INTERNATIONAL BUSINESS-

Running head: WALMART IN ITALY

5

WALMART IN ITALY

 

 

 

 

 

 

Walmart in Italy

Name

Institution

 

 

 

 

 

 

 

 

 

Introduction

Walmart is multinational retail goods store based in the United States of America. Walmart operates chains of hypermarkets and discount retail stores globally. The company was founded back then in the early 1960s by the founder Sam Walton. Walmart is one of the successful companies to have ever existed according to the research conducted by the fortune global 500 that was published to the public in 20014. The company is also responsible as it is the biggest private employer. This is because Walmart as a company has approximately about 2.2 million employees (Fortune Global, 2014).

Walmart’s desire to dominate the international market has been received with mixed responses all over the targeted markets. For instance, Walmart’s operations in the home market in America, regions of the Asian markets in china and in South America have proven to be successful. Walmart’s operations in South Korea and parts of Germany have proved to be a failure. This can be greatly attributed to the fact that the company faces stiff competition from other companies that had already been established in the region and had already established their dominance.

Why dominate Italy?

Economic factors

It is due to this reason that Walmart is targeting the Italian markets. There are several factors that qualify Italy as the best market target for the company to establish its retail stores. Those factors are: political, economic and legal, which will potentially affect the establishment of Walmart in Italy. Italy has of late been a target for foreign companies due to it ready market for products and services. The increase in customer demand of Walmart commodities means that Walmart will have a ready market for the produced goods. It is the desire of any company to have a market that is ready for their products and services. This will provide maximum security for the company to produce more goods and services. Walmart has established strategies that they will put in place in order to dominate the Italian market with success.

The Italian GDP growth as at 2015 was at 0.8%. If the same growth rate increases, it is expected to better in the coming years. Many businesses would like to be associated with a country that has a stable GDP in order for the company to establish their stores. The steady growth of the Italian GDP is greatly attributed to the low prices of petroleum products. Because of this reason, forecasters project that the low prices of fuels will increase the consumption due to the affordable price and by doing so drive the growth of the GDP. The Italian government has established policies that will control the growth of the country’s GDP in order to attract foreign investors to their domestic markets (Bustillo & Talley, 2011).

Another economic factor that has attracted Walmart to establish its retail stores in Italy is the Italian foreign investment index. The Italian foreign investment index stands at 8/10. This index is based upon the economic stability of the country. Italy enjoys a stable political stability thus a contributing factor for attracting foreign investors. In comparison to other country’s foreign investment indexes for instance the United States of America which stands at 9/10. People and companies will tend to be attracted more to the Italian market in comparison to the United States market. Economic risks and business investments environment are the major contributing factors to the development of a stable foreign investment indexes. Under the current prime minister of Italy, Matteo Renzi there are numerous economic reforms that have been worked on that ensures there is a much lower taxation on the consumer goods in the Italian markets than any other country. By lowering taxations on goods, it encourages more consumption of the consumer goods. Increases in demand of a commodity will for sure lead to an increase in supply thus there will be a need for the companies to establish the consumer retail stores at the disposal of their customers. The corporate tax rate of the Italian market is also attractive at 27.5% and makes the company eager to establish retail stores in the country. This economic incentive makes it feasible for Walmart to enter the Italian economy. The economic reforms will also encourage the consumers to increase their spending. Walmart can bring those services and products closer to the customers with the one-stop retailer.

Political issues

Apart from these economic reasons that attract the hypermarket giants, the unemployment rate in Italy is relatively higher meaning the company will not experience employment issues as the labor market is ready for them. Walmart has put down strategies that would make the penetration of the Italian market easier for them. The strategies include penetrating the regions where there exist no private developers or private companies (Koenig, 2006). Some might view this as a strategy to hide from competition. A political reform led by Prime Minister Renzi has recently passed. This reform is concerned with the inefficient labor market in Italy and the 12% overall unemployment and 40% unemployment of people under 25. The bill makes it easier for employers to fire unproductive workers. Walmart needs a motivated and productive workforce in order for our operations to be efficient, so this new bill would potentially be beneficial to us because it will ensure that we have the right people for the jobs. There is a large pool of entry level workers that are looking for work in Italy, so our entry into that market will give us the opportunity to pick the best workers that will stay on staff for a long period of time. There is a major concern of doing business in Italy. Many fear the power of organized crime there and the costs that they represent for a business. In Italy, organized crime only has influence in what is called the ‘mezzogiorno’, or the southern half of Italy. As you will see later in the presentation, Walmart’s entry strategy will be based in the north where private action is almost nonexistent.

Italy is in a very transitional period. There are a lot of reforms going on today, most of which are aimed at improving the business environment there. We are confident, especially in the north, that the changes in the political, legal, and economic sphere will strengthen the Italian market

Legal issues

In addition to some economic reforms, there have also been waves of other reforms as well. A legal reform, for example, has been ongoing in protection of intellectual property. A few recent innovations include new measures to combat counterfeiting, protection for Internet related intellectual property, merging and simplifying patent and trademark rules.

Conclusion

The penetration of Walmart’s to the Italian market can be viewed as a strategy it is using to dominate new markets for their goods and services. They can use the advantages in making them remain relevant away from their domestic markets. Factors such as the political stability exhibited in Italy can be of great advantage for the developing companies. The availability of skilled labor in the Italian markets means that Walmart will not have a hard time in investing for labor (Birchall & Yeager, 2006). Walmart will extend its operations in Italy due to the desire they have in dominating more international markets. This will be made possible with these factors.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reference

Fortune global (2014). Report on GDP of European countries, retrieved from,

http://fortune.com/global500/2014

Govindarajan V. (2002). Taking Walmart global: lessons from the giants, retrieved from,

http://www.strategy-business.com/article/13866?gko=17e9c

Phalguni S. (2015). Walmart venturing in international markets, retrieved from,

http://marketrealist.com/2015/02/walmart-looking-growth-international-markets/

Birchall, Jonathan; Yeager, Holly (2006). “A Purchase on Psephology” (US

ed.).financial times p. 10

Koenig, David (2006). “Wal-Mart Targeting Upscale Shoppers”. ABC news

Bustillo, Miguel; Talley, Karen (2011). “For Walmart, a Rare Online Success”. The Wall Street Journal. p. B1.