Good Example Of Research Paper On Cultural Trends
As Wal-Mart works in almost 27 countries, one of the biggest challenges faced by the organization is producing the goods and selling them according to the culture of each and every country because all the countries have different norms and values with different living styles. For example; people of South Asia live with their families and extended families where as people who are living in Europe like to keep their lives private (Kapstein, 1994)
Governmental regulations and restrictions are different in most of the countries of the world including the ones in which Wal-Mart is dealing. For example; countries like China and Japan prefer to use goods which are produced by them locally rather than exported goods. Some countries have more trade tariffs than others. Or there are even countries where there is no restriction on imported goods by the government.
Economic policies may differ from country to country according to the specific requirements of country. For example; banking policies can be either expansionary or contracting depending on the demand of currency of the country. So, it is necessary for Wal-Mart to produce and to sell its products into a specific country according to economic policies regulated there (Kapstein, 1994)
Different Exchange Rate
All the economies of the world have different currencies which results in birth of exchange rates. Wal-Mart faces the problem of converting their revenues into single currency which comes from diversified backgrounds (Scott and Wellons, 1997).
International politics play an important role in deciding the overall success of an internal organization. Because to the fact that countries have different blocks, they have their favorite nations with whom they like to do businesses. So, it is difficult for Wal-Mart to survive in this critical environment (Magee, Bergsten and Krause, 1972)
International Legal Framework
As an international organization, Wal-Mart has to fulfill the requirements of International Chamber of Commerce, World Trade Organization and other international and local Non-government organizations, requirements of whom are different in most of the countries. Moreover, they keep on changing. So, it is difficult for Wal-Mart to cope in changing environment.
Competition from Local Companies
Wal-Mart has to face competition from large number of local companies. As they also try to maintain quality and offer reasonable prices. So, Wal-Mart has to survive in neck to neck competition from not only international but local firms and industries.
Globalization is the factor which cannot be ignored while deciding the future of any multinational. It surely has its advantages that multinationals can cross geographical boundaries for the purpose of earning huge profits. But it also has some cons. Corporate social responsibility is one of its examples. Corporate social responsibility of Wal-Mart increases as it works in more than 27 countries (Magee, Bergsten and Krause, 1972)
If Wal-Mart borrow 20 million euro then the profit earned by Wal-Mart will be $ 579,845 because firstly we will need to convert 20 million euro into dollars. Wal-Mart will get $ 22,600,000 (€ 20 million * 1.13). Now, if investment is made for 90 days at lending rate of 6.73% then Wal-Mart will get $ 22,980,245 ( 22,600,000 * ( 1 + 6.73%( 0.25)) then they will determine how many euros are owned. Euros owned are € 20,364,000 (22,600,000 * (1 + 7.28 %( 0.25)). Then Wal-Mart will determine amount in dollars which is required to pay the loan. That amount will be $ 22,400,400 (€ 20,364,000 * $ 1.10). At this point, profit will be determined which would be $ 579,845 (22,980,245 – 22,400,400) (Hallwood and MacDonald, 1994)
The idea of multinational is producing tin traditional South Asian food and selling it in United Kingdom. Variety of tin food will consist of types of gravies, desserts, chapattis and other dry snacks. I plan to sell the product through distributors who will be most probably Indian house wives striving for life. They will sell these foods in their local neighborhoods. Tin food will be sold there due to the fact that nowadays, people from South Asia migrate to United Kingdom for getting education, jobs and to enjoy better standards of living. So, this is the target group who miss their local and traditional foods and they will surely buy tin food. I will need to buy kitchen groceries, spices and utensils according to the demand of tin food. 15 to 20 employees will be needed to help in preparing of tin food and 5 to 10 employees to send tin food to the distributors. Startup expense will be higher because distribution network will be established. Moreover, supplies will be bought from time to time (Moffett, Stonehill and Eiteman, 2014).
Our company will trade its product in China due to the fact that China has huge and diversified population. Following are the factors which can affect the balance of trade.
Exchange Rate with other currencies affects balance of trade of China because of the difference between currencies of importing and exporting countries. We will export tin food to China. So, when Chinese currency will have higher value than our local currency then we will receive more money resulting into an effect on balance of trade (Eiteman, Stonehill and Moffett, 2001)
Non-tariff Barriers for example health standards, environmental and safety policy etc. also have effect on balance of trade. As balance of trade is all about imports and exports, non-tariff barriers of China are specific and according to their national requirements.
Taxes or Restrictions on Trade are main issues tackled by the Chinese government and they have certain restrictions on trade. People cannot import goods which are restricted by the government or export goods which have high demand in their own country.
Exchange rate can affect demand of tin food in case Chinese currency’s devaluation because people will then hesitate to buy the products resulting in fall of demand.
If the product fails any health standard or disgraces any condition of environmental and safety policy then people in China will not use tin food as per previous demand.
If tin food consists of any item which has been restricted by Chinese government then we would not be able to sell our product to Chinese people.
There are three types of import controls which are imposed by the government of United Kingdom. They are the following
Bans- a condition where goods cannot be imported.
Quotas- a condition where goods can be imported in proportions.
Surveillance- a condition where imported goods are monitored by issuing licenses.
The business would be affected by the trade regulations set by the country because of the need of importing raw material for the product. As the product would be South Asian food, some of the spices or material is not easy to get in the country. Moreover, local employment regulations are applied in representing office in United Kingdom. Slight violation of regulation will cause local authorities to put restrictions on the business. A business guide relating to consumer protection has been published, violence of which will cause businesses undergo lengthy investigation and lose important customers. Some of the regulations are as follows;
Special Offer on stock which is not available. In UK, businesses are not allowed to advertise about special offers on goods which are not in stock or without disclosing the sound reasons about the decision of special offer.
Need of honesty about advertorials. While promoting business on advertorial media, it is necessary for businessman to deliver his intentions of advertising to its customers.
Direct advertising to children is not allowed as they may force adults to buy particular items as a result of direct exhortation.
No win situations are banned. Businesses cannot just let customers think that they have been given products free or without charge or there is price for a particular equivalent benefit.
So, because of above mentioned situations, the business would be affected by the import control regulations set by the government of United States (Eiteman, Stonehill and Moffett, 2001)
Eiteman, D. K., Stonehill, A. I., & Moffett, M. H. (2001). Multinational business finance. Pearson Education India.
Hallwood, C. P., & MacDonald, R. (1994). International money and finance (pp. 251-2). Oxford: Blackwell.
Kapstein, E. B. (1994). Governing the global economy: international finance and the state. Harvard University Press.
Magee, S. P., Bergsten, C. F., & Krause, L. (1972). The welfare effects of restrictions on US trade. Brookings Papers on Economic Activity, 645-707.
Moffett, M., Stonehill, A., & Eiteman, D. (2014). Fundamentals of multinational finance. Pearson Higher Ed.
Scott, H. S., & Wellons, P. A. (1997). International finance: transactions, policy, and regulation (pp. 83-84). Foundation Press.