Impact of Cultural Distance on Cross-Border Acquisitions

This assignment delves into the influence of cultural distance on the success of cross-border acquisitions. It examines the concept of cultural distance and its impact on various aspects of the acquisition process. The analysis focuses on the role of 'cultural experience reserve' as a mitigating factor in overcoming cultural barriers. The assignment likely requires students to research relevant theories, analyze case studies, and draw conclusions about best practices for managing cultural differences in cross-border acquisitions.

INTRODUCTION OF INTERNATIONAL BUSINESS
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TABLE OF CONTENTS
Table of Contents.................................................................................................................................2
Introduction..........................................................................................................................................3
1. Evaluation of particular aspects of the Country’s political structure and processes that
should be taken into account while assessing the political risk...................................................3
Assignment 2: Reflection Individual....................................................................................................8
Conclusion..........................................................................................................................................10
REFERENCE.....................................................................................................................................11
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INTRODUCTION
International business is the combination of all the commercial transaction that takes place
between more than two countries or nations beyond the limit of the political barriers of both the
countries. It is the transaction of manufactured products that are specially performed by the
multinational companies (MNCs) present in both the countries. The companies have gained
momentum in their business when they passed their borders because they come across with
various companies that have already set up a successful business in the international market.
That is why; expansion of business internationally is very important for gaining profit and
earning huge profit. Moreover,the companies deal with a large number of the population when
they sell their products in the global markets. Here, Fashion Era Pvt Ltd is considered as a
fashion retailer industry that wants to expand their business to the developing countries of the
world.
1. Evaluation of particular aspects of the Country’s political structure and processes that should
be taken into account while assessing the political risk
The political condition of India is very corrupted that has a severe effect on the business and
economic growth of the country (Cumming & Zahra, 2016). Increased corruption has affected
the economy of the country so Fashion Era Pvt Ltd can face numerous political issues before
moving to India. This has caused the vivid loss in the tax revenue of the country that resulted in
causing the social imbalance in the country. India is an agricultural country and a large number
of barren lands are present in India. The company can take the risk of investing their funds in
those lands but they must know that the political leaders of the country would not allow them to
build their industry using those barren lands (Cano-Kollmann et al. 2016). A large number of
agricultural lands are present in India but agriculture can bring development in India. India needs
to have the strong industrial background for being called as "developed country". The political
environment is worse in India and the political leaders do not permit industries of other countries
to expand their business in India. Moreover, the foreign companies are charged huge taxes and
the companies had to face many political issues while constructing their industry in India.
Fashion Era Pvt Ltd should have to be prepared to undergo these political risks before their
movement in India.
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Extensive corruption in India has drastically affected the efficiency of the Indian economy and so
the competition is reduced among the industries within the country (Van Hoorn & Maseland,
2016). Business entrepreneurs face a great issue in starting a business and enforcing business
contracts in India. For example, WalMart is an MNC that wanted to start their business in India
by tying up with Bharti. The company had to continue a fight with the political leaders of the
country for nearly two years to make their business strategy to come true. WalMart finally
entered India but the parties mentioned it to be a ‘backdoor entry’ in India that means the foreign
investment can never be accepted in India. The political parties of India not only obstructs the
MNCs to enter India but also opposed strongly to the privatisation of the public sector of India
(Srinivas, 2013).
Corruption in India has uplifted the costs, related to business sectors thus affecting the Foreign
Direct Investment (FDI) in business in India. The corruption has even affected the tax revenues
of the country as a result; Indian government had to face a problem regarding the budget of the
country. A Large section of people is affected by the budget problem of the country and poverty
removal effort of the country has been immensely degraded (Gupta & Mukhopadhyay, 2016).
India has the favourable condition for industry construction and industry can easily flourish in
India. Corruption in Indian political system is bringing downfall for India and the industries
cannot spread their business in India. Fashion retail industry has a perfect scenario for their
growth in India and people of India always accept the new style of attire. The company, Fashion
Era Pvt Ltd has the huge scope of success in India because people of India are very style
conscious and they accept a variety of styles. The company needs to analyse about their political
risk factors that can cause a barrier in their way of success (Anderson, & Yotov ,2016).
The company needs to choose a perfect place for starting their business because many places in
India are still poverty-stricken and the places are not connected to the main cities by roads
properly (Sarkar & Sarkar, 2016). Electricity problem is a big issue that the company needs to
look after before investing in any land in India. Moreover, the local political leaders do not allow
any foreign investment in their area and they motivate the people of that area to not to allow the
company to construct buildings in that area. A large section of people in India is still illiterate
and follows whatever their leaders instruct them to do (Kim, & Lui, 2015). They do not analyse
what consequences can occur if any foreign company invests in India and how it will bring
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economic growth for the country. Fashion Era Pvt Ltd has to face these problems also before
constructing the building and they should with communicate with the people of their chosen
area.
