International Business Report: Assessing India's Business Suitability

This report provides a detailed analysis of India's suitability for international business expansion. It examines the legal environment, including the legal system, courts, investment policies, and contract laws. The report identifies key legal issues such as international relations, dispute settlement, human rights, child labor, gender inequality, bribery, corruption, and terrorism threats. It also assesses various legal risks, including socio-environmental risks, regulatory risks, employee-related risks, and consumer market risks. Furthermore, the report explores the monetary environment, including exchange rate systems, currency convertibility, and currency risks, alongside government reform measures such as trade policies, fiscal reforms, and capital market reforms. The conclusion emphasizes the growth potential for multinational organizations in India while stressing the importance of understanding and mitigating risks through detailed analysis and strategic planning.

Running head: INTERNATIONAL BUSINESS
International Business
Name of the student
Name of the University
Author Note

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Table of Contents
Introduction......................................................................................................................................2
Research of the country for doing business abroad.........................................................................2
Legal Environment......................................................................................................................2
Legal issues in International Business.........................................................................................3
Legal Risks..................................................................................................................................4
Reform measures by the Government.........................................................................................6
Conclusion.......................................................................................................................................7
Reference.........................................................................................................................................8

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Introduction
The business report is discussing about the suitability of a country around the globe in
respect of international expansion. In this regard, the country that has been taken into
consideration is India. For researching the country to conduct business abroad, the different
attributes that are taken into consideration are the legal environment, legal issues relating to
international business, legal risks as well as reform measures by the Government.
Research of the country for doing business abroad
Legal Environment
 Legal System – The legal system present in India is bearing an infrastructure that is
influenced by the colonial rule of the British. The Constitution is depending upon the
Government of India Act 1935, which was passed by the British Parliament (Sinkovics
2014).
 Courts – There is the existence of a unified judiciary, even though the country is having
a quasi-federal structural aspect. India also follows the system of common law and there
is separation of power between the judiciary, executive and the legislature. The decisions
which are taken by the Supreme Court are binding the High courts and the other
subordinates court in the country.
 Investment and Trade – The new industrial policy of India is generally associated with
a de-licensing industry and doing the introduction of reforms that are concerned with
fiscal as well as regulatory aspects. This is providing a vast encouragement in respect of
foreign investment (Penrose, 2013).

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 Contract - A contract can be regarded as a binding agreement between the two parties to
refrain from doing something. There are domestic contracts for the sale of goods and
services and agreement between the two parties which accepts the offer. The contract law
varies from country to country. Contracts are complex and some contracts risks may be
due to loss of intellectual property, revenue leakage and cost overturns and loss of
bargaining power. The parties who are in contract must have the legal capacity to enter
into general contract. There must also be genuine intent to enter into different agreements
from the parties.
 Government Policy - There can occur the classification of the policies of the
government in respect of FDI, which can be classified under three segments. Firstly,
sectors where it is prohibited. Secondly, sectors where it is being subjected to a cap such
as regarding telecommunications where FDI upto 49% has been permitted. Thirdly, there
exists the residuary segment in which there isn’t the requirement for having any
permission from the Government’s end (Sinkovics, 2014).
 Foreign investment Promotion Board (FIPB) – Foreign Investment Promotion Board
(FIPB) is the proficient body for taking into consideration as well as making
recommendation regarding foreign direct investment (FDI) that is not falling under the
route that is considered being automatic in nature (Penrose, 2013). India also do not have
full provision of capital account convertibility. The non-residents who are investing a
considerable sum of money to comply with the foreign exchange regulation in the
country are governing foreign direct investment.
 Foreign Portfolio Investments – There might occur the investment of only Foreign
Institutional Investors having registration with the Securities & Exchange Board of India

