengthening exchange rates of their currency against other world currency, therefore, increasing the margin of profit gain by high fold in the forex market.

In conclusion, the reforms in Chinese business market have brought along many positives to firms that would want to expand their growth in the countries. The pros majorly target the company groups and attract them to invest in china as they help in growing the economy of the country in general. It is quite evident that many business companies shy from investing in the foreign countries probably due to problems like; insecurity, political instability, and stringer regulation related to opening of business in that country.

However, when proper reforms are put in place, and business regulation made reliable, many companies can expand their branches globally and increase their profit. References Reuvid, J., & Li, Y. (2005). Doing business with China. London: GMB Pub. Brink, A. (2011). Corporate governance and business ethics. Dordrecht: Springer Verlag. Zhang, L. (2007). Regulation of foreign mergers and acquisitions involving listed companies in the Peoples Republic of China. Alphen aan den Rijn: Kluwer Law International.