Question 1(Mandeep) Various macroeconomics concepts have a direct impact on the expansion of companies either locally or internationally

Subject:BusinessPrice: Bought3

Share With

Question 1(Mandeep)

Various macroeconomics concepts have a direct impact on the expansion of companies either locally or internationally. Macroeconomics concepts such as comparative analysis, trade restrictions, tariffs, and exchange rates have directly impacted the growth of Walmart Company in the United States of America. The comparative analysis involves comparing two or more companies serving in the same industry and competing for the same companies (Nazzal, 2013). Walmart has used this macroeconomic concept by analyzing other companies like Amazon and Target, competing with them in the retail industry. With these other companies focusing on expanding internally, Walmart has developed both internally and internationally. For example, the leading stores of Amazon and Target companies are all located in the United States of America. At the same time, Walmart has extensive stores in various countries such as the United States of America, Canada, Europe, Mexico, and China (Nazzal, 2013). Therefore, even though these companies and others in the same industry compete as cost leaders, they all use different expansion strategies in executing the available markets for their goods and services. Walmart Company has used the technique of purchasing operations that exists in various companies and changing these operations to Walmart operations to grow internationally.

Another macroeconomic concept that impacts Walmart Company expansion in the United States of America is trade restrictions. Trade restrictions involve two or more countries putting barriers to trade goods and services between the countries affected. These trade restrictions help companies expand as they do not face competition from other international companies (Nazzal, 2013). Therefore, with the trade restrictions imposed by the United States of America on goods and services from China, Walmart Company will expand at a higher rate.

Trade tariffs are another macroeconomic concept that directly impacts a company's expansion within the country. For example, the United States of America has imposed trade tariffs on goods and products from other countries, such as 25% on goods from China. These tariffs directly impact the expansion of Walmart Company in the United States of America (Mun and Yazdanifard, 2012). For example, the disproportionate impact of trade tariffs on rising prices of commodities and goods, reduction in production, drop in the level of income that companies earn, and reduction of employment in the country have affected the expansion of Walmart in the country (Ciner, Gurdgiev, and Lucey, 2013) negatively. Therefore, due to the imposition of trade tariffs, Walmart Company will expand at a slower rate.

Also, exchange rates are another macroeconomic concept that has an impact on the expansion of companies. Currency exchange rates impact trade, income flows, rate of interest, and inflation, directly affecting a company's growth (Mun and Yazdanifard, 2012). For example, when the United States dollar is weak compared to other currencies, companies boost their productivity and expand. The Walmart Company uses the concept of foreign exchange, which determines its expansion within the United States of America depending on the strength of the dollar currency compared to other currencies.

Other macroeconomic concepts that impact the decision of companies such as Walmart to expand include consumers' confidence, the country's economic growth and development, the inflation rate, interest rate, and unemployment rate (Ciner, Gurdgiev, and Lucey, 2013). All these factors influence the prices of goods and services in the price and hence the income level. Therefore, these economic factors would directly impact companies in their decision to expand by these financial concepts.

 

Question 2(Catherine)

If an organization like Walmart wants to open new locations in new countries, they need to consider certain macroeconomic concepts that will affect their ability to do business within that country. As most international trade is not between governments, but between people and businesses in different countries, it is important for businesses to understand things that affect trade. Both parties should expect to gain from their trade, but they cannot be successful if trade restrictions and tariffs are not in their favor.

If Walmart wants to open new locations in the Philippines, they need to consider what the comparative advantage for them is. For some companies, this might be what they can bring to a country that is low cost for them to make that they can sell in a high profit. For Walmart, it might be something else. The Philippines is a unique country. It had one of the highest literacy rates in Asia and is the third largest English-speaking country in the world. They also place a lot of focus on being a business-friendly economy. Because Walmart is opening physical locations in the Philippines instead of importing items from there, it is important to know how their business will be received.

Of course, they do need to bring in some items in order to stock their stores, and this is where knowledge about trade restrictions and tariffs will benefit them. Currently the Philippines maintains a two-tiered tariff policy on rice, corn, pork, chicken, sugar, and coffee. Any of these products are subjected to a tariff rate quota. If an import is outside this minimum access volume, it will be taxed at a higher out-of-quota rate. Walmart needs to consider what they are bringing into the country and what they can source from the Philippines, because one might cost them more than it is worth.

Other factors Walmart needs to consider is the economic health of the country. In the beginning of 2020, the Philippines were in a good place. Their GDP had risen to 6.4 percent in the last ten years. They were on track to rising higher in economic freedom then they had been in previous years. However, due to COVID-19, the government imposed strict lockdowns and many people were not able to work. Walmart needs to realize that this is a country still in economic recovery, and it might be some time before opening a new location here is profitable.

Question 3 (Sean)

The balance of payments can influence exchange rates by the behaviors of their respective currencies (Keblowski et al., 2020, p. 415). For example, increases in income encourage foreign spending, and this can cause the dollar to depreciate, and this is what changes the exchange rate (Gwartney et al., 2018, sec. 19-3a). Consequently, this affects purchasing power by making it easier for Americans to purchase goods and services from foreigners when the dollar is appreciated against the foreign currency (making the foreign currency’s price fall relative to the dollar), and more difficult when it is depreciated against it (Gwartney et al., 2018, sec. 19-3a).

Trade deficits are mostly okay. We have learned many times throughout this course that trade deficits are not bad. However, when it comes to increasing current consumption, this is not a good reason to incur a trade deficit; these projects (or ventures) do not improve the economy as a whole (Gwartney et al., 2018, sec. 19-6). In general, pros for trade deficits include an improved standard of living, comparative gain, and foreign investment (Bhatt, 2020). Foreign direct investment (FDI) is encouraged under these circumstances (Bhatt, 2020). Cons include that a deficit could be harmful for developing countries, job outsourcing could take place, and the value of currency could reduce (Bhatt, 2020). It is worth noting that a deficit only harms a developing country that incurs such a deficit; developed countries such as the U.S. need not worry about this con (Bhatt, 2020).

Question 4 (Andrew)

The balance of payments among countries ebbs and flows continuously based upon criteria such a volumes of trade, debts and loans being paid, variation in exchange rates, varying levels of inflation, and other economic parameters that affect a nations currency. One of the primary drivers of the currency exchange rate is the rate of inflation relative to other countries. If one country experiences rampant inflation while another remains stable in its prices, The country experiencing inflation will increase its desire for imported goods to alleviate rising costs, thus reducing the amount of that currency in the exchange market (Gwartney et al. 2018).

I do not believe that the United States needs to be worried about the trade deficit. Given we exist in a capitalistic globalized economy, the basis tenets of that economic structure dictate that markets determine the supply, demand and price. Its only natural that in this environment there will be disparities among nations, based upon the goods needed by each nation and their ability to efficiently produce them. Given that a trade deficit is simply importing more than a country is exporting to a specific country, its only natural that these will exist. Its common for when there is a strong dollar, and a growing economy inside the US, that the deficit will grow as consumers have more money to spend on foreign goods. The strong dollar makes foreign goods cheaper for consumers (McBride, Chatzky, 2019). Conversely, trade deficits are not always tied to strong economic growth. Japan and Germany for example have had multiple recessions, While running large trade deficits for the last 3 decades. They key here is to ensure that funds and goods received are being put towards productive drivers of GDP growth (Rice University, n.d.).