Challenges For Walmart In Doing Business In Australia: Essay. Solutions.

Background of Walmart and its market presence

1. Foreign invest and expansion is very essential for a company to survive and develop in the modern market. However, in Australia, it is not upon looked else just as a procedure, but there are several ways of guidelines and rules to do business. For example, if a company chooses to invest in Australia through FDI it has to follow certain trade guidelines which have been set according to Australia. In this discussion, we have taken Walmart as a MNC who wishes to do business in Australia. The discussion will investigate and analyse the key elements of the trade and identify the challenges that Walmart can face while doing business in Australia.

Walmart is an American retail company which has a dominant presence in the retail chain industry. The Walmart retail stores detail in several sectors and products which gives it the opportunity to expand and operate in a number of fields. With its headquarters present in USA, the Walmart Inc. is one of the largest MNCs in the retail chain sector in the world. It has a large dominant presence in the world and currently operates in 28 countries. Walmart has more than 11718 stores all over the world which heralds the dominance in the retail chain industry. Besides this Walmart, in terms of revenue collection is the world’s largest company which sums up to approximately US$500 billion. Walmart also has the reputation of being the largest employer in the world in the private sector with more than 2.3 million employees all around the world. However, despite its dominant presence all over the world, Walmart Inc. has not yet ventured into the Australian market. The Australian market still remains open with its vast potentiality. In 2017, we have seen the entry of Amazon, another retail chain giant in the Australian market, while possibilities remain for Walmart Inc. to invest in the Australian market and expand into the vast market.

However, if Walmart Inc. comes to Australia on the lines of FDI, it has to go through certain processes, which have been set by the Australian government to review the purpose and productivity of the FDI. Australian government is open to foreign investments which can benefit the Australian economy. According to the government, the Australian economy had been built by foreign investments and it is necessary for large foreign companies to come and invest in Australia so that the economy sustains its growth and development in the future (Aph.gov.au 2018).

Australia's trade policy on foreign investment

Firstly, let us look into the internal strengths and weaknesses of Walmart Inc. to do determine its efficiency to enter into the Australian market. Walmart’s primary strength is its strong brand image. Walmart is known all over the world for its dominant presence in the retail chain sector and it has a large and well equipped distribution network which lets it to cater to a number of people all over the world. Walmart uses advanced technology to maintain its strong distribution network, which also helps the company to maintain the supply chain worldwide. Besides the strengths, the primary weakness of Walmart is that though it has a significant presence worldwide, majority of its market shares come from the US markets. Hence it can be seen that Walmart needs to expand significantly in other countries such as Asia or Australia to capture the potential markets and increase its market share.

Walmart should look forward to increase its presence in the Australian market by following the competitive theories and increase its profitability. Active strategy and management can help Walmart develop its operational market strategies in Australia.

Australia is an open market which allows investors from all over the world to swarm in the Australian market to do business. This helps the in the dual benefits both for the investors in terms of profit and for the Australian economy in terms of economic growth, employment and income flow. It also helps in the creation of new jobs besides the existing jobs and help in the introduction of new and innovative technologies in the country, which can be later used for the further growth of the market in the future (Armstrong 2015). However, doing business in Australia requires following several guidelines. Though the business formalities of the Australian government have been kept flexible by the Australian government compared to other countries in order to draw a larger number of direct foreign investors, it is mandatory for the investors to follow the regulations accordingly (Fan et al. 2016). Following these procedures can ensure the clarity of the business operations and the benefits that the business firm tends to give to the host nation’s economy.

Walmart needs to prepare accordingly to follow these regulations in order to establish business in Australia. Firstly, Walmart Inc. requires producing an in-depth proposal regarding its business policies and its plan of operations in Australia. This includes the amount of investment that is being planned by the company to be invested in Australia, the number of stores that it plans to open in Australia, the strategic locations it has chosen in Australia and the benefits that the company has in its mind for the people of Australia (firb.gov.au 2018). This includes the people who are to be employed by the company and the people whom they are going to cater to. An overall planning like this can help the company to determine the benefits that they are going to give Australian economy in its due course of business.

Walmart's strengths and weaknesses for entering Australian market

The next part of the proposal submission includes the review by the Australian government. The duty of the Australian government is to review the proposal submitted by Walmart in a detailed manner, judging the interests of the people and the economy in the lines of the case summaries provided by Walmart. The approach by the government is a flexible one compared to the other nations who require the company to go through several procedures to present its idea in front of the host government (firb.gov.au 2018). The approach of the Australian government is such because it believes that hard and fast rules, and rigid environment prohibits large companies who require flexibility to invest from investing their most valuable assets. The incomplete investments are not valuable both for the host nation and the company willing to invest (Koojaroenprasit 2013). The limited investment results in the limitation of flow of the cash and thus defeats the idea of total development. However, the process followed by the Australian government, which is the case analysis of the proposal, helps the company to maximize its investments to a larger scale and at the same time also safeguards the interests of the Australian people and the economy as a whole.

