Pest-Walmart In South Africa
Essay Preview: Pest-Walmart In South Africa
Report this essay
Economic Environment:
“Since1999, South Africas economy has been growing steadily. In addition, consumer inflation has been decreasing. While the GDP rate has been rising, unemployment rate and US exchange rate have had a downward trend since 2001. The countrys financial and industrial infrastructure is well developed and has outstanding growth potential [Anon 2006(10)]. However, South Africa has the problem of enormous socio-economic inequalities, which were encouraged by the apartheid regime. S. Africa has been described as a powerhouse of Africa. In addition, its major strengths against competitors include its physical and economic infrastructure, natural mineral and metal resources, a growing manufacturing sector, and strong growth potential in the tourism [Anon 2006(4)].”
The purpose of this section is to analyze the economic environment of South Africa, and determine whether or not the targeted market is an attractive one for the company to enter. Determining the level of attractiveness will primarily focus on an analysis of the economic factors that will affect or assist the company before it enters the market, and it will also verify whether or not entering this particular market will have a positive overall outcome for the company, both in expanding its global image and generating desired levels of profits.
While conducting research on the general economic environment that is currently taking place in South Africa, a major issue that should be considered is the high property levels and values. Foreigners have taken an extra interest in property in South Africa, which has ultimately led the country in enjoying increased levels of tourism, primarily as a result of both property levels and the upcoming two thousand ten (2010) Olympic Games.
Taking a closer look at the economic factors of the country, those that proved to be most beneficial and important for the company to focus on before beginning this particular venture were levels of capital growth, off-plan, commercial property, exchange rates, the cost of living, economic stability, and housing storage.
South Africa’s economic environment points towards increased property levels as a justification for the country’s capital growth in that these property levels have made the country a more attractive prospect, leading to steady overall growth. An example of this is the steady growth in property as far as value is concerned, resulting in a increase of just over thirteen percent (13.5%) in the West Cape area, and close to a sixteen percent (16%) increase in the metropolitan areas. Having said this, these growth rates could ultimately be interpreted by investors as a stable economy. In addition to this, investors will be more interested in making such property purchases due to the expected future growth levels, since they will be able to benefit on the short run as well as the long run.
Considering the information we derived from our property assessment, we can now focus on the issue of off-planning. This term primarily deals with purchasing
Before Investing in South Africa, or anywhere else in the world, the target market should be fully analyzed in order to determine if the target market in profitable if Wal-Mart is implemented. According to my research, South African property has become and interest to foreigners which in return has shown a steady market due to the growth in tourism for the two thousand and ten (2010) Olympics.
However, in order to specify the economic factors in South Africa that may influence Wal-Marts choice of entering into South Africa are capital growth, off-plan, commercial property, exchange rate, cost of living, economic stability, and housing shortage. According to, …. The capital growth in the South African economic environment focuses on the fact of how property has increased its value on a steady growth and in prices from 13.5% in the Western Cape and 15.9% in the metropolitan areas. Thus, investors such as Wal-Mart say this is an indication of a stable economy because of the flattening in growth rates.
Since, we have stated that South African property has increased its values it’s obvious that investors will be interested on purchasing such property due to its future growth. When speaking of off-plan factors we mean the purchases of desirable locations like metropolitan areas such as the Cape Peninsula area. This factor is used as an investment strategy in which Wal-Mart can take into consideration.
However, for Wal-mart commercial property is of much more importance since if Wal-Mart decides to implement they will require commercial property. Therefore, when dealing with commercial property in South Africa the economic factors discuss its returns and its strong demand. According to the Economist Magazine, South Africa is in one of the top performing markets and this market will continue to grow in the future. If Wal-Mart decides to enter the South African market then by purchasing commercial property at low prices may decrease their capital investments on property and equipment.
In addition to purchasing valuable property another important factor which enables property purchases to happen easily through the low exchange rates between the rand and other major currencies. For example, when foreign investors want to invest in South Africa they can buy more for their money. Since these exchange rates allows stronger currencies to gain more value for their initial investment then Wal-Mart may be able to retain some of this start-up property capital to pay off, invest, or purchase other significant variables that are required.
Also, when evaluating the cost of living in South Africa, is relatively cheaper than other countries. For example, clothes are much cheaper compared to European prices for clothes which is due to the many factories producing clothes for the international market. While linking this factor and Wal-Marts motto, we can understand that this low cost of living is an advantage. Wal-Mart’s motto is “low costs, everyday” and if in South Africa the cost of living is inexpensive that means that South Africans will be able to make cheap purchases from Wal-Mart.
According to the Economist (Feb 2007), the South African economy is set on a steady growth path and forecast to keep steady for the foreseeable future. While inflation in past years was high, it has now been brought down through strict measures taken by the South African Reserve Bank to within the 3 to 6% target. Furthermore, the Economist predicts growth in construction and continued expansion in total domestic demand will see a real