Changes in the Global Market and the Role of Multinational Companies

The global market has undergone changes in the recent time with an increasing role played by them in the emerging market. Multinational companies are amongst the one who are taking the advantage from the international market.  The recent time has shown the increasing magnitude of the issues growing in the countries they are expanding their work.  The high flow of FDI from the emerging market is creating an accumulated pressure on the overall growth of the market.  The growth of the FDI during the past three decades is considered to be remarkable.  The global FDI fell by 10 percent in the year 2008 due to global financial market. The direct investment thereby flows from a developed country and has grown roughly to 40 percent from 2003 to 2007(Moran, 2012). The global environment is however changing rapidly causing a change in the emerging market. The continuous liberalization of FDI has led to worldwide competition.  Technological and logistical advancement has led to influence in the developed and emerging market.  The dramatic changes in FDI landscape in the four decades have undergone change. The FDI growth into the service has made roughly to the 25 percent of the total FDI flow in the early 70’s(Moran, 2001).  At present the service sector amounts to two third of the total global FDI flow.  The strong Competitive pressure is created by the process of globalization forcing firms to internationalize at the moment. The regional distribution of the emerging market has undergone considerable change in the recent time.  The Asian market has overtaken the Latin American market   and the Caribbean which were previously dominating the industry(Hill, 2007). Most of the investment in the sector includes trade supporting services whose investment has increased in the recent time period.

For a company to become a global brand is not a cakewalk. The wisest approach adopted by the company to accept the opportunities across the globe are through flexibility available in the broad direction. The systematic framework however helps in implementing the policies. One of the best examples for explicitly utilizing the resources across the border is only possible if the company develop improvised strategies. Wal-Mart is the largest name in the retail industry which is expanding its operations by consistently expanding business venture in other countries (Morck, Yeung and Zhao, 2008). The company has opened its first international store in the year 1991. At present the company is operating in 50 states with a workforce of more than 9, 50,000. The store is operating across the world with its three type outlets.  The company has developed inside the United States and has developed as an efficient model. The reason to go global is due to the reason that the company wants to gain a significant name in the international market.  It wants to show a growth in the profits and this can only be attained if the company expands its operations. The company wants to create a significant value in the mind of the customers across the globe. Carrefour is a French multinational retailer and operates in more than 30 countries. Lidl Stiftung & Co. KG is another retail brand having operations in more than 26 countries.  Similarly the retail sector is one of the growing sector with ample of booming opportunities (Liu, 2008). The advent of the globalization across the globe has created multiple opportunities.  The growth in the sector is only possible because the companies are on the verge of expansion. The growth is only possible if they persistently workup the growth strategy (Jensen, 2008).

Expansion Strategies of Retail Giants like Wal-Mart and Carrefour

Wal-Mart is the world largest retail store and has a huge international market. The company has more stores in the international market than in the local U.S market. The United Kingdom, Canada, Mexico, Brazil and China are the five largest markets in the world.  In the international market the company is facing competition from various international and local brands. The various competitors are Carrefour in France, Metro AG in Germany, Tesco in the United Kingdom, Loblaw Companies in Canada, and Ahold in Netherlands.  Wal-Mart international revenue is growing at a fast pace. The annual growth rate is around 7.3 percent for the fiscal year 2009-2014.  The international profitability also became low which is due to high front end expansion cost (Dakota and Van Witteloostuijn, 2007). Shifting from one country to other require adaptation of the local environment. This will however help the brand to expand its operations in an effective manner. Likewise Companies like Wal-Mart are opting for Entering inside re international market through FDI. This requires selection of a location that will effectively help in attaining huge profits. The brand follows a policy of adaptation of the local needs in order to expand its operations. The business model requires little change in the case when a company wants to expand its operations. Wal-Mart entry into China is a live example of an insight into the whole process.  The company is good enough to adapt the local market by creating a competitive atmosphere for the localities. They are using several approaches in order to neutralize the local competition. It is slowly and gradually gaining the competitive position in the international market. Like in case of Germany it entered the country by acquiring a hypermarket chain (Asiedu and Lien, 2011). They understand the strategy which needs to be adopted in order to acquire the market. In the case of Canada the brand acquired a weak brand Woolco in order to transform the brand into the market player. So, Wal-Mart understands the process through which it can accumulate capacity in the International Market. The products they are providing are unique in a way that they cannot be duplicated. Moreover the brand is providing facilities to the local customers that are built on the local necessity. Wal-Mart has created a great market standing though its strategic expansion strategies (Nocke and Yeaple, 2008).

