Expansion to Asia: The National Australian Bank - Case Study Example

Expansion to Asia: The National Australian Bank Name: Tutor: Course: Date: Table of Contents Table of Contents 2 Introduction 3 Issue Identification 3 Critical Discussion 4 Recommendations 7 Conclusion 8 Introduction National Australian Bank (NAB) is one of the leading financial institutions in Australia offering deposits, credit and foreign exchange services. In the recent past, the organization has found it increasingly difficult to meet the objectives of shareholders in a shrinking loan and credit portfolio both a home and in established markets of Europe and North America. The organization is facing a strategic issue of diversification into the populous and untapped Asian market especially China. The expansion strategy into this region is the most challenging issue to corporate level management. Peng and Wang (2008) observe that long-term intention of an organization is to drive business objectives and sustainably build competitive advantage. In the case study, NAB has to be patient in obtaining currency license, gaining acceptance by local customers and overcoming stringent regulatory limitations in the foreign market. In the event of expansion, the organization finds it challenging to develop and exploit of core competencies of Chinese workforce, build synergies through Joint venture and create value to the Chinese economy (Neha, 2013). This report will establish how the National Bank of Australia needs to have an effective entry strategy into the Chinese market through strategy formulation and implementation. Issue Identification The issue identified in the case study is entry strategy and the associated cross-cultural differences which affects organization culture and change management. The Austrade commissioner, Brent Stewart notes that China has stringent regulatory limitations coupled with business environment and cultural challenges. However, there is a potential of NAB making great gains given several success stories of other Australian businesses such as The Woods International, Neuplex and MtM, an Australian Automotive manufacturer. Cultural differences between nations are found in the level of values which is the deepest level. Bono and Heijden (2011) argue that values are less tangible than practices, hence cultural differences in organization is identified in their levels of practices. Joint venture that is ethically driven allows organization in the party to form a new subsidiary without altering the parent companies. They can access knowledge, funds and assets but profits are owned by the parent entities. National Australian Bank has the opportunity of establishing a joint venture with a Chinese entity in the banking sector to make quick gains and expand its banking portfolio (Rugman, 2009). It is noted in the case that bridging cultural differences in China is not easy. It will be a tall order for NAB to consider a wholly owned subsidiary or strategic alliances in a tough Chinese business environment with many stringent regulations. Critical Discussion Strategic management is critical in the event of market expansion and entry into foreign markets. The move requires deeper understanding of leadership and corporate governance, organization structural design, human resource capabilities and best management practices and systems. Diversification engenders a cultural mix and international understanding between countries (Bono & Heijden, 2011). In the case study, cultural differences between Australian and Chinese workforce has been highlighted as the major gap between strategy and performance of the NAB. Piepenburg (2011) agrees that Hostede explored six dimensions of national cultures; power distance, individualism versus collectivism, uncertainty avoidance index, masculinity versus femininity, indulgence versus restraint and long-term orientation. In relation to the case, Australia has low power distance and individualism compared to China with high power distance and collectivism. Most Asian nations reflect close geographical proximity, related historical background, identical communist political systems and similar religious practices and beliefs. On the contrary, Australia reflects consultative political practices, low levels of corruption, even income distribution and individualism (Neelankavil et al. 2011). Culture and values influence leadership and corporate governance. Pankai (2003) argues that by developing and exploiting core competencies, the organization establishes distinctive capabilities that competitors find difficult to copy. Chinese consumers are receptive and accommodative to foreign goods as long as they are aligned to their national values, beliefs and history (Rugman, 2009). In the case, the Australia-China Gateway mentions culture as the major issue which needs to be addressed before entry into this market. The NAB strategic management board has constituted a 17 member diverse team to undertake feasibility studies in China. Success in the market will be based on the effectiveness of the joint venture, level of innovation such as e-business and induction or training of employees from both nationalities to cope with cultural differences (Mauri & Michaels, 2008). Apparently, there are variations in typologies of individualism and collectivism identifying Australia and China respectively. National cultures exist in values but organizational cultures are embraced in practices. In creating harmonious working environments for employees in the cultural divide, the organization will need to involve all the employees in participatory planning. The organization has to achieve the goals of its shareholders, engage employees productively and comply with international regulations governing business practices and best employment practices (Pankai, 2003). As earlier stated, National Australian Bank has the option of forming strategic alliances or joint venture with an Asia-pacific entity. Mauri and Michaels (2008) noted that strategic alliances have limited scope and function like trading access or emerging