Walmart’s Report in the United States and China
Company Overview
Walmart Inc. is a multinational retailing company that is involved in both retail and wholesale operations. Since its initiation in 1962 in the Arkansas United States, Walmart Corporation has retained the leadership position in the retailing industry. The company is today ranked as the global retail leader on the ground of its market share, profitability, resources and global presence. Currently, the company owns 11,700 stores in 28 nations (Hazzawi, Palladini & Martinelli-Lee, 2014). The company attributes its success to the use of strategic approaches and effective marketing strategies. Walmart provides an extensive range of products ranging from grocery, household items, finance, and pharmacy and so on. The company is guided by the cost leadership approach which has helped in gaining a competitive position in the industry.
Purpose of the Report
This report aims to offer an in-depth analysis of the macroeconomic environment of Walmart Corporation in the United States and China. The analysis will focus on how the macro environment setting impacts the firm’s economic operations and performance.
An Analysis of the Market Structure in the United States and China
United States
The United States retailing sector is the largest of the globe which is more than 50 percent higher than that of China despite its high population (Reuters, 2018). The retailing sector is very competitive as it is mainly dominated by some of the most established and global firms such as Amazon. The retailing industry is best categorized as very competitive. In that, there are many retailing firms which are mainly domestic and have acquired a notable and admirable reputation in the market. As per 2017, it was estimated that Walmart had acquired a market share of 21.5 percent within the retailing industry with 44 percent on the online platform (Chekwa, Martin & Wells, 2015). In other words, this makes the corporation the leader in the market over its close competitor Amazon (Deagon, 2018). The retailing sector has been a source of controversial debates in the recent based on its ability to expand and explore opportunities mainly in the potential and emerging markets. Competition in the retailing landscape is rising rapidly with the increased presence of small and international enterprises. The growth of convenience and online stores have become an additional source of purchase for the retailing consumers with a relevant market share which appears to be significant competition for the retailer.
The competitors in the market have created a reputation of offering similar but differentiated items. For instance, Amazon has dominated the online market as it offers the most convenient online purchases that are well supported by innovation and technology (Hazzawi, Palladini & Martinelli-Lee, 2014). However, Walmart has built an affordable, convenient and quality oriented brand that seeks to increase the consumer’s satisfaction and experience (Blackwell & Eppler, 2014). The barriers to entry in the market are rather minimal, but the growth of the market is lower considering that extensive resources are needed for efficiency. Also the leading players in the market boast of intense brand loyalty (Zaczkiewicz, 2017). They are well established regarding resources which generally supports their marketing ventures and expansion into the global market at ease.
China
While the retailing sector has recorded a significant growth globally over the last few years, China has been a significant contributor to this expansion. China is the leader regarding population and therefore it provides a potential retailing market. However, it is indicated that the retailing industry is lower. China falls under the emerging retailing markets with an estimated growth of about 10 percent yearly when equated to the global range of 2 to 5 percent (Peltier, 2015). Based on research, the Chinese retailing market is dominated by domestic firms which have occupied more than 80 percent of the entire market with a lower portion for foreign firms. Over the last few years, it has been attributed that the market has expanded rather significantly which has changed the situation of most firms as a whole but multinational firms such as Walmart seems to be struggling.
The retail market can be categorized as a monopolistic competition due to the increased risk of new firms. Additionally, there are very many retailers in the market which is evident by the level of the competitors’ products differentiation to appeal to the general public where China’s society is collective (Lamb, Hair & McDaniel, 2012). The market is one that discourages the entry of foreign companies due to the high operation tariffs, great advertising and promotion expenses and intense loyalty to the domestic firms as a whole. Based on 2017 reports, it was established that the total of retail sales reached $5,781.43 billion and it is expected that the sales will expand by about 7 percent in the next year (Peltier, 2015).
Based on the graph above it is evident that the United States experienced a notable GDP decline as from 2006 and 2009 during the last global financial crisis. The GDP level began to rise positively in 2010 which demonstrated an additional slow down for years. However, the situation was different in China since the crisis held minimal impact on its economic stability. In that as from 2005 and 2015 the GDP in China was about 9.7 which was higher than that of the United States in its peak period (Statistics Times, 2015). The decline in 2008 was driven by the low level of exports from the global setting.
Walmart experienced an intense sales decline in the United States during the crisis period which is attributed to decreased number of customers flow to the stores due to the spending fear among the consumers. As an affordable store, the company experienced losses that threated closure of some of its stores in the nation. The stability of the economy in 2010 resulted in jobs creation along with higher spending which resulted in higher sales and revenue. However, the stability of the business in China was more desirable since the spending was higher and the company reported a positive performance. The trend created more opportunities for growth due to the rising urban population and increased earning among the consumers (Donnan, 2018).