India is not politically and economically stable, which is a very crucial fact that needs to be
understood by the people (Siddiqui, 2016). That is why; the company should interact with the
people so that the political risk lowers a little for the Fashion Era Pvt Ltd. The political instability
of India affects the business profit margin and operations of the employees. Corruption adds a
more problematic and risky situation for the fashion retail company. The company needs to
assess very carefully and minutely before investing in the developing country (Kim, Mansfield &
Milner, 2016).
The growth of the bilateral trade and the regional integrationare the most important factors for
Fashion Era Pvt Ltd. The agreement for the regional integration is very much applicable when a
business organisation is trying to shift their business to the other countries. In the case of Fashion
Era Pvt Ltd, the bilateral trade is the most applicable as it helps this company to flourish their
business in the developing country effectively (Gómez-Herrera, 2013). Bilateral trade means the
Business deals between the two countries. In the bilateral trade, the government takes the active
part in the business. According to the business rules of the Indian Government, the business
organisation cannot use any hard cash for the business transaction. Apart from this, the bilateral
trade is very important for the business organisation as it helps the business organisation to deal
with the big order business with the cheaper amount. The bilateral agreement various factors
such as trade security, producing innovative products, maintaining the professional standard and
the sustainability (Anderson & Yotov, 2016). According to the other people, the bilateral
agreement reminds the business organisation of the imitation of the other products and also helps
them to avoid the illegal business activities as it may hamper on their future business transaction.
In the bilateral business, the organisation can easily negotiate with the amount whereas in the
other business agreement they cannot negotiate.
The political landscape of India is very different from others and the Indian Government controls
all the rules, regulations of India. The political structure of India includes many parliamentary
bodies like the state government and the central government. Each the state and central
parliamentary bodies have different power, different sectors. In the political scenario of Indian
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Government, all types of amendments, business deals, monetary budget passed by the State
Government. As India is a democratic country, therefore, all the activities of India is controlled
by a large number of politicians. However, India is considered as the federal country, but all the
powers are at the hand of politicians (Cumming & Zahra, 2016).
The politicians of India are elected by the people and take an active part in parliamentary
activities. The corruption, self-cantered mentality of the politicians effects all the activities of
India. On the other hand, the poor political structure, the corruption in Indian politics hampers
the Social growth, political growth, environmental growth of India. Besides the economic field,
the business activities of India also have been effected by the activities of Indian politicians
(Anderson, & Yotov , 2016).
According to Cano-Kollmann et al. (2016) the business activities of India are mostly effected
due to the inter conflict of Indian politicians. In the 21st century, the current political scenario of
India controls directly on the business activities, specially takes active part in the international
business. Intra Conflict between the different political powers also effect on the business
economy and also hampers the society. Due to the corrupted mentality, greed for the more power
sometimes, the politicians influences the laws, regulation, business economies of India and
makes, passes the laws, business guid3elineas as per their needs.. These kinds of activities make
a bad impact on the business activities of India and on the foreign investments. For international
business transaction a strong economic potentiality, a strong political structure are needed, but
when the International marketers comes to India for business purpose the major issues that
hinders them are poor economy and the complex, corrupted political structures of India. It has
been seen when the international business companies comes to India, them for the business deals,
they have make business deals and the business deal contains many prohibitions related to Indian
business law. The other problem is the exchange rate that business organisations are facing at
current situation. The exchange rate in India is too low to make a successful international
business transaction. Sometimes, it has been seen that the international marketers have to spent a
huge amount to avoid the exchange issue and this reason makes the international marketers
irritated, dissatisfied. This kind of activity makes a negative impact on the mind of the global
business organisations and for these reasons, sometimes. The international business organisations
refuse to make business deals with India. Apart from this, the other major issue that the business
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organisations have to face in India is the complex investment process. In the case of large
amount of deals, foreign investment, the business organisations need to follow many
prohibitions, hindrance due to the complex of Indian politics. According to Kim, Mansfield &
Milner, (2016) it has been seen that the fast decision of the Indian government effect on the
global business. For the example, sometimes Government makes very fast decision and as per
the decision, Government ban many products, many law, changes many business rules. The
international business suffers the most for this kind of fast decision as they have to perform their
business activities based on the rules of Indian Government. If the business organisations can
follow all Indian business organisations successfully, they can run their business effectively in
India and also can earn huge profit from their business (Kim, Mansfield & Milner, 2016).
As per the opinion of Siddiqui, (2016).), it has been observed that Indian Government
sometimes makes sudden decision, changes many business suddenly without any pre declaration
and ban some Indian currency that also effect the business growth of India and the foreign
investment and the activities of international business practises. The sudden change in economy,
business rules hampers the business planning as the business organisations cannot promote their
business by following the previous business rules and they have to change all their business plan.
