Trade restrictions are a way for a country to protect themselves. 

Trade restrictions are a way for a country to protect themselves.

Brianna Mortel

From the BUS621 Leadership and Teamwork course, I selected the Czech Republic, now known as Czechia, as my country of expansion. Throughout my MBA journey, we’ve reviewed several important factors to consider before expanding into a new country. A major focus is the trade sector. Being able to trade will help promote growth for Walmart.“An analysis of supply and demand in international markets can show us how trade influences prices and output in domestic markets” (Gwartney et al, 2018). The best way to analyze whether a market is good is to use a comparative analysis on the supply and demand. The basic concept is that an open economy is best to allow for open selling and buying. “International competition will direct resources toward producers who have a comparative advantage…the exports will generate the purchasing power necessary to buy goods that foreigners can supply more economically” (Gwartney et al, 2019).

The next concepts to consider are trade restrictions, tariffs and exchange rates. Trade restrictions are a way for a country to protect themselves. There’s also the factor of politics. Political figures and countries benefit from limiting outside competition.“Tariffs, quotas and exchange rate controls are the most commonly used trade-restricting devices” (Gwartney et al, 2018). A tariff is a tax on foreign imports. According to Gwartney (2018) the tariff rate in the Untied States was just below 5%. Whereas, according to macrotrends (2018), the tariff rate in Czechia in 2018 was 1.69%. A higher tariff means more tax revenue for the government but also provides a level of security and protection for the product producers. Then the government can take this tax money and apply it to areas that will provide them a comparative advantage. Czechia’s tariff rate is low meaning they aren’t collecting much tax revenue.“Some countries fix the exchange rate value of their currency above the market rate and impose restrictions on exchange rate transactions” (Gwartney et al, 2018). If the exchange rate is high, the cost of the exports will be too expensive for foreigners and force them to shop elsewhere. Czechia’s exchange rate is fluctuating as they have joined the European Union. They currently use the koruna as their dollar but will eventually move to the euro. This will make trade within European a whole lot easier.One other very important concept from this course that is worth paying attention to when expanding into Czechia, is their unemployment rate. The unemployment rate in Czechia have historically been low, less than 4%. Czechia has government incentives for people to get jobs so they can keep a low rate. They are an industrial hub of Europe and have a ton of factory jobs available. This is great for a Walmart expansion because the government will incentivize the people to obtain a job at Walmart.

Resources

Gwartney, J. A., Stroup, R. L., Sobel, R. L., & Macpherson, D. A. (2018). Macroeconomics: Private and public choice (16th ed.). Retrieved from https://www.cengage.com (Links to an external site.)

Macrotrends (2018). Czech Republic Tariff Rates 1988-2021. MacroTrends. https://www.macrotrends.net/countries/CZE/czech-republic/tariff-rates#:~:text=Czech%20Republic%20tariff%20rates%20for,a%200.07%25%20increase%20from%202015.