A domestic company selects a foreign company and merger itself with foreign

A domestic company selects a foreign company and

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A domestic company selects a foreign company and merger itself with foreign company in order to enter international business. Alternatively the domestic company may purchase the foreign company and acquires it ownership and control. It provides immediate access to international manufacturing facilities and marketing network. ADVANTAGES Less time consuming and quick to executive Less risky as compared to greenfield Immediate grab of market share Reduce competition by taking over rival DISADVANTAGES Acquiring a firm in a foreign country is a complex task involving bankers, lawyers and specialists from both countries Sometimes host countries impose restrictions on acquisition of local companies by foreign companies Labour problem of the host country’s companies are also transferred to the acquired company MARKET SELECTION - CAGE framework Cultural distance Culture is usually defined as shared values and meanings of the members of a society. Affects not only the underlying behavior of customers in a market but also the execution and implementation of marketing and management strategies. Impacts on the way messages concerning the ability of the product or service to satisfy the needs and wants, are received and interpreted. Administrative distance Also termed as political distance and exists due to different bureaucratic, working and political structure prevalent in host countries. Different government policies are an important source of administrative distance. Indian government maintains tight controls over foreign investment in domestic retail sector in order to protect domestic companies.
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LISA YANG IBUS20002 Business in the Global Economy High regulations in the foreign country will need more time and money to spend in overcoming these regulations. Presence of corruption can also increase the administrative distance between the countries. Economic distance Economic disparity between two countries. Firms find it easy to deal with host countries that are close in economic distance for the following reason: Transfer knowledge easy because of having similar market segments that can afford to consume similar types of foods and services. Efficiency in operation and lower cost by having similar physical infrastructure such as airport, roadways, railways etc. Leverage skills and knowledge based resources by replicating process learned in one market to another. Geographic distance When the distance between the home and host increases it is hard to conduct business. Apart from inter-country distance, distances within a country, the size of the country, conditions of roads, and availability of transpiration and communication infrastructure will impact business operations in that country. For example: Time to travel 200 km in North America will be 2 hours whereas in India it will take more than 6 hours due to conditions of road.
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