Bus401

BUS401: INTERNATIONAL BUSINESS

THE LEGAL and POLITICAL ENVIRONMENT OF INTERNATIONAL BUSINESS

MODULE 1 - CASE

CORE PROFESSOR: Dr. DAVID PRITCHARD

TRIDENT UNIVERSITY

Globalization and the eagerness of a certain business organisation to operate across borders involves two dimension i.e. change in economic operations of various countries, and change in the participants of global economic operations (Amponsah 2001).

China, the second largest economy in the world, is a lucrative market for western retailers, due to its huge population, booming middle class and rising disposable incomes. Entering this market in 1996, Wal-Mart was one of the first retailers to take advantage of this growth opportunity. However, the inability to resonate with the local market has made it difficult for foreign retailers to gain significant presence in China, and Wal-Mart is no exception.

The political and legal risks involved in China are numerous; China has a very strong and growing economy while the United States economy is considered much stronger with the vast resources available to support it. The communist economic style of leadership adopted by China clashes with the Democratic style adopted of the United States.

Going global require transformation of managerial skills learned at the home office to enable the managers to function cross-culturally. Business firms must focus on selecting and training managers to become more attuned to different cultures, particularly in the culture of their country of assignment (Maddox 1993). Wal-Mart’s leadership must take into consideration China’s cultural norms, offending them as well as their Chinese business partners could cause a political storm of negative press against the company and hinder expansion.

China’s legal system is not compatible with those of western countries, Wal-Mart has been able to skirt some U.S. laws allowing them to profit more from paying much lower wages and not worrying about working conditions as they...