Economic Growth Banking Sector Development -Myassignmenthelp.Com

Question: Discuss About The Economic Growth Banking Sector Development? Answer: Introduction International expansion involves strategy for market entry that includes vital choices such as market focus, determining the target customers, allocation of resources, services and product offering and so on (Chen et al., 2015). When it comes to banks, expanding to foreign lands require knowledge about that countrys government as well as banking regulations (Considine et al., 2016). In addition to that, banks have to analyze the banking culture followed in the target nation. Amungo and Buck (2017), in a study concerning the expansion of Nigerian banks revealed the relevance of various theories relating to internationalization of organizations. The authors mentioned three specific theories that are the resource based view (RBV) theory, the eclectic theory and the transaction cost analysis (TCA) theory. According to the eclectic theory, banks have to explore the Ownership advantages that include managerial skills, specialized banking services, reputation and so on. Then, the banks have to focus on the Location advantages that are posed by the target nation including easy regulations, market size, and government interference and profit opportunities. Lastly, the theory mentions the Internalization advantage tha t concerns internalization of operations of the bank in foreign market. The RBV approach supports the view that banks have the advantage of managerial abilities, the brands reputation and organizational culture amongst others that help them expand in other countries. As per the TCA theory however, focuses more on factors like the entry and transact cost of the bank. The cultural proximity between two countries, property rights, legal concerns are included in the TCA factors (Cho, Lee Lee, 2015). The given report focuses on the Australian and New Zealand Banking Group Limited (ANZ) and its strategy to expand in Brazil, France and Korea. The report provides an overview of the bank and then proceeds to the market analysis that would help it formulate the required strategy for expansion. ANZ Bank currently has headquarters in Melbourne, Australia and after its Asian expansion strategy; it aims to penetrate into the European and South American market. Overview of ANZ Bank Established in October 1951, ANZ operates in more than thirty countries providing services like retail, corporate and commercial banking, insurance, transaction banking and many more (Anz.com, 2018). It is the largest bank in New Zealand and fourth largest in Australia. The bank is also amongst the top fifty banks in the world. Involved in many award-winning initiatives, ANZ believes in adapting to changing environment in order to meet customer demands. The bank also drafts policies that are aligned with the Sustainable Development Goals (SDGs) of the United Nations. With Shayne Elliott as the CEO, ANZ has an organizational structure that deviates from the hierarchical structure. The banks culture allows every employee to have a say in matters regarding any operation or decision. In a recent announcement, the bank decided to overhaul its structure and adopt an approach that distinguishes itself from others. According to the CEO, the bank aims to follow a term-based approach that would enable it to do things in a more agile way. In matters concerning ethical code of conducts, ANZ has developed two separate guidelines for directors and employees to be followed. In addition, it has prepared a Conduct and Ethics Policy Framework that comprises the ethical standards that need to be maintained in the company. These ethical policies and codes of conducts are maintained strictly in the bank that has helped it maintain a reputable and respectable position in the market. With a view to expand its operations in countries beyond the Asia-Pacific region, the bank has initiated a strategy to bring further amendments in its organizational policy. One of its policies is to acquire foreign banks and merge those with its own. However, the process would not be easy as the countries chosen for expansion have very strict rules and regulations regarding banking (Pradhan et al., 2014). It is but also true, that ANZ has an advantage of strong base in Australia, which it can utilize to establish foreign branches. The ANZ Bank holds a very good reputation within Australia and New Zealand despite being stained with controversies in the past. As already mentioned ANZ holds the top rank in New Zealand and is fourth biggest in Australia. It is thus evident that the bank does have a stronghold in its native place. However, in order to acquire businesses in Brazil, France and Korea, the bank has to clear off its name from the controversies and look ahead. The CEO mentioned this need in a recent statement made in the parliamentary committee of Australia where he stated that the bank is committed to rectify previous mistakes. He further added that steps have already been taken in this regard, those involved in forgery, and scandals have been removed. Market analysis of Brazil Banking system is Brazil has become quite efficient in recent times after years of economic sloth that slowed the countrys development pace. Many banks have installed sophisticated banking sites that not only offer banking services at a faster rate but also provide non-stop assistance to the customers. Numerous banks operate in the country with each city having at least one branch. Brazils five largest banks have around 10 to 15 thousand branches spread across the country and all international operations are centralized at the headquarters located majorly in Sao Paulo and Rio de Janeiro (Syriopoulos, Makram Boubaker, 2015). In addition, all the banks have corresponding branches in other nations. Brazils efforts to stabilize the financial condition during the late 20th century were commended by the global economic leaders and experts. This showed that the country had mechanisms that can cope with any situation leading to financial distress. Moreover, the flexible rules and regulations of the banking sector make it luring enough for international firms to eye it. ANZ, being in a phase of image rebuilding and progress, would have great scope in Brazil. The country has a lot to offer when it comes to strategic alliances and partnerships. In a study by Coleman and Feler (2015), it has been revealed that post the global crisis of 2011-2012, Brazil has emerged