Impact of Cultural Distance on Cross-Border Acquisitions
Added on 2020-02-05
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INTRODUCTION OF INTERNATIONAL BUSINESS1
TABLE OF CONTENTSTable of Contents.................................................................................................................................2Introduction..........................................................................................................................................31. Evaluation of particular aspects of the Country’s political structure and processes thatshould be taken into account while assessing the political risk...................................................3Assignment 2: Reflection Individual....................................................................................................8Conclusion..........................................................................................................................................10REFERENCE.....................................................................................................................................112
INTRODUCTIONInternational business is the combination of all the commercial transaction that takes placebetween more than two countries or nations beyond the limit of the political barriers of both thecountries. It is the transaction of manufactured products that are specially performed by themultinational companies (MNCs) present in both the countries. The companies have gainedmomentum in their business when they passed their borders because they come across withvarious 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 andearning huge profit. Moreover,the companies deal with a large number of the population whenthey sell their products in the global markets. Here, Fashion Era Pvt Ltd is considered as afashion retailer industry that wants to expand their business to the developing countries of theworld.1. Evaluation of particular aspects of the Country’s political structure and processes that should be taken into account while assessing the political riskThe political condition of India is very corrupted that has a severe effect on the business andeconomic growth of the country (Cumming & Zahra, 2016). Increased corruption has affectedthe economy of the country so Fashion Era Pvt Ltd can face numerous political issues beforemoving to India. This has caused the vivid loss in the tax revenue of the country that resulted incausing the social imbalance in the country. India is an agricultural country and a large numberof barren lands are present in India. The company can take the risk of investing their funds inthose lands but they must know that the political leaders of the country would not allow them tobuild their industry using those barren lands (Cano-Kollmann et al. 2016). A large number ofagricultural lands are present in India but agriculture can bring development in India. India needsto have the strong industrial background for being called as "developed country". The politicalenvironment is worse in India and the political leaders do not permit industries of other countriesto expand their business in India. Moreover, the foreign companies are charged huge taxes andthe 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 theirmovement in India.3
Extensive corruption in India has drastically affected the efficiency of the Indian economy and sothe 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 businesscontracts in India. For example, WalMart is an MNC that wanted to start their business in Indiaby tying up with Bharti. The company had to continue a fight with the political leaders of thecountry for nearly two years to make their business strategy to come true. WalMart finallyentered India but the parties mentioned it to be a ‘backdoor entry’ in India that means the foreigninvestment can never be accepted in India. The political parties of India not only obstructs theMNCs 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 ForeignDirect Investment (FDI) in business in India. The corruption has even affected the tax revenuesof the country as a result; Indian government had to face a problem regarding the budget of thecountry. A Large section of people is affected by the budget problem of the country and povertyremoval effort of the country has been immensely degraded (Gupta & Mukhopadhyay, 2016).India has the favourable condition for industry construction and industry can easily flourish inIndia. Corruption in Indian political system is bringing downfall for India and the industriescannot spread their business in India. Fashion retail industry has a perfect scenario for theirgrowth in India and people of India always accept the new style of attire. The company, FashionEra Pvt Ltd has the huge scope of success in India because people of India are very styleconscious and they accept a variety of styles. The company needs to analyse about their politicalrisk 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 inIndia are still poverty-stricken and the places are not connected to the main cities by roadsproperly (Sarkar & Sarkar, 2016). Electricity problem is a big issue that the company needs tolook after before investing in any land in India. Moreover, the local political leaders do not allowany foreign investment in their area and they motivate the people of that area to not to allow thecompany to construct buildings in that area. A large section of people in India is still illiterateand follows whatever their leaders instruct them to do (Kim, & Lui, 2015). They do not analysewhat consequences can occur if any foreign company invests in India and how it will bring4
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