Economics: Analysis of Cross-Border Mergers and Acquisitions and Comparison of Indian and Chinese Economies

This paper analyzes the factors that determine the effectiveness of cross-border mergers and acquisitions by firms. It also compares and contrasts the economies of India and China based on various factors such as foreign direct investment, trade, health, and education status.

Economics 1
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Economics 2
Q3
Mergers and acquisitions (MAs)
Mergers and acquisitions (MAs) have remained time remained a popular strategy for
firms and signified a vital alternative for strategic expansion. Globalisation and technological
development have vastly added to the popularity of MAs and cross-border MAs. In 1990 (the
alleged fifth merger wave), the prevalence of this stratagem increased enormously. Acquisitions
completed in 1997 alone were priced at more than all acquisitions for the period of the 1980s
(Bebenroth 2015, pg. 67). The worldwide MAs activity in 1998 equalled over US$2.1 trillion in
terms of the stock worth of the transactions publicised (Soofi and Zhang 2018, pg.91). Besides,
the total value of deals finalized between 1998 and 2000 was approximately US$4.3 trillion,
which is over the total amount of all transactions done during the previous 30 years (Bertrand et
al. 2016 pg. 103). And, whereas the general MA market follows a cyclical nature, and has cooled
since the prime of the late 1990s, the entire number of global MAs has been growing recently at
a fast rate. While there is extensive research in the field, it is inopportunely disjointed, leaving
gaps that must be addressed. Herein, we analyze the factors that determine the effectiveness of
cross border MAs by firms.
The effectiveness of cross border MAs is influenced by many aspects. In this paper, five
elements that ought to be given a great emphasis by firms when introducing and executing cross-
border MAs. These consist of good management, business policies, taxation, cultural integration,
general business environments in the country. These factors are each discussed comprehensively
in the next section.

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Good Management
Just like every business activity, cross border MAs necessitate that they are completed with
apposite methods of management in each and every feature of the concerned business. Some of
the crucial leadership and management aspects that necessitate eagerness in their treatment
comprise product development and integration, market analysis and human resource aspects.
According to Lin, Officer and Shen (2013, pg. 67), good administration should comprise the
features of human resource. Cross-Border MA mainly relies on human capital if continuous
success is to be achieved. Human capital facets directly give an idea of workers who are in
employment by the concerned entities. There is each time the matter of job safety that emerges
when cross border MAs arise. Frequently, workers develop the perception that they ought to
have their involvement in the companies that are merging, however candid or idealistic they may
be. Such workers perceptions usually hurt their productivity, and failure gets directly connected
to human capital management.
Product integration and development is another topic of concern when dealing with the
matter of good governance in cross-border MAs. Rationally, the engaged business in a cross-
border MAs activity has the exceptional merchandises that they produce or supply (Johanson and
Vahlne 2017, pg.13). When these kind of companies merge, they successfully develop into a
single business, and in such an instance, the products ought to be integrated in a manner that
reflects cross-border MA exercise was completed. Developing a product and integrating it is one
of the most thought-provoking responsibilities in cross border MAs. Thus, it demands for highest
eagerness when trying to rationalize all the thorny issues that are regularly experienced during
the product development process. Eventually, it is only through good governance that a
sustainable product integration and development can be reached in cross-border MAs.

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Cultural Integration
Culture integration has always been a very complex topic in cross-border MAs.
Committing to cross border MAs activity without completely integrating these conflicting views
on organization culture is a big blunder of dire ramifications that any involved company would
make (Johanson and Vahlne 2017, pg. 101). Any business at all times has its philosophy from
which all its objectives and strategic decisions emanates from. As a result, it might be quite an
overwhelming undertaking attempting to have the cross border companies to pull out their values
owing to the fact that nearly everything in relation to administration will remain undamaged
notwithstanding the MAs exercise. The crew set for cultural integration exercise in cross border
Mas is expected to ensure that new organization culture that is to be developed is inclusive of all
the characteristics as earlier held by the practices of the concerned companies businesses
(Bertrand 2016, pg. 56). This is undoubtedly a tough assignment, however the concerned
businesses are required to do everything in their control to warrant that single but operative
organizational culture is embraced. This consequently helps the new business to achieve its goals
in keeping with terms and conditions of the mergers or acquisitions.
Business Strategies
Every state has its business strategies. These rules many times reveal how any entity
should operate while in a particular area. According to Degbey and Ellis (2016, pg.34), systems
determine how productive or unproductive business grow into in the markets of such countries.
As soon as a firm amalgamates with another, there is a higher likelihood that marketplace rivalry
for supply of a particular product to the consumers eventually stops to exist. With no rivalry in
the marketplace, the new firms mutates to a monopoly type of business and this drastically