(SOURCE: Soni, 2015)

The retail market in India is known to be one of the emerging markets due to the growing trends.  The Indians has a high purchasing power and a rapid growth in the middle class society has created an opportunity for the International brands. Retail sector is considered to be one of the most advancing areas that are consistently expanding its operations through FDI route.  In the recent time many International companies have expanded there operations in the emerging market.  Multinational companies instead of other format of strategic expansion are opting FDI. Until 2011 the foreign direct investment was not allowed in the multi retail brand. Single retail brand was limited up to 51 percent (Kolstad and Villanger, 2008). In the year 2012 India has allowed 100 percent FDI in the single retail brand with 30 percent source of goods from India. In the year 2012 India has allowed 51 percent FDI in multi brand.  Agriculture marketing was expected to grow due to introduction to new technology.  The major benefit of FDI is in both the supplementary and complimentary context. It has helped in accessing the top class market through an easy access to technology.  International companies who are willing to make an investment in a single brand or multi brand retail can make an application. This is due to the tremendous growth in the Indian economy (Blonigen and Piger, 2014). This is the reason that the international brands are taking initiative to make advancement in India.  The business Sector in India is controlled by large number of regulations. There is huge opportunity of foreign investment in the country that is encouraging others to make a safe investment into the country (Basu and Guariglia, 2007). At present India is experiencing fresh spirit of economic development. An array of reforms is being introduced into the international market creating lot of opportunities in the country. The improving environment pertaining to the investor friendly environment is helping them (Shaha and Shinde, 2013).

Opportunities and Challenges of Foreign Direct Investment in India

The market already has ample of opportunities due to the growth in the customers. The Wal-Mart in India is currently working under the joint venture with Bharti. This is due to the regulations in the country that has restricted the foreign investment. .  In the recent time many International companies have expanded their operations in the emerging market.  Multinational companies instead of other format of strategic expansion are opting FDI (Nisa, 2007). They are consistently improving the sale in the country as India is considered to be one of the emerging markets. Wal-Mart targeted the Chinese market in the year 1996 due to the low buying power of the consumers.  This has helped them to enter into the market through the low price retail strategy. As the most populous county in the World China has a lot of potential. The middle class disposable income in China is lower than that of United States.  The best part of Wal-Mart is that it has accumulated the local market through the multifold opportunities created through effective implementation (Saha, 2013).

In India Wal-Mart has strategically entered the market by creating various market opportunities.  The major benefit of FDI is in both the supplementary and complimentary context. It has helped in accessing the top class market through an easy access to technology.  It is understood that the company need to build competency based on the local market by adhering to the policies. It is essential in the initial year for the company to understand the local market. In India the rules and regulations are tough previously making the entry of the foreign company selling the multiple goods very tough.  Later the country has adopted various policies according to the given structure. The joint venture was adopted by the country in order to enter in the market. The Wal-Mart in India is currently working under the joint venture with Bharti. This is due to the regulations in the country that has restricted the foreign investment. .  In the recent time many International companies have expanded their operations in the emerging market. It is essential for a company to choose a most appropriate way to enter into the market. This will however help the local market to make proper and effective advancement.  As per the regulations in the country it is allowed that a100 percent FDI in the single retail brand with 30 percent source of goods from India. In the year 2012 India has allowed 51 percent FDI in multi brand.  

However the company has to find out the most appropriate way to enter inside the market. Procuring the resources from the local market will help the company to grow in an effective manner. In case of advancement to India it is seen that Government has already mentioned that the FDI can only be made if the company procure 30 percent of the resources from the local market.  In India the purpose of introducing the FDI is to make an effective change.  This has helped both the country and the company to overcome the issues that are involved in managing the Foreign Direct Investment (Chakrabarti, Paul and Ghosh, 2014).

To conclude it is necessary to notice that the global market has undergone changes in the recent time with an increasing role played by them in the emerging market. Under such a changing atmosphere it has become necessary to adopt the changes in order to expand the function. Various international companies are expanding their business functions. The annual growth rate is around 7.3 percent for the fiscal year 2009-2014.  The international profitability also became low which is due to high front end expansion cost.  Wal-Mart has developed in recent years and considered to be one of the most effective retail outlets. It strategies to expand into the Indian market has created lot more opportunities. It is expanding in the recent time and this has led to the growth of the company. The business model requires little change in the case when a company wants to expand its operations. Wal-Mart entry into China is a live example of an insight into the whole process.

References

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