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or Non-resident Indians for making investment in shares via the stock exchange
(Picciotto, 2016).
Legal issues in International Business
 International Relations – India has formal diplomatic relation with most countries in the
world. However, the country is having a bitter relation with the neighboring country,
Pakistan, which led to at least three wars between the two countries from the time they
got independence. India also plays an important role in certain international organizations
such as IMF, G8-5, WTO and East Asia Summit.
 Dispute Settlement- Dispute Settlement is an important legal issue. The companies in
other countries do not want to establish any business in India. Moreover, India is also not
willing to outsource its services with China and Pakistan due to certain legal issues which
are filed against these countries.
 Human Rights – A major conflicting area in India is associated with businesses as well
as human rights. Land acquisition by organizations as well as state governments in
respect of mining as well as infrastructure projects has been a controversial concern
regarding various states, which sparks recurrent protests by indigenous groups as well as
civil society players (Wild, 2014).
 Child labor – There have been the publication of reports regarding the utilization of
child labor, especially within the textile industry. Lack of social security and poverty are
the main vital cause of child labor in India. Lack of quality education is the main reason
for children dropout from the school. Moreover, children who are willing to work as
domestic labors in India are also increasing (Wild, 2014).

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 Gender – Gender is an important and critical development issue in India. There is still
the pervasiveness of inequality, discrimination as well as domestic violence, especially
within the poorest states of India. The political participation is identified as an important
factor in removing gender inequality in the country. (Meyer, 2016).
 Bribery and corruption – Bribery and corruption are regarded as a major obstacle for
the socio-economic development of the country. This distorts the international and
national economic disorders. There is the well entrenchment of corruption within India
as well as pervading various scenarios of everyday life. (Verbeke, 2013).
 Threat of terrorism – There occurs the posing of threat from various domestic as well as
global group of terrorists in India, which is considered being significant. India has been
threatened by many terrorist activities and the Government along with the effective help
by the military forces to trying to combat against these attacks. (Verbeke, 2013).
Legal Risks
 Socio-environmental Risks – India is conventionally a male dominated society where
women hold an inferior place. The negative insights in respect of women are carried to
the workplace as well. Companies are facing the challenge of maintaining diversity as
well as equality. There is the prevailing of a corruption mindset at every societal level.
Indian public psychology does the rationalizing of earning money via unethical ways. As
a result, establishments are having an increased threat of white-collar crime as well as
damage of reputation (Meyer, 2016).
 Regulatory Risks – Another risk associated with the process of conducting business in
India is having the involvement of regulations that are changing or are considered being
unpredictable. Unknowable portions of the law can be scoured up by the authorities of

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the State or Federal bodies for challenging a domestic or global organization
unexpectedly. Although, this occurs rarely but can do the formations of a major delay
(Penrose, 2013).
 Employee Risks – Multinationals making an entry to India does the assumption that
India is having a huge workforce. But, majority of the population in India is residing in
rural areas and there exists high rates of illiteracy. Therefore, the English-speaking
workforce that can be considered being employable is less than the quarter of the urban
population. The Indian staffs are having the requirement of an increased level of
assessment as well as time of management (Enderwick, 2013). For countering these risks,
the senior management is required investing in tools relating to business intelligence for
getting accurate data as well as not basing their decisions upon insights, particularly when
global reporting is being undertaken.
 Consumer Market Risks – In India, there occurs a change in the requirements of the
customers by each State as well as within the State. Because of the distinguishing factors
related to religion, language, culture, weather as well as infrastructure, there occurs a
change in the demand of the customers nearly every 100 kilometers. Therefore, although
on the surface the size of the market is considered huge in respect of the country, there is
the requirement for localizing the products in accord with the tastes of the customers
(Cavusgil, 2014). This is stating that, multinationals are having the requirement for
making an entry into a number of niche markets and might not be enjoying the large
economies of scale to sale a single product throughout the country.

