China is known for being a major and important trading partner to the United States. Any change in the value of Yuan would tremendously have an effect on the dollar value. An example is when United States dollar is much stronger than the Chinese Yuan causing United Sates their customers enjoy the low prices of imports from China with tourists from the United States making trips of low prices. The disadvantage is that a strong dollar can cost the U.S. exporter due to the competing cheap prices of their competitor China. The U.S. companies will find it difficult to compete with China whose prices will be lower for importer due to their low currencies. Equally, in a situation whereby the U.S. dollar is not strong and the Chinese yuan is much stronger, the U.S. exporters will find it easier to have an advantage over the Chinese. Markets will prefer to buy items from the U.S. as compared to China due to their low currency strength. Chinese tourist will also benefit from the low prices and therefore can travel and even study cheaply in the United States (Murphy & Yuan, 2009).
Through this, it is observed that in a case where prices of imports are high, they tend to lead to higher inflation and prices in the United States. Walmart is a business that focuses on low production cost and therefore all this depend on the inflation in the country that is partly determined by prices of imports. Prices of imports are determined by the strength of the dollar. It is clear that when there is manipulation of the Chinese yuan, and the currency becomes stronger it can be helpful for importers and exporters in the United States (Murphy & Yuan, 2009).
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Importers such as Walmart will be able to import products from China at a cheaper price and that means more profits for the store. Exporters such as the store too can compete with China’s products due to the high prices caused by their strong currency. It is, therefore, advantageous when the strength of the Chinese yuan becomes higher as compared to the United States dollar currency. Manipulation is greatly advantageous to the Walmart store and since the strategy used is the low cost of production, it is critical to take advantage and gain a competitive advantage in the markets (Murphy & Yuan, 2009).
Walmart is an American multinational retailing store that mainly sells items in retail both locally and internationally through exports. Using the assumption that the Yuan may continue increasing as compared to the dollar, Walmart should take advantage of it and come up with strategies to have a competitive advantage over China’s stores. Firstly, they should ensure that they increase their exports at a lower price before the Yuan drops or dollar rises. Exporting the items will be cheaper because the currency is low as compared to China and therefore markets will prefer the cheaper currencies. They should ensure that they increase their items in more markets due to the competitive advantage they have over China whose currency is much higher (McKinnon & Schnabl, 2008).
Most businesses will prefer to import items from the United States as compared to China due to their low currency. A high currency means that the rate of buying the Yuan will be high and therefore discourage importers of other countries from importing from China. It, therefore, means China will export rates will be lower. It is best that Walmart stretches its market by creating awareness of their availability and cheap prices as compared to Chinese stores whose prices will be higher due to the Chinese currency. Walmart should also ensure that they increase their production once they have acquired other markets due to the high demand that will emerge (McKinnon & Schnabl, 2008).
Another aspect is that there will be fewer imports from China and therefore many of the customers in America will prefer buying items locally than importing them from China. The high currency in China will be a great discouraging factor to the customer making everything expensive to those importing Chinese products. High currency means high prices for the items as compared to the locally found products and therefore Walmart is going to benefit greatly. Walmart, therefore, can take advantage and maximize in taking over the local market of the United States as most people will prefer buying items locally (Choi & Kim, 2003).
An exporter from other countries such Argentina who is selling items to China, they will gladly accept payment in Yuan as compared to the dollar currency. The reason as to why they would prefer Yuan is because of the strength it has as compared to the dollar currency. The stronger a currency is the more valuable it is around the world. Considering the fact that Chinese yuan is more valuable due to its highness as compared to the U.S. dollar currency, it is best that the Argentina’s exporter to receive payment through the stronger currency (Choi & Kim, 2003).
In conclusion, China is a great competitor to the United States and therefore a change in strength of their currency affects their export and import rates greatly. In 2010, it is seen that they had devalued their currency by 2% percent in order to increase their exports. It is critical that both countries ensure that the strength of their currency is friendly in order to encourage both exports and imports. Exports and imports have a great impact to a countries economic stand and therefore it is critical that a country watches out for the currency. Walmart in this instance should take advantage of the high currencies and therefore, many in the U.S. will prefer buying locally and those in other countries will prefer buying from the U.S. as compared to China (Choi & Kim, 2003).
References
Choi, J. J., & Kim, Y. C. (2003). The Asian exposure of US firms: Operational and risk management strategies. Pacific-Basin Finance Journal , 11 (2), 121-138.
McKinnon, R., & Schnabl, G. (2008). China's exchange rate impasse and the weak US dollar.
Murphy, M., & Yuan, W. J. (2009). Is China ready to challenge the dollar?. Center for Strategic and International Studies ( http://csis. org/files/publication/091007_Murphy_IsChinaReady_Web. pdf).
