Walmart Inc.

is a multinational retail company based in the USA that operates across different countries
around the world including Canada, China, UK, and Germany. As described by Madura (2016),
multinational corporations are the firms that engage in international businesses. Such corporations
require their managers to conduct international financial management which involves making international
investing and financing decisions. The goal is to maximize the firm’s value. Walmart sources the products
from different countries and sells them at different locations.
            The international finance market facilitates the trading of financial wealth between countries and
focuses more on topics like foreign direct investment and currency exchange rates. Because of
globalization, many firms are going global, leaving their mark on different countries in order to expand
their market and diversify risks. Such markets help Multinational corporations with reduced transaction
costs, mobilization of funds, formation of capital, and risk management. In such instances, the role of
international finance becomes crucial as it provides companies with the market to trade financial assets
and make investments in foreign countries. As given, Walmart recently established its two retail stores in
Shenzhen, China, which has a population of 3.7 million. Given the huge market, Walmart generates
earnings greater than that of what is required to operate in Shenzhen. Hence, Walmart can remit those
earnings to the main office in the United States. Here are some of the insights into how Walmart can
utilize international finance markets to expand and finance its business in foreign countries.
a.     The spot market is the market where the trading of financial instruments such as currencies, and
securities occur. Additionally, this market facilitates the exchange of foreign currencies (Ozun & Erbaykal,
2009). It is where the organizations, countries, and traders settle their financial transactions and
investments. Since the Walmart stores in China require other currencies to buy products from other
countries or import, it needs to convert Chinese currency into foreign currency to facilitate the purchase or
transaction of those products. This is where the role of the spot market comes into focus. Furthermore,
the company can also use the spot market to convert the excess earnings that are to be remitted to the
parent company in the US. The excess earnings from stores in China are in Chinese currency (Yuan)
which can be converted into US dollars through the spot market.
b.     Walmart Inc. is likely to establish other stores in Asia in the future. For this purpose, the company will
be required to preserve different currencies in the international market to facilitate the operation and
growth of the stores in the foreign market. While it needs to maintain deposits in the international market,
it also can borrow funds from the same market when it requires funds. In this way, Walmart can utilize the
international money market while establishing other stores in Asia.
c.     In the international bond market, the bonds issued are not domestic to the investors. It means that
the non-domestic borrower issues bonds in the country using that country’s currency.  For instance, a U.S
corporation may issue foreign bonds denominated in Indian Currency and are sold to Indian investors.
One of the major reasons for issuing bonds denominated in foreign currency is to benefit from lower
borrowing costs (Tawatnuntachai & Yaman, 2008). Also, it helps MNCs to match the cash inflows and
outflows from their foreign subsidiaries with the respective foreign currencies. Using the international
finance market, Walmart could use this as an opportunity to issue bonds in the foreign market to generate
funds that will be required to establish the new stores. In other words, Walmart can use the international
bond market as an effective way for raising capital. The bonds can be denominated in the required
currency. In the future, when the stores will be established, they will start generating cash flows. The cash
flows may be further used to pay the interest on the bonds.
References
Madura, J. (2016). International Financial Management, 13th Edition. Boston, USA: Cengage Learning.
Ozun, A., & Erbaykal, E. (2009). Detecting risk transmission from futures to spot markets without data
stationarity: Evidence from Turkey's markets. The Journal of Risk Finance; London, 10(4), 365-376.
Tawatnuntachai, O., & Yaman, D. (2008). Why do firms issue global bonds? Managerial Finance;
Patrington, 34(1), 23-40.