international business- walmart in italy

Running head: WALMART IN ITALY 1

WALMART IN ITALY 4

INTERNATIONAL BUSINESS- WALMART IN ITALY

Walmart is a multinational company that deals with goods in retail. Its stores are based in twenty-seven different countries in the world with the head office in the United States of America. It operates chains of hypermarkets and discount retail stores globally. Walmart was founded by Sam Walton in 1960s. The research conducted by the fortune global shows that Walmart is one of the most successful companies to have ever existed. Walmart is the biggest responsible private employer having employed 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.

Walmart has chosen to dominate Italy market because of several favorable factors that qualify Italy as the best market for the company to establish its retail stores. These factors include; economic, political and legal factors. Below is the elaboration of these factors.

Italy has of late been a target for foreign companies due to the 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.

Apart from these economic reasons that attract the hypermarket giants, the unemployment rate in Italy is relatively higher meaning that 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 their operations to be efficient, so this new bill would potentially be beneficial to Walmart because it will ensure that the company has the right people for the jobs. There is a large pool of entry level workers that are looking for work in Italy, so Walmart entry into that market will give it 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, this is so because of lower levels of development. Walmart’s entry strategy will be based in the north which is industrialized and prosperous where organized crimes action is almost nonexistent unlike in the southern half.

Italy also, with the intention to attract foreign investors, offer incentives to foreign companies that invest a certain amount in the country or those companies that choose to base their business in selected locations. It also has an open policy towards foreign investment in all areas of business including retail trade which is the Walmart’s target.

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. I am confident, especially in the north, that the changes in the political, legal, and economic sphere will strengthen the Italian market.

The company formation procedures in Italy is simple and is similar to those found in other countries, that is, preparation and drafting of the necessary documents which include articles of association, memorandum of association, a declaration by the directors that they have accepted to become the first directors of the company, among others.

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 the 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. ADD MORE INTO LEGAL ! ( SEARCH INTO ORGANIZED LABOR+INTELLECTUAL PROPOERTY AND MAYBE TALK ABOUT THAT)

To sum up, 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.

REFERENCES

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.