FDI Case Study

Nowadays, a company’s business dealings have become more international, and there is a need for an effective cross-cultural communication: understanding a foreign culture is a long-term process of assimilation, conception and integration and is certainly the key to successful business extension internationally. Culture is a complex system that includes knowledge, beliefs, norms, morals, law, customs, and other abilities possessed by people as a part of society. Fundamental differences in norms, morals and values between the home country of MNEs and the host country of their foreign affiliates often create functional complications and amplify the efforts required to enter a foreign country. Basing on the framework provided by Transaction cost theory, greater external uncertainty leads to increased transaction costs. A high cultural distance may boost the information asymmetry which results in increasing the costs relative to investigation, evaluation, and pricing of potential target firms. Costs associated to the negotiation procedure between the acquirer and the target firm increase when values, customs, and behavior systems are not shared by both firms. In the same way, post-acquisition incorporation difficulties occur when the target’s decisions and behavioral rules are not familiar and/or understood by the foreign affiliates and vice versa.
2. Objective
This paper attempts to analyze relation between cultural environment and FDI. The main aim of this paper is to find out the relative impact of culture and its elements on FDI decisions of MNE’s.

3. Research Methodology
The methodology based on this paper is exploratory in nature and information collected is based on secondary sources. The entire framework is theoretical and pro...

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...rsity in terms of linguistic differences is likely to complicate communication in internationalization processes. Therefore, language distance arises as a major issue to deal with when choosing the formula to carry out an FDI.
SOCIAL STRUCTURE
The social structure of a society refers to its basic social organization and association. Two main scopes along which social structures differ are the individual-group dimensions and stratification dimension. In some societies, the individual is the vital building block of social organization. In other societies, the group is the building block of social organization. All societies are stratified into diverse classes: class conscious societies are distinguished by less social mobility and a high scale of stratification. Less class conscious societies are distinguished by high social mobility and a low scale of stratification.