It is often seen that large corporate MNCs like Walmart, in order to maximize their profits devise different ways to avoid the benefits that they had earlier promised to the government. Australia follows a very strict policy regarding these policies (firb.gov.au 2018). The flexibility shown in the case analysis of the proposal doesn’t ensure that the proposals are approved. It is approved only after the detailed analysis where benefits are judged at every step of the investment. If the government doesn’t find any process or step suitable then the project might not be approved or be cancelled (Lee 2013). This aspect safeguards Australia’s interest against the exploitation by the corporate bodies, which is often done in many developing nations.

This type of strictness in the trade-policy might pose a challenge for Walmart as it would be bound to comply with the national interests and might have to alter some of its own policies to do business in Australia. The Australian government presumes the fact that all the investors are expected to comply with the high standards of Australian law, and maintain its conduct accordingly (firb.gov.au 2018). This aspect allows the government to place complete trust in the investors and give them the permission to carry out their business in Australia.

Australian regulations on foreign investors

There are several behavioural regulations that have been set up by the Australian government to ensure the ethical corporate behaviour of the foreign investors (Turnbull, Sun and Anwar 2016). Walmart should consider these regulations while planning their business proposal.

Firstly, Walmart is expected to main professional corporate governance, which should aim at the economic efficiency and the development of both the company and the nation. Ensuring good relations between the management, employees and the stakeholders can maintain a professional corporate governance (firb.gov.au 2018). Proper and timely compensations, lucrative incentives help the stakeholders to remain aligned to the company. Moreover a monitoring system should be implemented for the maintenance of the effective governing system along the corporate principles. The standards of the corporate governance are set by the Australian Securities Exchange and all the corporate bodies are expected to comply by the set standards (firb.gov.au 2018). These principles require the corporate bodies to develop a formal mandate which would specifically mention the roles of the management and the governing board. The board requires to be comprised of independent persons who are able to do their duties irrespective of any liabilities (Thorpe and Leitão 2014). The principles also set that the chairperson of the board and the chief executive officer should different persons, so that they can distinguish between their job roles, and justify them accordingly. The company should also set a code of conduct for the employees which are to be strictly followed by all. The company should establish an audit board which will monitor the activities of the company. The company should also monitor the potential business risks and avoid the.

The Organization for Economic Co-operation (OECD) is often responsible for the setting of the principles of international trade. Walmart should also consider the OECD regulations, which are primarily the guidelines for both the government and the investor (firb.gov.au 2018). The OECD guidelines are a complete set of strict guideline, which serve the purpose of reminding the corporate owners their responsibility towards the society. This enables the investors to function in a more efficient, transparent and competitive manner, which can further help the company to profit and at the same time contribute to the development of the host economy (Jos Jansen and Stokman 2014).

The Australian Securities and Investments Commission (ASIC) is one of the prime bodies that looks after the operations of a foreign investing company. The body is independent of the other commonwealth governing bodies and is responsible for the registration of the foreign companies for operating in Australia (firb.gov.au 2018). The company verifies the company details and its policies and he different persons from the board or management body before registering the company. Walmart should register with the ASIC, in order to operate its business in Australia. The requirements of the registration process include the submission of certain reports which are essential for the ASIC to determine the status of the company. Similarly, Walmart also requires to submit a copy of the balance sheet of the company, along with the statements of profit and loss for the interval of the previous 15 months (firb.gov.au 2018). The company also requires to submit other documents which verify its registration in its home location. These documents act as the verifying documents for the ASIC to determine the authenticity of the company. Moreover, another challenge that Walmart might face is that the company requires hiring a local agent who would be answerable for the different activities of the company. The ASIC should always be informed of any amendments in the company policies at any period of time while operating in Australia and also require placing formal documents with regards to the amendments (Bayari 2013).

Corporate Governance standards for Walmart's business proposal

According to the Corporations Act 2001, the Australian law allows the director of the foreign investing companies to shoulder additional responsibilities in order to maintain the proper functioning of the company (firb.gov.au 2018). The challenge of Walmart is to give its directors additional responsibilities, which helps it to maintain the corporate responsibilities. The directors are required to be extra careful in exercising their powers and should be diligent enough to take mature decisions. The directors are also required to maintain the best conducts and act in good faith for promoting the interests of the company, which involves avoidance of misuse of power or the abstain from the improper use of confidential information for self-benefits or harming the company. Walmart requires understanding these duties as they are enforceable in the Australian court of law. Failing to adhere to these aspects might end up in a legal battle which might be harmful for the company’s operations as well as reputation.