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affects the power of the consumers to shop from a wide range of businesses. This is often
supposed to be an unfair business habit such that many countries have ended up coming up with
policies to regulate cross-border MAs aimed at upsetting monopolies. Thus, when initiating any
form of a cross-border MAs, it is very critical that the rules that regulate the operations of foreign
business operations are not flouted in any way lest the business will end up geting illegalized in
the nation where it is to be established.
Taxation
Taxation is also one of the most thought-provoking matters in the practice of business.
The taxation dares are magnified in cross-border MAs. In most instances, the acquiring firm, is
that it functions in a foreign land is necessitated to pay higher tax rates than its competitors in
business that are categorized as local businesses (Soofi and Zhang 2018, pg. 98). The uneven tax
rates between the foreign-owned companies and the locally owned companies in cross border
MAs in many instances work against the desires of the acquiring firm. As there develops a
partial playground in regards to tax fee to the authorities of the country where the business is to
take place, achieving sustainable profitability always turn out to be elusive. Thus, it becomes a
vital obligation that the taxation feature of the business is considered before venturing into cross-
border MAs.
Conclusion
Cross-border MAs are multifaceted business functions that necessitate good management,
ethical behavior and planning prior to setting them up. Failure to effusively undertake these three
activities would eventually leads to failure and such disappointments at all times cause massive
losses of money. Every single phase that is undertaken when in the mission to achieve a fruitful

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cross-border MAs business must thus be identified and examined and then a verdict on whether
to take it or not be made. Nonetheless, it is worth stressing that the above-discussed features only
form the foundation of what ought to be considered before finalizing on any cross-border Mas
exercise. Realistically, each cross border MAs activity tends to differ from the other and thus the
requirement to guarantee that every single exercise is examined in line with its exceptional
specifications and demands. In conclusion, it very important that any concern that is raised by
the team that is tasked with spearheading a successful cross border MAs transaction is given the
due emphasis and attention it deserves.
Q4
India vs. China Analysis of Economies
China and India are thriving. Superficially it is effortless to get fascinated. The two economies
are the two most populous countries. Whereas China accounts for about 20.4 percent of the
world’s population, India accounts for 17.0 percent. Besides, the two are still in evolving states
with per capita earnings of only $1,741 and $720 (Grupe and Rose 2010, pg 11), and already
categorized as the fourth and eleventh principal markets globally at nominal exchange rates.
Nonetheless, regarding of purchasing power parity (PPP), they by this time have been at one
time the second and fourth-biggest markets. The current paper aims to compare and contrast the
economies of two countries. Significant comparison factors are economies, business dimensions,
foreign direct investment, trade, and health and education status.
Indian Economy vs. Chinese Economy

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Regarding economic analysis, the China’s economy has experienced massive industrialization
during the last 25 years. Manufacturing’s share has increased to 46 percent, one of the uppermost
fractions in the world, whereas agriculture’s percentage of GDP has tumbled to 13 percent. The
Indian economy, on the other hand, has not experienced such radical structural change.
Industry’s fraction of GDP is just 27% whereas agriculture’s share has stagnated at 21 percent.
The portion of the manufacturing industry has not undergone any change in the last 20 years.
Nonetheless, there has been a substantial development of the service sector. These consist of
offshore services along with the creation of many consulting and banking service tasks in India,
plus many owned by leading multinational firms like IBM, General Electric, technology firms
and other investment banks.
Indian vs. Chinese Foreign Direct Investment (FDI)
The influxes of FDI into China have been quite a lot to those into India owing to some factors.
First, China exposed its regulatory regime towards FDIs much earlier and broader than India.
Second, the bigger and wealthier market of China has been a central attraction aspect. Third,
China has several cost benefits to India albeit its labor outlays are now commonly greater than
India’s that include more developed service infrastructures, efficient transportation, and less
burdensome regulations for businesses in products (Shah 2015, pg. 144). Accordingly, China of
late has been very outstanding not just as the fastest developing market in the world, but also as a
manufacturing avenue for international trade. This robust appeal of manufacturing in China has
also allowed the government to inspire competitiveness among international corporations to
bring their very superior technology when they localize in China, despite the fact they are very
conscious of poor intellectual property safety and the peril that own technology could become
pirated.

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Indian vs. Chinese Trade
In terms of trade, China has been supposed to beat USA as the global leader in product exports
(Shah 2015, pg 213). The exports of India have also been increasing rapidly lately. However,
India is still a fairly minor player in the international export market. One of the constrictions on
India’s exports is poor infrastructure such as electrical energy, railways roads and ports. Another
is the extreme red tape and bureaucracy that drastically affect exports and imports. Nonetheless,
Indian legislators towards solving some of these restrictions to catapult growth in India’s exports.
Indian vs. Chinese Development Strategies
Another main difference in the two economies is the development policies these two giants have
undertaken. Specifically, means, timing, and extent which these two countries have acquired
global knowledge are very different and explains the reason for their different growth paths and
performance. As an extensive characterization, China has been gaining very much after
integrating globalization. On the other hand, India has been much circumspect and autarkic. It
opened up much more slowly and much later, and today is yet to be effectively integrated.
Indian vs. Chinese Health
Government spending on health care in China is over five times that in India. Liping (2008, pg.
45) classified china’s economy in the High Human Development category whereas India’s
economy is in the Medium Human Development category. China ranks 88 while India’s ranking
is 130. The worth of Human HDI of China (0.737) is more than India (0.634). The life