Due to the high population that is present in China, the per capita income difference amid both nations is rather high. In that the general population of China is like four times higher that of the United States. With respect to nominal concepts the GDP per capital of China account to 7,572 dollars which takes then eightieth position globally. On the other hand the United States takes position 9 among the wealthiest nations that holds a per capita income amounting to 54,678 dollars (Donnan, 2018). The United States takes the lead among the two with reference to per capita. With the exception of the global crisis it is rather evident that the changes that the demand for the company’s products is higher in the United States which is fueled by a higher spending habit.
In comparison to the United States, which demonstrated a rather stable inflation rate when equated to China which appeared to be unpredictable (Bloomberg, 2017). With respect to Walmart, the inflation rates in china are likely to affect its intentions for expansion as well as investment in general based on the fact that intense inflation is likely to result in the erosion of the corporation revenue due to prices variances that surrounds several aspects such as resources. With regard to the United States, the respective steadiness of the inflation will lead to an established and functioning economy which are likely to contribute to increased control expenses and rising productivity due to the capability for better management of anticipations that surrounds inflation.
Based on the graph the unemployment rate in China has been rather consistent between 2007 and 2011. In that the unemployment ranges from 4 percent to 4.2 as indicated. This is different from that of the United States which has experiences drastic changes. From 2007 and 2009 unemployment rate was low but later escalated during 2009 to 2010 and the situation only began to stabilize in 2010 to less than 2 percent. Evidently during the period Walmart benefitted more in the United States where the spending was higher when equated to China. In that individuals spend more when the income is consistent which then triggers their spending habits.
The United States demonstrated a budget excess amid 2008 and 2009. The situation is normally characterized by intense taxes and lo spending tendencies which holds undesirable implication on products demand by creating demand for the basic commodities. Where there is a possibility that Walmart was not affected as much given that it provides affordable products it is evident that the customer traffic was rather low (Solomon, 2018). An assessment of the company’s performance demonstrate that its growth was minimal. From 2010 and 2017 the country experienced a budget stability and this has generally assisted the company in stabilization since the income gain has been stable. In the exception of 2011 and 2012 it is evident that the Chinese economy suffered from a budget short fall. This was well aligned with the needs of the government to standardize the business surrounding which has further been boasted by the rising middle class population.
The United States balance of payment demonstrate a transaction record which creates a desirable amount for the nation between 2010 and 2016 with undesirable amount amid 20008 and 2009. The movement of BOPs in the United States is constant since the nation highly relies on imports as well as economic exchanges with the result being that there is an intense flow of finances to the international markets (Mclntyne, 2018). On the other hand in China the nation is highly dependent on export which has the capability to foster higher growth within the economy as the economy generates high capital. The state is likely to lead to the creation of more working opportunities which will enable the company to expand globally.
An Analysis of the Monetary and Fiscal Policy in the United States and China
It is without a doubt that China was highly affected by the 2001 bubble. The company responded by developing a policy that tightened its economy through the increased interest rates. However, during the 2008 crisis the country responded by dropping the interest rates which favored economic development (Fernald, Spiegel & Swanson, 2013). In turn this led to a rather fast economic development and GDP. This is often contributed by the fact that the government is involved in controlling the financial industry. The structural reform has been helpful in controlling the rate of unemployment as a whole within the domestic landscape. In some cases this has incorporated tax reduction and exemptions. Due to the reduction of the interest rates this has created the opportunities for investment for the involved companies that has resulted in the ability to overcome from the low growth rate (Tan, 2018). Currently the country, boasts of being among the leading nations in terms of economic growth and investment opportunities.
Walmart is a retailing firm which implies that the ability to increase its sales as a whole is reliant on disposable income and government based policies that encourages more investment and spending. The company is one of the leading revenue contributors in the United States. While its operations had been affected back in China because of the policies that favors domestic market it benefited more on higher spending between 2008 and 2012 (XiangDong & Wang, 2011). With the increased individuals spending in support of the economy, Walmart is likely to benefit from increased revenue for its quality and affordable goods despite the fact that both governments are lowering their spending to avoid deficits that will affect the structural balance. The united government similar to that of China holds that the private industry is a major driver of economic wealth.
An Analysis of the Foreign Trade Policy Instruments
Over the most recent years, there has been a notable growth in trade liberalization in China. This resulted in the country exceeding America in 2013 and became the leading trade country. The development has been fueled by the general implementation of policy choices and price controls. It is worth noting that for 17 years now China has been a committed member of WTO which has facilitated the desire of the country in participating in global trade as one of the benefit. Based on a review conducted by WTO, the United States is engaged in the local and multidimensional incentives that have resulted in open trade (Willige, 2016).
Most countries are involved in the implementation of policies in order to ensure that their economic growth is stabilized. The country has implemented policies that seeks to enhance trade accessibility beyond the United States and additional multinational markets to promote developments with reference to trade (Bradsher, 2018). China has a weak value when equated to the United States. The tendency of China is objected at encouraging Walmart’s exchanges. In other words the operation of Walmart in China is more likely to experience revenue depreciation. In that its investment and stability in the future is to be negatively affected which further discourages market development. Similar to other companies that are involved in multinational operations Walmart’s performance would be impacted by exchanges prices in the chance that the value is low (Scott & Sam, 2016). Since the exchange value in the United States is higher, it means that as an affordable center corporation it is able to gain the utmost value from its operations there than in China. With the stability of the company other industries particularly those that supply products and the manufacturers will ultimately gain the benefits.
