Neotel Russia Case Study

Question 4)
CAGE Framework
Cultural Distance Administrative Distance Geographic Distance Economic Distance
Attributes Creating Distance
Different languages.
The Russians speak Russian. Translation might be required for Tata Communications executives working in Russia and vice versa.
IT Systems are in Russian which makes it hard for any non-russian to understand. Absence of colonial ties
The Russians were not colonized while India was a former British colony.
Russia uses the ruble. Both Russia and India are part of BRIICS trading bloc.
Based on Exhibit 7, Russia’s low ease of doing business ranking (120). TCL could find it hard to replicate their success with Neotel Russia and India are in different continents. Russia currently does not share
The low ease of doing business ranking of Russia is also a concern. The local company would provide the local knowledge on doing business in Russia and the distribution networks while TCL provides the financial support to expand PASCAL’s existing infrastructure.
Russia has the largest land area globally. Considering that 73% of its population is urban, TCL may choose to focus on urban areas only to capture the most of the market.
Financial considerations
TCL did not have a strong balance sheet which was what stopped it from a major acquisition. As PASCAL’s shareholders were looking for a 100% sale in the region of USD$150 and above. Hence, funding to acquire PASCAL would be a challenge for TCL.
Managerial considerations
PASCAL currently leases bandwidth from Rostelecom. TCL would need to decide if they are continuing with the existing strategy or they prefer to build their own network in Russia which could be a challenge considering the land area.
TCL also has to consider how to merge their management with the existing operations in Russia considering the language
In addition, it reduces the threats from the competitors. Risks + Mitigation steps
Due diligence on the acquired company would reduce the risks associated with the acquisition.
By keeping the existing local staff of the acquired company, it would ensure that there is minimal disruption to operations.
Returns
By merging business operations of the acquired company and Tata Communications, it would allow both companies to achieve economies of scale. This would result in cost savings for Tata Communications.
Reaction of stakeholders
Suppliers of TCL would need to increase their capacity to meet TCL’s increased Shareholders would likely take Merger and Acquisition news positively in the long run as it results in higher profit margins and better dividend paid out by Tata Communications. Are there resources and competencies to implement effectively?
If not, can they be obtained? How can these be obtained.
The merger and acquisition could be funded by issuing new stock, issuing bonds or taking bank loans to fund the operation. Consistency
Logical