Assignment

To:

supervisor

From: Senior business Manger

Date: July 15
Target Company:

Wal-Mart

Target Market:

India

Subject: Expansion of Wal-Mart in new international market to seek new opportunities.

Introduction:
I just received your email about Wal-Mart International expansion, Wal-Mart is a multinational
US based company. It has more than 645 neighborhood market locations and more than 3400
superstores and 11000 stores around the world. Wal-Mart operating Japan, US, Canada, China,
South Africa and many other countries, but it is not operating in India that is one of the worlds
largest market.
I suggest that Wal-Mart should consider India as new opportunity.
http://corporate.walmart.com/our-story/locations/united-states
http://www.businessinsider.com/wal-mart-plans-huge-neighborhood-market-expansion-2015-6
1. Analyze how each of the three major dimensions of international finance can affect your
possible venture of your MNC in your chosen new international market, including
potential opportunities and risks for each dimension.

Answer:
Three International finance dimensions that are different from Domestic finance are as fallow;
I.
II.
III.

Foreign exchange and political Risk

Market Imperfection
Expanded opportunity set

If Wal-Mart starts its expansion in India, foreign exchange is a big risk because India is not
developed country and its currency Indian Rupees is fluctuating consistently. Now a days India
64 Rupees are equal to 1 US dollars but two years back it was on 46 IND Rupees = 1 dollar, so
currency instability is a major hinder to invest in developing country like India, another factor is
India is facing recession in its economy, people are unemployed
Political Risk is risk faced by companies and investors due to instability of governments and
changing in ruling party, continuation of policies made by previous government are normally not
endorsement by new government. For example India Government regulation required foreign
retailers to buy 30% products from local businesses. Another major problem of India. According
to world audit report India is 67th rank in corruption. Wal-Mart starting negotiation with Bharti
Enterprises for joint venture in India but Wal-Mart is being closely eyed on internal corruption in
Government departments. Indian Government not only fails to control corruption but Indian
Ministers involved in corruption. So before entering into India Wal-Mart should consider any
trade barrier for foreign company in India, Import/Export Cost
But there is opportunity for Wal-Mart to invest in India because they are 2 nd largest populated
country of the world.

Market Imperfection:
Imperfect market means a market which has some but not all feature of a perfect market or
competitive market. India is one of the biggest market of the world but most of portion is
occupied by China industry, India impose some restrictions on foreign investors to buy some
goods from locals. India market is occupied by Big Bazaar, Pantaloons and Star Bazaar.
Expand Opportunity:
Very important factor to consider for Wal-Mart is future Expansion opportunities. India Is one of
the fastest Growing Retail market of the world with 2 nd largest population after China. India is a
developing country, so it peoples buying pattern is changing over the years. Retail market is for
all classes nor only for elite class. India retail market is growing 25% annually. Wal-Mart was
offer for joint venture by Bharti Enterprises and TATA Group as well. Although there are some
hinders but future growth opportunities are brighter.

Reference :
International financial management 4th edition (Cheol S Eun ) Page-5
http://www.worldaudit.org/corruption.htm
http://www.cheatsheet.com/business/consumer-business/wal-mart-still-encounters-indias-noentry-signs.html/?a=viewall

http://www.nytimes.com/2013/10/10/business/international/wal-mart-puts-india-plan-onhold.html?_r=0&module=ArrowsNav&contentCollection=International
%20Business&action=keypress&region=FixedLeft&pgtype=article
http://www.forbes.com/sites/walterloeb/2013/10/16/walmart-what-happenedin-india/

2- Examine the economic trends and impact of globalization in the chosen market and determine
which of those emerging factors have potential for disruption that could affect operations.

Answer:
India is a developing country but it has a capability to become one of the worlds powerful
countries, Recently India joins nuclear suppliers Group. According to Bloomberg survey, India
will be worlds 3rd largest economy out of worlds 20 largest economies in 2030. Recently Oil
prices fall, this reduces pressure on current account deficit, Inflation and subsidies. Recently they
improved public spending efficiency and increased revenue to invest in public infrastructure.
People are improving their standard of living and spending more on buying products. The retail
market is expected to reach 47 lacks crore by 2016/17.
India has a largest human resource, its big human resource exporter in UAE and Gulf Countries.
India is favorite country for new business with cheap and trained labour.
Impact of Globalization on India, early 1990s India faced economy challenges due to foreign
exchange crunch that leads to defaulting on loan. so India had major policy changes in 1991.
They Introduced Liberalization, Privatization and Globalization. The new policy on economy
was the integration of Indias economy with Global economy. The Following Impact on India;

I.

India produced Low price and High quality products due to large number of producers
from domestic market and as result of globalization.

II.

India is a big IT industry so they offer large number of jobs. India offered its services in
IT industry as a result; many International companies outsource Indian Labor.\

III.

Many Multinational companies come to India to enter into Joint venture in existing
Industry e.g. Tesco, Wal-Mart e.g.

IV.
V.
VI.

Increase in Investment in India by foreign countries due to globalization

Telecommunication and software Industry are booming in India.
Entertainment sector has worldwide market; Bollywood movies are distributed and
accepted around the word. Hollywood investing in India.

There are some disruptive factors that create problem for Mal-Walt to operate in India.
I.

Current Government policies are complicated to operate their, as we discussed above

there is protectionism policies.

II.

Corrupt practices in India, bribes are demanded by officials to start work and get
permission.

III.

Problem at the India unit have ranged from not having the appropriate license required to
sell different products to not having permit in place while building stores.

http://www.bloomberg.com/news/articles/2015-04-10/the-world-s-20-largest-economies-in-2030
http://www.fibre2fashion.com/industry-article/8/738/impact-of-globalization1.asp
http://economics.about.com/od/globalizationtrade/l/aaglobalization.htm
http://www.forbes.com/sites/meghabahree/2013/07/01/walmarts-troubles-continue-in-india/