References
Blackwell, R., & Eppler, D. (2014). An Approach to Strategic Situation Analysis: Using Models as Analytical Tools. Journal of Global Business Management, 10(1), 80.
Bloomberg. (2017). China’s per capita GDP set for ongoing rise as the economy shifts from manufacturing to services. Japan Times. Retrieved from: https://www.japantimes.co.jp/news/2017/06/26/business/chinas-per-capita-gdp-set-ongoing-rise-economy-shifts-manufacturing-services/#.Wy6EMWN9jIU
Bradsher, K. (2018). China’s Economy Grows, and Its Trade Gap with the U.S. Widens. New York Times. Retrieved from: https://www.nytimes.com/2018/04/16/business/china-economy-trade-gap-united-states-grows.html
Chekwa, E., Martin, J., & Wells, K. (2015). Riding On the Waves of Sustained Competitive Advantage: Consumers' Perspectives on Walmart Corporation. International Journal of the Academic Business World, 9(1), 61-73.
Deagon, B. (2018). Amazon vs. Walmart: Locking Horns in A Battle For Retail's Future. Investor’s Business Daily. Retrieved from: https://www.investors.com/news/technology/walmart-vs-amazon-retail-stores-e-commerce/
Donnan, S. (2018. US-China trade tensions hitting global growth, says WTO. Retrieved From: https://www.ft.com/content/67d3f55e-3e20-11e8-b9f9-de94fa33a81e
Douglas A. Mclntyne. (2018). As China GDP Surges, a Threat to US Position as Top Economy. Retrieved from: https://247wallst.com/economy/2018/01/18/as-china-gdp-surges-a-threat-to-us-position-as-top-economy/
Fernald J., Mark M. Spiegel & Swanson, E. (2013). Monetary and Fiscal Policy Effectiveness in China: Evidence from a FAVAR Model. Federal Reserve Bank of San Francisco.
Grieves, J. (2010). Organizational change: Themes & issues. New York: Oxford University Press.
Hazzawi, I. A., Palladini, M., & Martinelli-Lee, T. (2014). The Wal-Mart Stores, Inc.: An American Dream That Touched the World. Journal of the International Academy for Case Studies, 20(2), 13-33.
Kaul, A. (2011). The Economy – it’s here and the jobs are where? The Global Forum. Retrieved from: https://theglobalforum.wordpress.com/2011/06/18/the-economy-%E2%80%93-it%E2%80%99s-here-and-the-jobs-are-where/
Lamb, C. W., Hair, J. F., & McDaniel, C. D. (2012). Essentials of marketing. Mason, Ohio: South-Western. Cengage Learning.
Peltier, C. (2015). China’s external accounts in transition. Retrieved From: http://economic-research.bnpparibas.com/html/en-US/China-external-accounts-transition-7/23/2015,25853
Reuters, S. (2018). Walmart opens first small high-tech supermarket in China. Retrieved from: https://www.reuters.com/article/us-walmart-china/walmart-opens-first-high-tech-small-sized-supermarket-in-china-idUSKCN1H90S4
Scott, M. & Sam, C. (2016). Here’s How Fast China’s Economy Is Catching Up to the U.S. Bloomberg. Retrieved from: https://www.bloomberg.com/graphics/2016-us-vs-china-economy/
Solomon, D. (2018). What impact would a trade war between the U.S. and China have on their economies? Focus Economics. Retrieved from: https://www.focus-economics.com/blog/impact-of-trade-war-between-us-and-china-on-their-economies
Statistics, Times. (2015). United States vs China GDP. Retrieved From: http://statisticstimes.com/economy/united-states-vs-china-gdp.php
Tan, H. (2018). China's economy grew 6.9% in 2017, topping both the official target and 2016's growth. CNBC. Retrieved From: https://www.cnbc.com/2018/01/17/chinese-q4-gdp-china-reports-fourth-quarter-gross-domestic-product.html
Willige, A. (2016). The world’s top economy: the US vs China in five charts. Retrieved from: https://www.weforum.org/agenda/2016/12/the-world-s-top-economy-the-us-vs-china-in-five-charts/
XiangDong, L. & Wang, Y. (2011). Influence of the Chinese monetary policy on the current macro-economy — Analysis with the FAVAR model. International Conference on E-Business and E-Government (ICEE)
Zaczkiewicz, A. (2017). Wal-Mart Maintains Top U.S. Retail Sales Pole Position, Amazon Gains. Retrieved from: http://wwd.com/business-news/financial/telsey-advisory-report-walmart-10838088/
