Multinational Corporation Expansion Essay
- Length: 6 pages
- Sources: 3
- Subject: Business
- Type: Essay
- Paper: #9983480
Excerpt from Essay :
Multinational Corporation Expansion; Wal-Mart- to Australia
Expanding into an international market is not an easy process, but a rewarding one. As a business executive of Wal-Mart Stores, a U.S.-based multinational company needs to consider expanding to Australia to seek new opportunities. In this case, Wal-Mart will have to begin a new store in the Australian market. The success of the business in this market depends on the market positioning, and other factors in the market. The success of expanding the Wal-Mart to Australia demands that certain factors be observed in order to establish the prospects of success in the market (Campbell, 2007).
Wal-Mart stores as a multinational retailer already runs a number of warehouses, and departmental stores in a number of countries. In the recent past, the company has grown to be one of the largest corporations in the world. Its expansion to the Australian market will play a critical role in boosting its growth and size. Wal-Mart is currently regarded as one of the most valued companies globally with employees' turnover exceeding two million people. Its expansion to the Australian market will see Wal-Mart opens a new store in Sydney, Australia. This move is significant to the business, for it will allow the business to build up its revenue volumes, and profits. This expansion will also boost the value of the business, and its span of market influence in the world (Frank, 2006).
Three major dimensions of international finance
Different aspects of international finance will affect the process of expanding the Wal-Mart stores in Sydney, Australia. This is because the business will be subject to new terms of operations in the new market. In addition, the business will be exposed to new market challenges of the consumer market, and the industry logistics. Indeed, the business success may be understood by looking at these different dimensions of international finance. The expansion of the business into the Australian market and its success will depend on how the business will face its challenges and risks and its strengths and opportunities (Doole, 2008).
The expansion of Wal-Mart into the Australian market will be affected greatly by the foreign exchange and political risks in Australia. The foreign exchange rates of Australia play a great role in affecting the success of the business. This is because the business transactions that the business will be involved involve the exchange of currency. The foreign exchange rates of Australian currency to the U.S. dollar will greatly affect the processes of exchange.
Exchange rate for the U.S. Dollar to Australian Dollar
Last Updated: 5/13/2013 8:08:30 PM.
Looking at the average exchange rates between the Australian Dollar to U.S. Dollar, it is evident that the exchange rate $1 USD to $1.01 AUD is a good rate that will make the business excel. This is because this exchange is at a same rate making it easier for consumers to use the American currency in transacting a number of businesses. In addition, the business will be well placed to import a number of items from the U.S. The best monetary exchange rates will also play a critical role in building the business (Campbell, 2007).
The Australian market political environment poses a number of political risks to the new business venture. The first risk that is posed is the ownership risk, where the new business will involve the domestication of some of the property and life of the business by the local laws. The fact that the business is run outside the U.S. means that it has to adjust its policy of ownership to life and property to the Australian law. However, this risk is not too much since Australia and the United States share much in common as regards the property law. They are also guided by a number of international laws on trade practice (Bennett, 2002).
The other risk that the new Wal-Mart business will be exposed to in the new market is the potential operating risk. In this case, it may happen that the state may interfere with the operations of the business for security, business, and ethical reasons. For instance, the Australian Government may set up new guidelines on tax codes, environmental standards, employee protection standards, and other standards that may interfere with the normal operation of the new stores. This risk should be anticipated so that necessary steps may be undertaken in the case of any eventuality in the change of laws (Frank, 2006).
Market imperfections may also affect the success of the new Wal-Mart store in Sydney, Australia. This is by affecting many of the interactions that will take place in the business in some way. Market imperfections in Australia may have gross impacts on the success of the business. This is by generating extra costs that will interfere with the smooth with the normal running of the business. It also has the capacity to interfere with the trade transactions that rational potential customers of the business will have to make. For instance, failures in the availability of foreign currencies may affect the foreign customer's transaction when making orders and sales. Communication technicalities may cause delays in the flow of goods/supplies that are sourced from the remote parts of the country, and this affects the normal business transactions (Doole, 2008).
In addition, market imperfections also provide an opportunity for the business to identify them, and eliminate them to have an advantage over other competing businesses. In this case, the proposed new Wal-Mart should identify the market imperfections, such as, absence of standard infrastructure in remote parts of the country, and the high labor costs in the country, and find means of overcoming the challenges. In this way, the business will be able to gain an advantage above that of its existing competitors, and shines in the market. This is critical especially by the fact that the Wal-Mart is a consumer good oriented business (Kline, 2010).
Expanded Opportunity Set
It may also be important for the business to consider the expanded opportunity set presented to it. In this case, it may be necessary for the business to stretch its eyes to look at the opportunity set for expansion that is presented to it by the new Australian market. In doing so, the business will conduct proper planning for future expansion of the business. The business may also be able to diversify its product lines to the different markets. This plays a critical role in minimizing the risks of failure in the market since the business will have an expanded set of opportunities to embrace (Bennett, 2002).
The Australian business market presents a number of market opportunities for expansion in business. These areas may be deeply explored by the business in their efforts to expand their business. The opportunities include the ever-expanding tourism industry, the good infrastructure in most of the urban areas, the availability of clean energy, the country's wealth of energy resources, which are renewable, advanced manufacturing, and the availability of other cutting-edge technologies. All these provide an opportunity for business expansion in Australia (Frank, 2006).
The Economic trends and impact of globalization
The Australian economy is among the top capitalistic economies on the globe that is flourishing today. The economy has seen a positive trend of growth with the current average GDP of U.S.$1.57 trillion. In the globe, this economy has been ranked as the top 19th largest importer and exporter, and this has made it flourish. These trends are an indication that the Australian market provides a good economic environment that the new Wal-Mart business will require for its success. The market is well structured allowing the business to affect the region, and succeed in expanding its operations (Doole, 2008).
The Australian economy is one of the most globalized economies in the world. This is because of the connection of Australia with other global markets. Australian companies export their products to many parts while others import. In addition, its cities have attracted people from all lifestyles, and this has affected the nature of potential consumers of the new Wal-Mart. Indeed, the new store is likely to attract diverse customers. The only challenge with this globalized market is that the business will have to balance on the needs of the different groups of consumers in the market (Kline, 2010).
Impacts of the monetary system in Australian Market
The Australian market monetary exchange system is a flexible system that is governed by the forces of demand and supply of the currencies. This form of exchange system is best for this proposed business. This is because it provides a fairground for the market to determine the market rates, thus not discriminating any market player including this business. This is also good, considering that the business operations will involve importing a number of items for sale in the country. This flexible monetary exchange…