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Monetary environment
 Exchange rate system
The exchange rate system plays a vital role for the firms who are trying to import the raw
materials and export the goods and services. The Indian firms will import the raw materials
and they will have to face higher cost of imports. These tries to reduce the competitiveness of
the exporting firms and thus this makes appreciation much easier (Shatz & Tarr, 2017)
 Currency Convertibility
The partial convertibility of rupee on the current account is adopted by India. These will
make imports cheaper. On the other hand full convertibility of rupees is considered risky because
there is deficit in the balance of payment in the current account. The partial convertibility of the
foreign exchange currency will make the value of rupee stable. India can export to other
countries easily and it will increase their profitability. It will also encourage import substitution
(Jain, 2015).
 Currency Risk
Strengthening the value of dollar is a major currency risk for India. The depreciation of
rupee will increase the cost of the unhedged proportion of debt against the volatility in
currency. The borrowing cost of the India corporate was lowered because the value of the
Indian rupee fell to a great extent. These risk will be high when there will be rise in the
global growth.

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Currency and Currency Manipulation
India is purchasing US dollars in exchange for the rupee to keep the domestic currency
from surging to the economically harmful level. This has been increasing the risk and the
economy will soon face the disastrous effect of the “currency manipulator” branding. It can be
seen that India came under the spotlight when there was increase in the scale and persistence of
busing other nation’s currency. The Reserve bank of India is trying to reduce the foreign
exchange purchases and thus this has made the capital inflow strong (Laffer,2014).
Reform measures by the Government
The Prime Minister of India did the enactment of a ‘cash ban’ for lessening the threat of
corruption as well as evasion of taxes.
 New Trade Policy- The trade policy of India has undergone many changes due to
liberalization. The trade policy was also made free from unnecessary control. Restrictions
on import and export ahs disappeared except a few items. Moreover, esay procedure of
export-import was started in the country (Malhotra, 2014).
 Fiscal Reforms- There were several reforms in the fiscal policy of India. Changes were
made in the Gross Domestic Product and Fiscal deficit. There were also further changes
in the tax system of the country.
 Capital Market reforms-The government has taken several initiatives for the capital
market reforms in the country. The limit of investment of the foreign companies and the
NRI’s was raised under Portfolio Investment Scheme. Moreover, in to control the capital
market, Securities and Exchange Board was also established in the country. The private
sector was also allowed to establish mutual funds in the country (Vashneya & Gupta,
2017).

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Conclusion
To conclude it can be stated that, India is providing a huge scope of growth for
multinational organizations. There is occurring an economical growth by 8-10%. Nevertheless,
for leveraging the opportunity in an effective manner, there is the requirement for the
management to have an understanding of the risk. While, doing the development of business
strategy, there is the requirement for developing a detailed risk analysis as well as mitigation
plan, without which the possibility of failure is exceptionally high.

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Reference
Cavusgil, S. T., Knight, G., Riesenberger, J. R., Rammal, H. G., & Rose, E. L.
(2014). International business. Pearson Australia.
Enderwick, P. (Ed.). (2013). Multinational Service Firms (RLE International Business).
Routledge.
Jain, S. (2015). Full Convertibility of the Indian Rupee: Exchange Rates and Feasibility.
Laffer, A. B. (2014). Currency manipulation and its distortion of free trade. The Laffer Center.
Malhotra, B. (2014). Foreign Direct Investment: Impact on Indian Economy. Global Journal of
Business Management and Information Technology, 4(1), 17-23.
Penrose, E. (2013). The Large International Firm (RLE International Business). Routledge.
Picciotto, S., & Mayne, R. (Eds.). (2016). Regulating international business: beyond
liberalization. Springer.
Shatz, H. J., & Tarr, D. G. (2017). Exchange rate overvaluation and trade protection: lessons
from experience. In Trade Policies for Development and Transition (pp. 115-
127).
Sinkovics, R. R., Yamin, M., Nadvi, K., & Zhang Zhang, Y. (2014). Rising powers from
emerging markets? The changing face of international business. 0969-
5931, 23(4), 675-679.

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Vashneya, U., & Gupta, S. (2017). Economic Reforms Concept and Strategy. Journal of
Management Science, Operations & Strategies (e ISSN 2456-9305), 1(1), 1-4.