technology. The case study points to a joint venture as the key to success in China. This depends on the level of participation and social responsibility the company offers its external stakeholders. A joint venture allows parent companies to retain their original entities through integration, identifying synergy, adjusting goals and planning (Rumelt, 2009). NAB needs to pay greater attention to process planning such as teamwork as opposed to mere achievement of goals. The two companies have communication procedures to formalize and so are their joint marketing messages. For example, marketing an internet banking design involving credit acquisition and deposits will bring customers to both organizations. Another synergy would be a joint venture with a micro-credit organization in which the bank provides credit while the micro-finance provides the groups of depositors (David, 2011). Goals of both organizations need to compliment or coincide with each other. One is offering credit while the other is encouraging investments through youth and women empowerment. Grant (2003) note that the strategic statements such as mission and vision are key components of planning. They provide rationale for the marketing messages and build a base for a cohesive brand images to both organizations. In the case, Foster Brewing Company has been able to make a great success in Tianjin because of good planning. The local government and regulators are keen on knowing what the new entity will offer the community, local and national economy as well as employment (Bono & Heijden, 2011). NAB together with its Asian partner needs to practice good business ethics and enhance corporate social responsibility to increase local and national acceptance. Successful growth of the organization takes effort and teamwork. Synergistic marketing opportunities are the way to go in emerging markets (Mauri & Michaels, 2008). However, a strategic joint venture can be disastrous if both organizations fail to effectively integrate in the process of participation. Recommendations A joint venture with a local Chinese financial entity is recommended. This will be followed by a well coordinated and planned integration exercise to involve employees in both cultural divides. The key to cross-border joint ventures is cultural harmony and participation. When employees of different cultures are able to actively participate in organizational management and productivity, they create a synergy that facilitates growth and development (Peng & Wang, 2008). In the case, culture has been mentioned as a strong factor in influencing international expansion to Asia. National Bank of Australia will need to identify a local subsidiary in China especially Shanghai that can easily align to its mission and vision. Learning the cultural differences engenders a feasibility study into the core competencies of organizations, synergies and long-term goals (Piepenburg, 2011). Neha (2013) opines that a joint venture strategy is highly effective compared to strategic alliances and wholly owned subsidiaries. There is need for planning of workforce, resources and creation of organizational networks. The National Australian Bank has to remain patient and be consistent in providing financial services to all the segments of the Chinese population within the next five years. Though there is uncertainty of unhealthy competition and selective regulation, the organization’s strategic plan will yield rewards and benefits to shareholders and employees of the bank (Brian et al. 2013). The bank will need to obtain a currency trading license and learn from best practices of other Australian companies already established in the region. Conclusion The report has established that there is need for NAB to expand into the Asian-Pacific market. It has also learned that culture and national values have greater influence on the performance of the organization in the new foreign market. The aspect of strategic joint venture is critical in international expansion if local markets have saturated (Rugman, 2009). Cultural fit has been recommended as crucial through training and induction of employees from the divide to participate in building the new entity. The report has also recognized the development of core competencies, teamwork, training and new management practices. Organizational strategies involve leadership and corporate governance, human resources, structural design and management systems. It has been recommended that a successful joint venture will mobilize human resources and coordinate expansion into the Chinese mass market. The organization will benefit from increased market share, portfolio and international presence by expanding to the Chinese market (Pankai, 2003). Reference list Bono, S. & Heijden, B, 2011, Managing Cultural Diversity. Meyer & Meyer Verlag. Brian, B., Bergh, D.D., & Duane, I.R, 2013, Constructs in Strategic Management. Organizational Research Methods. Vol. 16 (1): 67-89. David, F.R., 2011, Strategic Management: concepts and cases. 13th edition. Pearson Education, Prentice Hall. Grant, R.W., 2003, Planning in a Turbulent Environment. Strategic Management Journal. Vol. 24: 491–517. Mauri, A. J. & Michaels, M.P., 2008, Firm and Industry Effects within Strategic Management: An Empirical Examination, Strategic Management Journal. Vol. 19: 211–219. Neelankavil A Anoop C & Rai, U., 2011, Basics of International Business. M.E. Sharpe. Neha, J., 2013, Strategic Management. Journal of Business Perspective. Vol. 17 Issue 1: 389-402. Pankai, G., 2003, Semiglobalization and international business strategy. Journal of International Business Studies. Vol. 34(2): 44-67. Peng, M.W., & Wang, Y.L., 2008, An Institution-based view of international business strategy: a focus on emerging economies. Journal of International Business Studies. Vol. 39(5):56- 78. Piepenburg, K., 2011, Critical analysis of Hofstede’s model of cultural dimensions: To what extent are his findings reliable, valid and applicable to organisations in the 21st century? 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