as a strong economic market. The government has also shown agility in allowing international firms establish business without burdening them with unnecessary rules and regulations. However, many obstructions have been laid by the government for international firms that have compelled many experts to believe that these regulations are too complex. Apart from the government, the Central Bank of Brazil too has a major role in drafting regulations. These regulations were imposed by the government in order to check tax evasion but these have consequently resulted in rigid regulatory policies. It is but also true that despite all these factors, many foreign banks have struck partnership deals with the local Brazilian banks and achieved success. Looking at ANZs future policy for expansion, it is evident that the bank is attempting to raise its technological base in order to make services smoother and friendly for customers. Chuang and Hu (2015) have found that the banks Super Regional Strategy aims towards forming positive affiliations beyond the boundaries of Australia and New Zealand. The bank is primarily targeting markets based in America, Europe and Asia, Brazil being one amongst these. Currently Brazil is going through the phase of economic renovation whereas ANZ aims to rebuild its image as a fair bank. Therefore, these two factors present a perfect scenario for the bank to open its branches there and become operational. Market analysis of France Although ANZ has an existing branch at Paris, it aims to achieve maximum benefits by expanding its operations there. France is one of the most dynamic countries in Europe with endless possibilities for business expansion. The country has a banking system that is characterized by increased regulations deriving mainly from the European scheme for encouraging a safe banking system (Alter Beyer, 2014). After Brexit, the French government has pepped up its efforts to lure more and more banks by easing regulations and cutting high rates of interest. Owing to this, other nations also found an opportunity to expand their business in France. Brexit has also provided an opportunity for ANZ to attract customers in not only France but also those leaving Britain to have access to better opportunities with the bank. Prior to Brexit, the banking and government regulations that existed in France were quite rigid and complex. The phase after the 2007 financial crisis especially saw many departments were formed that looked after the financial security of the country. These departments proved to be a hurdle for international firms who looked to expand their businesses. Nonetheless, ANZ managed to expand its operations in France when it opened its first branch in the country that served customers mostly belonging to the Asia-Pacific region (Lodhia, 2015). The branch provided wholesale retail services to the customers. Apart from that sole branch, ANZ has no other branches in the whole of France and that is the reason why it has aimed to expand its operations here. ANZ provides financial services as well other than providing banking services across the thirty-four nations. France being at the center now after Brexit, presents a golden opportunity for ANZ to target the market (Schoenmaker Peek, 2014). However, certain things have to be kept in mind while planning to approach the French market, one of which is the presence of the European Union. The regulations that govern banking operations in France have a major control of the laws drafted by the EU. Therefore, ANZ must understand this aspect and then take subsequent steps. Another obstacle that ANZ might face while expanding to France is the language barrier. Although employees are trained to work in any country with varying linguistic backgrounds, it is not easy to get along from the beginning (De Jonghe ztekin, 2015). Although the French government has announced establishment of institutions to provide language training, it remains to be seen how long it would take the country to adapt as per international demand. Nonetheless, with technology as the leading objective, ANZ has the opportunity and the prospect to prosper in its international expansion aimed at France (Theguardian.com, 2018). Market analysis of Korea South Koreas banking sector has been an area of concern for the past few decades despite the fact that the countrys financial standard has shown improvement (Bruno Shin, 2014). Both the government and the investors have are facing problems regarding the sectors stability. However, the good news for ANZ is that the regulations imposed by the Financial Services Commission (FSC) have been eased. Owing to the improvement in the standard of regulation quality, customers and clients have been endowed with opportunities to find a prospect in the country. In a report by the Scotia Bank on South Koreas economy, the efforts put by the South Korean government to stabilize the countrys banking sector have been found (Gbm.scotiabank.com, 2018). Among its peers, South Korea is probably the most stable and open economy amidst all the geopolitical and political turmoil. It has also been found that the government is putting in increased efforts to make the banking sector more flexible and welcoming towards international firms. In an attempt to attract investors, the government is providing monetary support to policy banks that are negatively affected by the issues facing the shipbuilding and shipping industries. Apart from that, South Koreas credit ratings and sovereign debts have also shown resilience. According to Standard Poors (SP), the strong public finances and encouraging policy environment have resulted in the countrys economic stability and rating (Xinhuanet.com, 2018). In spite of that, expanding to South Korea must have to be strategized sensibly looking at the situation faced by the existing foreign banks in the country. In a report published in the Financial Times, the HSBC Banking group aired its concern regarding banking in the Asian country (Ft.com, 2018). The disappointment has been expressed majorly in the retail banking area where foreign banks have performed the lowest. The cause for this poor performance has been attributed to the excessive government interference. A look at the countrys economic performance in the last financial year of 2017, signs of improvement are there but the banking environment is still displaying signs of instability (Eiu.com, 2018). However, with the increasing influence of the global economy and