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International Business Strategy For Retail Banking

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International Business Strategy

2040 Downloads 8 Pages 2012 Words

Introduction

International business is defined as a business entity that engages in international economic activities and that conducts business functions with all those businesses that do business in abroad. Most of the business entities in current scenario have been emphasizing towards globalization so that the scope of business can be encouraged (Lowe and Doole, 1997). The design of international business strategy cannot be separated from the external macro level context in which it operates. The present research study has been made on Bank of China which is engaged in the provision of banking and other financial services such as commercial and investment banking, insurance and other investment services. As per the market analysis, it has been observed that the company operates its business through various segments such as corporate banking, personal banking, treasury operations, insurance services and investment banking services. There are wide range of financial services which Bank of China has been delivering to the clients as per their specific needs and demands (Menen, 2010).

Corporate strategies of Bank of China

The corporate strategy of subsequent bank includes offering adequate services to the corporate customers, providing diversified authorities to the government body, managing trade related products and so on. Bank of China ensures that they are giving proper credit services to the clients.

On the other hand, corporate strategies of Bank of China include earning more foreign currency so that the value of domestic currency and country's economic state can be enhanced and improved. Similar to other banks, Bank of China also provides deposits and other overdraft facilities to the customers so that they can manage their financial aspects in an adequate manner. The bank has been trying to include several things in the service provision where in chief emphasis has been given towards diversification and expansion aspects. The treasury operations segment of the bank deals in foreign exchange transactions, it also increases customer based interest rate; thus as a result, overall capability of the earnings can be enhanced (Bank of China well positioned for continued overseas expansion, 2015). At the same time, the investment banking segment includes debt and equity underwriting and financial advisory which augments financial capability of the bank. It has also been observed that the Bank of China specializes in underwriting general and life insurance business services so that safety can be delivered to people. Other segment of the bank comprises of investment holding and other miscellaneous activities that aids in augmenting the financial capability of the bank. To expand the services, Bank of China has been focusing on different market entry strategies.

Bank of China seems to be highly emphasized towards corporate banking because that is the chief source of acquiring long term profits and revenue. The bank focuses on such thing so that collaboration with different successful entities can be made. The main aim of emphasizing on corporate banking is to increase long term partnership with major business customers (Lynch, 2006). Hence, in such respect, the bank defines business with small and medium sized enterprises because that is a crucial part of corporate banking business. This is highly committed to excellence and it also aids the entity to become efficient and professional partner which satisfies various needs of small medium enterprises. Bank of China (considered as the fourth biggest lender that provides better financial services to the clients) has been planning to set up more US branches by selling asset and securities (Verbeke, 2013). The planning has been made this year in terms of facilitating cross border investment amid the two countries. Currently, Bank of China has its branches in New York, Los Angeles and Chicago and in order to look more forward, the bank has been planning to establish the business in Panama (South America) (Bank of China, 2015). However, the expansion plan has to overcome stringent US regulations which are made for foreign banks.

Apparently, when Bank of China has made a decision to enter an overseas market, it looks for more business growth and success. From several resources, it has been found out that with a unique and comprehensive financial platform, Bank of China offers commercial banking, investment banking, insurance services, asset management, aircraft leasing and other financial services so that complex demands of different customers can be fulfilled. Hence, to enter in new market place, Bank of China can emphasize on market entry strategies because that is the planned method of delivering services to a new target market and distributing them to different customers (Lowe and Doole, 1997). Hence, in such respect, Bank of China can acquire assistance from formal and informal institutions that delivers financial help from diversified contexts. This is also another source of finance through which Bank of China can acquire assistance to operate business properly in new target areas. Many companies successfully operate in a niche market without changing the market segment and it happens due to formal and informal institutions (Peng, Wang and Jiang, 2008).

Implications of formal and informal institutions

Formal and informal institutions have an essential role in a market economy to support the effective functioning of market mechanisms. This assists the firms to engage in market transactions without incurring undue expenses on costs or risks. These institutions generally include the legal framework and its enforcement on business practices and along with the same, it also includes regulatory regimes. The institutions are strong in developed economies, their roles and contributions are almost hidden and invisible (Lynch, 2006). However, in contrast to this, when any market does not work in proper way in some emerging economies, the overall facets of the economy gets suffered.

Hence, institutions can provide positive and negative impacts on market entry strategies in which the Bank of China will be able to conduct all the functions in new American market properly. Concluding the entire research study, it can be said that China is not a single market; but its province is different; therefore the market can grow in the same way if comes in collaboration with other entities. From the research study, it is also evaluated that the significant growth of overseas investments really started to develop strengths of banks and other institutions in the year 2002 as China opened up and join the World Trade Organization. This depicts the opportunities of more growth and success. On the other hand, the impact was swift because Chinese companies grew quickly as they capitalized on new found knowledge and they have also invested their reserves and leveraged funds in different activities (Menen, 2010).