The sudden changes also hamper the financial budget, capital funding of the business
organisations. Especially it becomes difficult for the international business organisations to
change their all their business planning, financial plan from the beginning. In order to run the
business successfully in India and to make huge profit, the business organisations needs to
follow all the sudden changes. According to(Anderson, & Yotov ,(2016) sometimes, sudden
changes are needed to control all the political corruptions and this also helps the government to
find out the risk factors related to their Indian economy.
On the contrary, according to Baier, Bergstrand & Feng, (2014) the sudden changes hampers the
business flow and makes bad effect on the Indian economy. The fast changes also hamper the
business scenario of the India and the rapid changes in politics create huge confusion in the
mind of people, business person and they feel helpless, confused. On the contrary, as per the
opinion of Cumming & Zahra, (2016) rapid changes in economy, political scenario sometimes,
helps government to decline of corruption and to identify the loopholes in Indian laws, politics.
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Indian Government needs to identify the risk factors at first in order to mitigate the various
apolitical issues effectively.
Indian Government needs to find out the source of corruption in order to solve the economic
issues that the Indian business marketers, internationals have to face in India. The government
needs to improve their political structures and also need to look at the fact that the politicians do
not make themselves involved in any kind of illegal activities. Apart from this, the government
also need to improve their economic by following the international economic guidelines that the
Indian business organisations do not have face any obligations while they are going to make
business bond with the foreign business markets as the poor economic structures hampers the
business profit. In order to increase the number of foreign investment, Indian Government needs
to take such a decision that the International business organisations run their business in India
successfully without any political barriers(Kim, Mansfield & Milner, 2016).
Apart from this, Indian Government needs to change their punishment procedures and needs to
make such a rules that illegal business practices, nay political figures thinks twice before forcing
others in illegal manner and involving in any kind of legal crime. In the case of breaking the
rules, the Government needs to take harsh step.
ASSIGNMENT 2: REFLECTION INDIVIDUAL
After analysing the various factors, The Fashion Era Pvt Ltd gets an overview of the Indian
business structures. The respected organisation can understand the total political structures of the
India (Pearson, Borner and Murray, 2016). From the political structures of India, the
management of this company understand that the corruption in the political structures hampers
the growth of the society. The corrupt political structures increase the number of illegal activities
of India and just because of this reason; India fails to develop their business market in the
international, as the Indian business does not have enough potential business structures to
compete in the international market. This study also helps the Fashion Era Pvt Ltd to understand
the cultural values of India and also helps them to plan their business strategy in such a manner
that their business activities would not effect on the cultural values of India as the cultural
beliefs, values care very sensitively issue in India (Stam and et.al., 2014). From this module, the
respected company can also understand the necessity of a business agreement, the regional
integration agreement for their business and the way it helps them to extend their business in
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India. This company understands the fact that international business agreement helps them make
a business bond with India and they can have the help of Indian Government. The help of
Government helps this company to control all the political barriers in India. Over viewing the
Indian political structures, the rested company can understand the basic fundamental features of
Indian business and it helps them to run their business in a sustainable way (Tsai and Lau 2013) .
From the above discussion, the Fashion Era Pvt Ltd Can understands the Indian political
structures of India clearly and they can understand what kind of activities they need to perform in
order to run their business successfully in India. The Fashion Era Pvt Ltd can also understand the
impact of political powers and can understand the fact that the corrupted, non-cooperative, self
cantered mentality of Indian politicians are the reason behind the low business growth of India.
Apart from this, the respected company can also learn how the complex political features can
influence the international business activities. On the other hand, the management of this
organisation can also know the fact that the illegal activities, complex nature of Indian politics
are another reason, for what the international business organisations show any intere4ast make
business collaboration with India (Vacca and Hoadley, 2016). From the above discussion, the
respected organisation can also understand the fact that the impact of fast decision and how the
business organisations have to suffer due to the rapid changes in the Indian business law. The
respected company can also understand what kind of procedures the business organisation needs
to follow in order to mitigate all the political barriers. This study also helps the respected
organisations to understand that what kind of steps Indian Government needs to take to control
the evil effect of politics. Over viewing, the sudden changes of Indian Government, Fashion Era
Pvt Ltd can understand the benefits and disadvantages of sudden changes in law and the way it
affects on the Indian Economy (Stam and et.al., 2014). This company can also know the fact that
the Indian Government can takes the harsh step to punish the illegal business practises.
Therefore, the respected organisation needs to follow all the business rules of India if they want
to run their business in India successfully. This company also needs to understand the total
political scenario to hold their market position in India. The management of this company also
need to look at the fact that they can have all the latest update about the various changes in
Indian business rules, Indian economy.
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CONCLUSION
After analysing the above study, it can be concluded that the respected company has to follow all
the basic features of business in order to promote their business successfully. The respected
company needs to use the bilateral agreement, regional integration agreement to extend their
business in India. From this study, the people can understand the structures of Indian Politics.
People can also know about the initiative effort of Indian Government in order to decline the
corruption India.
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