Walmart China Essay

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1 - What is the nature of the opportunity in China and why would Wal-Mart seek to expand there? The opportunity for Wal-Mart in China is huge due to the shear number of potential consumers and growing middle class ready to spend money on retail products. However, its economy is very different from most other large countries for many reasons. The P.E.S.T. analysis provides a macro level view on the environment in China. This analysis will evaluate the Political, Economic, Social and Technological factors which could affect Wal-Mart China. PEST Analysis Political: Since the 1980’s China has been “opening up” to private (both foreign and domestic) business. They entered the World Trade Organization (WTO) in 2001, which has further advanced the ability for private business growth. However, the local governments still have the authority to make “judgement” calls on who is allowed to conduct business in their jurisdiction. Many local governments are imposing hefty fees on trucks crossing borders and showing favoritism to local or state owned companies. This makes the political factor less appealing due to the lack of national enforcement on the local jurisdictions. Economic: China’s economy is huge, and has a growing middle class. Gross Domestic Product (GDP) has grown in the 6% range for the past several year, and the retail market has grown over 200 times from 1996 to 2002. The growing middle class wants to spend more of their disposalable income on retail good, while the poorer segment is only interested in necessities such as food and clothing. Both present an opportunity for Wal-mart. Social: China is very traditional, but there is shift towards more westernized views. Chinese are socially drawn to saving money and spend a lot of their leisure time shopping for the best deal. They also are very particular with the freshness and quality of food.

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