Walmart must adhere to the policies and regulations under the Corporations Act 2001. This act of law make Walmart liable, to adhere to the laws of Australia while performing any deals, corporate takeovers of Australian companies or any other financial deals (firb.gov.au 2018). There are certain regulations under the ASIC which gives it the right to supervise over any deals that take place in Australia. Walmart must be aware of these regulations. As the licensing of business is done under the independent body of ASIC, Walmart automatically makes itself answerable for all its dealings in the Australian Market (Rogers and Dufty-Jones 2015). This aspect is followed in order to check the financial misconducts in the Australian market that might occur due to the personal profit making of the foreign investing firms.

In case of takeovers of Australian firms, Walmart must do so in presence of the Takeover Panel, which is another body which regulates the control of corporate organizations. The takeover bids must be transparent and focused on the benefits of the company as well as the economy (Bowman, Gilligan and O'Brien 2014).

It is improper under the Corporations Act to manipulate the market prices to gain improper benefits. It is often seen that the companies reduce their capital to a superficial amount to draw financial benefits from banks or similar organizations. ASIC is bestowed with the responsibility of monitoring such activities on a daily basis (firb.gov.au 2018). This gives ASIC huge powers to investigate and interrogate with regards to improper conduct in the market. Walmart should be aware of such illegal practices so as to stay clear of the hassle of legal issues. Legal issues are brought forward and enforced on the basis of the Corporation Act.

As the companies such as Walmart require to be enlisted in the Australian Security Exchange (ASX), they are bound by the laws regarding stakeholders. The Company needs to issue notice regarding the stakeholders (Firb.gov.au 2018). The transparency of the process requires the company to issue such notices every time a transaction is made. This ensures the safety of the stakeholders who have invested their money into the company. Improper misconduct regarding stakeholders or professing false statements regarding disclosure of the stakeholders might lead to fraud cases which will draw upon legal suites by the ASX against the company (Treasury.gov.au 2018). Companies such as Walmart must take these issues seriously to avoid such hassles in business operations.

The OECD guidelines form an overall structure consisting of similar regulations that have been discussed above. Any foreign investing company must adhere to the guidelines of OECD in order to conduct business in Australia. The OECD guidelines ensure that the foreign firms act as good entities while dealing in Australia (Firb.gov.au 2018). The OECD is an independent body and is not governed by any government. However, every country tries to uphold the OECD guidelines in order to adhere to the fair play policies. This also ensures the truth and honesty along with transparency of the foreign companies who are ready to invest in Australia.

One of the senior executive is known as the National Contact Point, who promotes the OECD guidelines to the foreign investing companies (Firb.gov.au 2018). It is his duty to guide the foreign investors to invest in Australia by adhering to the guidelines of Australia.

Figure 1: Import/ Export Form

Figure 2: Customs Form

2. This unit has been very essential for me to understand the different challenges that a company can face while promoting their business in the foreign lands. It is also important to understand that direct foreign investment (FDI) is essential for the development of a country’s economy. Without FDI the economy of a country goes to a standstill with no prospective development. Moreover, without the lack of innovation and foreign ideas, a certain economy cremains backward in terms of development (Kurtz and Nottage 2015).

The analysis and synthesis of the key concepts of foreign business policies in Australia has enabled to understand the various features that is required to follow to pursue business ina  foreign land. The theories of business have helped in understanding the different business techniques and the way to implement them while conducting business in foreign land.

The choice of Walmart as a MNC has helped in the understanding of how a large company works in the global scenario. The presence of Walmart in all many countries and its urge for development has helped in the understanding of different laws and regulations that are important to be considered to conduct the business operations in Australia.

The assignment has also helped in the detailed understanding of regulatory bodies such as the OECD, ASIC and ASX. The assignment has further helped what are the regulations that they maintain and how they regulate the foreign investment companies. Monitoring the activities of the foreign investment companies, help the regulatory bodies to maintain transparency of the deals of the companies (Pokarier 2017). These monitoring helps in the reduction of corruption. It also helps in the prevention of exploitation of the employees and the resources of the nation.

These open laws and the prospects of a successful business in the foreign investment category had inspired to work as the business professional. The challenges of working in a foreign country and maintaining the laws of the land require utmost dedication and carefulness towards the work that is to be done. Moreover, working in Australia, has its own set of advantages. Australia is one of the most developed economies in the world. Moreover, the Australian government follows a very flexible approach to draw in investors from the foreign countries. Australia provides all the facilities that are required for the foreign investment companies to set up their business with ease and operate comfortably.

The laws that pose as challenges to the new business firm are some of the basic laws, which are required for the maintenance of the transparency of the company. These laws might pose challenges but will help me to operate the business in a more ethical and transparent manner that will help both the employees and the nation.

References:

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