China's Influence on Walmart and Yum!

Paper Summary:

The paper explains that Yum's profits have risen in the past years due to the increasing popularity of the food and the pace of expansion in China whereas Wal-Mart has profited because of its reliance on Chinese goods to keep prices low. The paper predicts that if the yuan was made more valuable with regards to the dollar, Yum would see profits rise due to the increase in the value of their profits, while Wal-Mart would see profits sink due to the cost of the goods and purchases being more expensive. The paper therefore shows how the currency revaluation would impact Wal-Mart and Yum in totally opposite ways.

From the Paper:

"If you look around today you will see many of the products around you are produced in China. In 1994, China devalued it's currency from roughly 5 to 8 yuan to the dollar, fueling the country's explosive development (Hornblower, 2008). This coupled with a massive workforce of cheap labor has led to cheap manufacturing of a great number of goods. China has been able to make these goods cheaply due to the mass amount of labor that they have and the fact that they have undervalued their currency so that these goods remain attractively priced. This in turn has created a huge trading surplus for them and has done the opposite in the United States. This has effects on the companies who are based in America."

Sample of Sources Used:

• Hornblower, Sam. (2008). Wal-Mart and China-a Joint Venture. Retrieved on November 26, 2008 from http://www.pbs.org/wgbh/pages/frontline/shows/ walmart/secrets/wmchina.html.
• Insana, Ron. (2005). Yum Brands Build Dynasty in China. Retrieved on November 26, 2008 from http://www.usatoday.com/money/companies/management/2005-02-06-insana-exec_x.htm.
• Otte, Timothy M. (2008). Yum! Brands' China Syndrome. Retrieved on November 26, 2008 from http://www.fool.com/investing/general/2008/02/06/yum-brands-china-syndrome.aspx.
• Wal-Mart. (2008). Most (70%) of Wal-Mart's Products Are Produced in China. Retrieved on November 26, 2008 from http://www.organicconsumers.org/ corp/walmartchina113004.cfm.

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