technology and South Koreas attitude towards it, global banks do have a strong chance to prosper in their endeavor in the country. ANZ group with its mission to provide unconditional services to customers irrespective o f country, cast or community has strong chances of doing well in Korea (Yoo, Kang Kim, 2015). Strategy formulation for ANZ ANZ provides numerous services to its customers both within and beyond Australia and New Zealand. Apart from the retail, corporate and commercial banking services, the ANZ group also provides financial services like investment, superannuation, providing financial solutions and insurance to millions of customers. Another feature of ANZ is that it provides state-of-the-art technology solutions to its customers. The firm believes in complete utilization of technology and thus it has laid stress on technology. After evaluating the markets of Brazil, France and Korea, it is evident that ANZ has great scope in expanding its business in these countries. In order to formulate strategy for the expansion, ANZ has to decide as to which area of business it wants to focus on while expanding. A look at ANZs purpose and strategy for its existing businesses, presents great opportunities for growing further. One of its business purposes is to internationalize its domestic services by reaching out to customers in different countries. Therefore, certain strategies have to be articulated to ensure error free and concrete plan for international expansion. First, ANZ has to analyze if its business is flourishing in its native region and if not, it has to make sure that the existing market is bringing in profit. This strategy involves minimum risk and maximum results, as the company would target its existing customers with new pricing, products and services. The existing customers would make it known to the company if the strategy has worked or not. This is one advantage of applying this strategy. Second, the company can look to develop fresh market segmentation. This strategy would require thorough market research to determine the new target group. Third and the most important are the merger and acquisition of existing companies or groups. ANZ is planning to enter into strategic partnerships and acquisitions in the said countries to grow its business (Ferreira et al., 2014). Hence, applying this strategy in the domestic market as an initial step would greatly help ANZ prepare for the international expansion. One aspect that often elude s the strategic planning is the understanding of cultural differences while establishing business in other countries. ANZ is based in Australia and it plans to expand its business in Brazil, France and Korea that are culturally distinct from Australia. Hence, training employees to adapt in those culturally distinct countries must be included in the expansion strategy (Turner Nugent, 2015). Recommendations Jiang, Holburn and Beamish (2014) suggest a firm that plans to expand to foreign markets must consider evaluating the performance of other firms in the target markets. This would help the firms understand the environment of the target markets and the risks associated as well. ANZ may follow these recommendations while formulating the plan. These include: Proper market segmentation is essential, as it would help ANZ demarcate its customers according to various businesses Market research must be done adequately and with emphasis recent trends evident in the target countries Goals and objectives must be prepared beforehand keeping in mind the budget and other necessities (Forbes.com 2018). A top-down budget should be developed along with a strategic project plan with consigned dates Reviewing regulations imposed by government and industry of the target country must be done after proper product gap analysis. This would ensure obtaining of certifications and compliance if needed It must also be made sure that the products and services decided to be marketed has been named and designated as per the said countrys local language and tradition Focus should be more on the companys strength rather on areas where it has not delved into yet or areas where it lacks consistency. Further, local distribution networks and logistics must be developed to sell the product and services through authentic and credible channels Apart from that, ANZ must be equipped with organizational, legal, finance and tax strategies that enables it to implement everything with given time and with perfection Conclusion The future success of a firm depends on the present strategies it implements. When it international expansion for developing the business, strategies become increasingly important. ANZ is a reputable banking company based in Australia and New Zealand that plans to expand the Asian, North American and European nations. It provides financial services to customers in thirty-four countries including Australia and New Zealand. ANZ has been in the news for several reasons mostly for its scandals and forgery. Shayne Elliott, the new CEO has pledged to rebuild the companys image by removing the stained employees and getting closer to the customers. With its vision to become a technologically advanced financing group, ANZ has employed many strategies pertaining to the development of technology. It is thus important for the company to test its capability whether it is ready to explore international areas of business. The report presented a systematic analysis of the expansion strategy that nee ds to be formulated by the company. In the report, it has also been highlighted that the bank has to rebuild its image in the public before planning to expand further as its image had been tarnished by past controversies. In addition, the report has provided a clear understanding of the current and previous market conditions prevailing in Brazil, France and Korea. Both the negative and positive aspects of economy in each country have been elaborated in the report. After analyzing the attractiveness of each market, it can be stated that ANZ has strong chances of being successful in these countries. However, certain things have to be kept in mind before taking a step forward. The report has provided recommendations for ANZ that it should follow to expand and grow its business. References: Alter, A., Beyer, A. (2014). The dynamics of spillover effects during the European sovereign debt turmoil.Journal of Banking Finance,42, 134-153. Amungo, E., Buck, T. (2017). 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