Walmart And China Case Study

Walmart is a retail giant and they have the numbers to prove it. In 2014, total revenues were $476 billion, profits exceeding $110 billion, they have 4,203 stores in the Unites States, and 6,107 stores internationally (Corporate Reports Inc, 2015). With the recent regulation reforms and crackdown on corruption they have decided to expand their operations in China. There are risks Walmart faces with their expansion into the Chinese market, and with the proposed changes previously mentioned there will be an impact to the business environment, but the expansion can result in benefits for both Walmart and China. Nationalization is not a risk that should be overlooked. Although recent reforms have taken aim at reducing the amount state-owned

The United States operates under what you would call “rule of law”, where “no individual is above laws that are clearly specified, commonly understood, and fairly enforced” (Daniels, Radenbaugh, & Sullivan, 2011). Additionally, if there is no defined law against an action, it can be said to be legal. Conversely, China operates on a “rule of man” viewpoint, where “governance and rules of conduct are at the discretion of a single person, such as the reigning emperor” (Daniels, Radenbaugh, & Sullivan, 2011). The key difference between the two is that Chinese law tends to be more subjective that that of the United States. It is imperative that this difference be identified and

The proposed reforms go against decades of how business has been conducted thus far and if there is not buy-in from the members of the political system the reforms are doomed to fail. According to Rao (2012), international businesses may face political risks when there are changes in government policies. One indicator of political instability is corruption (Rao, 2012). While there is already corruption in China, an increase of this corruption could be an early sign of things to come. Should the crackdown on corruption prove successful, China can stand to attract additional international business, increasing the competition faced by Walmart. One of the proposed methods to reduce corruption is to allow for more transparency within the political system ("China 's bolsters corruption," 2012). Transparency International uses control of corruption and transparency, as well as other areas, to determine a country’s corruption perceptions index (CPI). As the CPI decreases, the likelihood of foreign firms commencing businesses in China