Economics 9
expectancy at birth in India is projected for 68 while it is 77 years for China. The infant mortality
rate in China is just 10.9 compared to 42.4 per thousand in India, the mortality rate for kids under
the age of 5 years 28 for the Chinese and 181 per thousand for Indians; and the maternal rate is
28 in China in 2014 and 181 per 100,000 live births in India. In spite of remarkable attainments
in different areas, immense human abilities remain unused in India while China has strong
human capital and happier educated society.
Similarities
Irrespective of many differences in their economies, China and India at least share some standard
features. First, the two giants are amongst the world’s earliest civilizations, dating back 3-4
millennia. For many years the first millennium AD, China and India contributed to a quarter and
a third of entire international trade. Over the past 200 ages of the first millennium and for most
of the second millennium they lost fame with the rise of Western Europe and Japan. This defeat
of some economic scope was predominantly rapid during the last 251 years, an era of fast
economic development in the USA, Japan and Western Europe. The main explanation for this
was not that their economies decline, but that they unexploited the Industrial Revolution.
Therefore, they did not profit from the fast growth that came to the nations that initiated and
rapidly embraced industrial production technology.
Another similarity between the two economies is that the overall quality of tertiary students in
both countries is still meager. All the same, the graduates of the best colleges are very talented
and are one of the key reasons why there is a considerable foreign investment in Research and
Development facilities by the United States for companies in China and India. Besides, the
significant number of Indian ex-students who are fluent in English has been one of the key

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reasons for India’s fame as the source of off-shored services that can be provided over the
Internet.
Both India and China profit from cultural values favorable to economic expansion as, such as
appreciation of education and work. Both countries lack social capital. In India, this is as a result
of the old caste philosophy and a pluralist society. This issue is not readily open to policy
measures. Even though the government attempts to encourage contracts between all community
groups and access to institutions and jobs for the so-called reserved castes, success rests low.
Contrary, violent battles between diverse social groups and religious appear repeatedly. This
worsens the growth of an ordinary economic orientation.
Finally, another unique similarity for the two countries is that they both face considerable
internal challenges. Both have to challenge increasing personal income and regional inequality
and environmental limitations. Other confronts for China are poor the tension between a one-
party state and financial systems and the evolution to an independent market economy with a
more educated population. Additional confronts for India are the exertion of creating a consensus
for critical reorganizations in a very diverse community still restricted by the estate of the caste
system, higher levels of illiteracy (53 percent among women), and limitations on the growth of
the higher education systems.
Conclusion
It is clear from the above discussion that China has demonstrated that its success anchored on its
investment in education and health, equal and equitable distribution of wealth and gender
equality. Conversely India’s low literacy levels and poor health results compared to China’s may
explain a big part of the difference in growth between the two states. The fact that in India,

Economics 11
people approachable and sound health policy and higher quality education could make a big
difference, not only to the public’s lives but also on the economic development of the country.
However, for India to outshine or match China, it must integrate a well-educated and healthier
labor force at all ranks of society.

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References List
Bebenroth, R., 2015. International Business Mergers and Acquisitions in Japan. Springer.
Bertrand, O., Betschinger, M.A., Bertschy, N. and Shidlauskas, R., 2016. On the Role of the
Political Regime in the Choice between International Acquisitions and Joint Ventures
when Entering an Emerging Market: Evidence from Russia. In Advances in Mergers and
Acquisitions (pp. 37-52). Emerald Group Publishing Limited.
Degbey, W.Y. and Ellis, K.M., 2017. Africa: An Emerging Context for Value Creation with
Cross-Border Mergers and Acquisitions. In Value Creation in International
Business (pp. 163-195). Palgrave Macmillan, Cham.
Grupe, C. and Rose, A., 2010. China, India, and the socioeconomic determinants of their
competitiveness. Economics Research International, 2010.
Johanson, J. and Vahlne, J.E., 1977. The internationalization process of the firm—a model of
knowledge development and increasing foreign market commitments. Journal of
international business studies, 8(1), pp.23-32.
Lin, C., Officer, M.S. and Shen, B., 2014. Currency appreciation shocks and shareholder wealth
creation in cross-border mergers and acquisitions.
Liping, X., 2008, February. Emerging Powers in East Asia: China, Russia, India. In Security
Handbook 2008. Emerging Powers in East Asia: China, Russia and India (pp. 57-158).
Nomos Verlagsgesellschaft mbH & Co. KG.
Shah, S.K., 2015. India and China: The battle between soft and hard power. Vij Books India Pvt
Ltd.

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Soofi, A.S. and Zhang, Y., 2018. Global Mergers and Acquisitions, Volume I: Combining
Companies Across Borders. Business Expert Press..