Where should our bank should expand internationally?Explain.

Management in International Business
Phase 1 Individual Project
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As the senior vice president of a bank in charge of strategy and implementation I would have many issues to deal with regarding foreign expansion. I will have to look at the macro environment conditions of the country involving interest rates and the economic situation. I will also need to consider whether the bank will be a subsidiary or a branch and the benefits or negative effects of either. There will also be several other factors that will be addressed and some of those will include the competitive advantage for our bank versus a manufacturing business as well as foreign trade issues. The CEO will need to address some questions regarding social and economic responsibility policies when doing business internationally and our banks policies regarding such decisions.
Understanding the macro environment conditions that are uncontrollable by our bank can be categorized best using the acronym PESTEL which consists of political, economic, social, technological, environmental, and legal factors. Political factors are ones that would include tax policies, availability of government contracts, safety regulations, shifts in political party and views, and trade agreements and tariffs. Economic factors are ones that address situations regarding comparative foreign exchange rates and the state of the economy. Economic factors are difficult to assess since economic forecast are constantly changing and tied to global economic stability but none the less are needed components in order to maintain a stable profit. Social factors can include how the demographics of a community view emphasis on job creativity or room for self guided thought on the job. Social factors can influence how a company defines job descriptions and might be necessary to attract the best possible local talent for the job. Technology can play a major role in the local environment where we expand our banking business. While the newest technology can improve working efficiency, it can sometimes be unnecessary depending on the local demographics. Environmental factors can be important in both short term and long term. Short term factors could include doing business in an area that is highly susceptible to natural disasters that could potentially disrupt business operations. In the long term we would need to be concerned with making sure we can continue business by protecting against unsustainable practices. Many legal parameters will need to be assessed including local labor practices which could also be affected by international laws (wisegeek, 2015).
While PESTEL is a broad range of issues that I will need to address there are other factors that can influence our decision to expand into a foreign market. The organizational form of our business needs to be considered. Our banking structure will either need to be a foreign subsidiary or a single branch or representative office. If we decide to use a foreign subsidiary, we will be increasing direct competition with local banks which could potentially take profits away from local retail clients. The host country could impose restrictive rules or regulations limiting our business growth to protect the local businesses and ultimately this could affect our profits. The other option is a local branch or subsidiary which will typically be focused on wholesale or investment banking. Either way both options will need to be considered to determine which is best for or banking structure abroad (worldbank.org, 2007).
International trade between many countries has been growing for several years but the trade to and from Asia which is one of the largest economies will continue steadily for the next decade at least. One example of how our bank can benefit from trade boom in Asia is to fill a growing need in cross-border payments. Many banks do extremely well at servicing large corporations but currently in Asia small to medium sized companies make up nearly 90% of total exports.  Our bank can fill this growing void by partnering with credit insurers, cross border payment companies or even supply chain financiers. Instead of trying to compete with all the supply chain complexities it could be very beneficial to form partnerships which can help us gain a competitive advantage over other banks and increase profit margins from the partners existing clients. This would help us capture more of the financial business of the supply chain (Latham, December 12, 2013).
Banks differ from manufacturing companies when implementing international strategy in many ways but both businesses do have some similarities. Some similarities would include the need to be aware of the cultural differences between U.S. business men and the business people in foreign countries. Understanding the cultural and the proper way to deal with locals can make a huge difference in the success or failure of business relationships. Employment laws and regulations are also similar for both banks and manufacturing companies in foreign markets. The difference between manufacturers and banks is a bank’s ability to use subsidiaries instead of having a brick and mortar type business structure in a foreign country. Another difference is a bank’s ability to work with many different industries instead of focusing on a select few.  These differences give a banking business a different competitive advantage compared to a manufacturing business.
Besides the similarities and differences between banks and manufacturing companies, banks have other trade issues. In the past banks were completely barred from opening branches and subsidiaries in host countries but that has relaxed in the past few decades. Now many banks with the intent of expanding internationally have to take on certain business characteristics of the host country, whether good or bad for the banks business. Also some countries require that the maximum direct foreign investment by the bank be below or within a certain percentage of the banks overall foreign business. With these types of trade requirements and restrictions it can make a significant impact on where our bank should expand internationally (nber.org, 2015).

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