Different market entry strategies of Bank of China

It is beneficial for the organization to effectively identify various strategies to enter into a new market to render the services and sell out the product to the different groups of people. In order to make the entry it is essential that the organization does a proper evaluation of the strategies to target the customers into the new market (Benito, 2005). There are various common strategies which can be adopted by the organization to outsource their product and services into the market which is entirely different from the previous one.

In order to make the entry into the market of Panama, Bank of China can adopt the joint venture strategy to start up their functioning within its geographical boundaries. All the aspect is considered for the purpose to meet up the requirement of the customer to whom they are targeting (Open for business: The incredible expansion of Chinese banks, 2013). This will be beneficial for Bank of China as the entry would be made in an easier manner. With the help of this strategy, Bank of China clearly identifies the market effectively as the market of the joint venture company is identified beforehand. Thus, demand forecasting is being done over their hand as it helps each other to expand within the geographical boundaries of US. The joint venture strategy will help Bank of China to assess the internal aspects through which valuable services will be offered to the customers as the market is new for them. Through this strategy, the respective operations are determined which will help Bank of China to develop the business plan as respective options need to be exercised upon to make the entry into US market at Washington DC (Stonehouse and Houston, 2013).

Beside this, all the segments are equally distributed and managed properly to make the entry and cater the ample customer groups. This strategy will help Bank of China to sequentially handle the entire operations in an effective manner to make the entry (Levy and Newell, 2002).

Advantages and Disadvantages of market entry strategies

Market entry strategies are useful because that aids the business entities to enhance the market share along with global strategic positions. Collaborative agreements can also be undertaken through the same and the ratio of investment should be increased at the same time (Hill and Jain, 2000). Further, bank of China should also emphasize on outright acquisitions so that shares and equities of different business entities can be acquired. However, on the other hand, joint venture involves foreign operations as it involves facilities with foreign partners. Controlling actions are also limited which also limits the potential of profits and as a consequence, it dilutes the entire operations of management. It can create fiercible competition in the market place (Matsuno and Mentzer, 2000).

Recommendations to CEO of Bank-of-china about market entry strategy

The joint venture strategy helps Bank of China to make an easy entry into the market of US. The market to make the offering is already identified previously by the venture with whom Bank of China is joining to carry out the entire operations and make the offering (The Impact of Formal Institutions on Global Strategy in Developed vs. Emerging Economies, 2012). All the information is available before hand as the business entity is already established and catering large number of customers. This strategy helped Bank of China to establish effective contracts with the customers and the clients to make the offering of product and services.

Conclusion

Summing up the entire case, it can be said that Bank of China has to emphasize on joint venture strategy so that assistance can be acquired from the successful entities who already operates business in the same market place. Bank of China should successfully enter into diverse market places with numerous entities as that will also allow the bank to share risks and other revenues. At the same time, it is also useful in terms of providing success opportunities to learn new environment.

References

  • Bank of China well positioned for continued overseas expansion.
  • Bank of China. 2015.
  • Benito, G. R., 2005. Divestment and international business strategy.Journal of Economic Geography.
  • Hill, C. W. and Jain, A. K., 2000.International Business 10/e: Competing in the Global Marketplace. McGraw-Hill Education.
  • Levy, D. L. and Newell, P. J., 2002. Business strategy and international environmental governance: Toward a neo-Gramscian synthesis.Global Environmental Politics.
  • Lowe, R and Doole, I., 1997. International Marketing Strategy: Contemporary Readings. Cengage Learning EMEA.
  • Lynch, R., 2006. Corporate Strategy. 4th ed. Financial Times Prentice Hall.
  • Matsuno, K. and Mentzer, J. T., 2000. The effects of strategy type on the market orientation-performance relationship.Journal of marketing.
  • Menen, M., 2010. Global Corporate Strategy - A Critical Analysis and Evaluation of Amazon.com. GRIN Verlag.
  • Open for business: The incredible expansion of Chinese banks. 2013.Partners.
  • Peng, M. W., Wang, D. Y. and Jiang, Y., 2008. An institution-based view of international business strategy: A focus on emerging economies.Journal of international business studiees.
  • Stonehouse, G. And Houston, B., 2013. Business Strategy. 2nd ed. Routledge.
  • The Impact of Formal Institutions on Global Strategy in Developed vs. Emerging Economies.
  • Verbeke, A., 2013.International business strategy. Cambridge University Press.
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