Globalisation of the Bank of Queensland - Case Study Example

GLOBALISATION OF THE BANK OF QUEENSLAND By: Course: Professor: University: City: Date: Table of Contents Introduction 3 The Body 3 What does globalisation mean to the bank of Queensland 4 An analysis of Brazil’s market situation: 4 An Analysis of the Korea Market 5 The Analysis of the French Market situation 5 Conclusions for each markets 6 The Brazilian Market 6 The Korean market 6 The French Market 7 Recommendations 7 References 10 Introduction The Bank of Queensland is one of the major banks in Australia whose presence and effectiveness is widely felt in the banking industry. The banks rides on the wheels of innovativeness, competitiveness and dynamicity[The162]. The organisation has managed to prove that new ideas and being different from other banks is what enables them to keep afloat in the competitive industry. The company has managed to retain an impressive reputation which means that they have the trust of potential customers. The bank boasts of more than 2500 branches and offices spread across the country, which translates to its networking capabilities[The162]. This also provides a basis for the conclusion that its employees have enough prowess to keep the bank thriving and competitive enough. The bank, which stands as one of the longest surviving banks in Australia has a customer base of more than 650,000 customers. The bank is well known for customer satisfaction. By the year 2007, the bank had an 88% satisfaction rating among its customers[The162]. These facts present the bank of Queensland as a potent bank in terms of seizing opportunities and the rate of growth. In a bid to have the bank earn more revenues, globalization is an aspect that would be put into consideration. Its ability to effectively manage its close to 300 branches in the country displays its potential to manage a larger network spread out over the world. This would of course translate to the need to come up with a strategy to scale up its operations to cover for a larger network requiring more skilled personnel and greater financial back up The Body A globalization strategy cannot happen abruptly, as financial resources needed to be distributed gradually into new markets after certain periods of time. Looking at the Bank of Queensland’s situation, it is best to consider appropriate markets that will ensure that it keeps on generating revenues even with its globalisation. Brazil, Korea and France come up as possible markets but it is important to look into the issue of how viable they are exactly. Determining the attractiveness of such markets can not only provide the much needed assurance for the bank of Queensland to set foot in these markets, but also provides a scale to determine which market to get into first. What does globalisation mean to the bank of Queensland Globalization brings promise and risks to the Bank of Queensland. The promise bit is reflected in the fact that it is bound to acquire new customers and markets. This also presents the bank with an opportunity to enjoy expanded resources for its employees and its partners[Lau14]. On the basis of risk, globalization means that the Bank of Queensland is bound to encounter political and economic risk. The amount of regulation also increases with globalisation being scrutinized by a number of international bodies. The bank will also place itself in a situation where it faces operational challenges due to the extension of their platforms, products and systems from their usual markets[Lau14]. An analysis of Brazil’s market situation: The Brazilian banking industry is highly competitive but dominated by five major institutions namely: SERASA Experian, SCPC, SCI Equifax, SCR and CADIN. There have been a number of acquisitions and mergers occurring, which has led to there being a higher concentration of strong institutions[IFC11]. The country is well served by its banking system, which has a great network of banking correspondents and has a banking penetration of 43%. It’s strongest bank, Banco do Brasil has 5089 branches and its second last bank (HSBC) in branch rankings has 865 branches. It is also worth noting that Micro-Finance Institutions in Brazil face very stiff competition from banks that are state-owned. The regulation of banks falls under Banco Central do Brasil (BCB). The following statics are available for the Brazilian market: Brazil has 137 multiple banks, 20 commercial banks and 4 development banks. These are coupled up by the availability of 158,600 ATMs, 3,177,100 POS terminals, 137,800,000 credit cards and 207,900,000 debit cards[IFC11]. The MFI sector which is also competition to the banks have fewer numbers for the customer bases. Only one MFI has more than 100,000 customers, only four MFIs have between 20,000 and 100,000 customers and 40 MFIs have less than 20,000 customers each[IFC11]. It is also observed that the North and Northeast municipalities in Brazil account for the larger unbanked population and also have lower banking infrastructure capabilities. The southeast region stands as the region with the highest rates of banked population. The country also has 14 million banked households and 26 Million unbanked households[IFC11]. An Analysis of the Korea Market There are 19 operational banks in South Korea, four of which are seen to dominate the banking industry. The four main banks are Shinhan Financial Group, Woori Financial Group, Hana Bank and Kookmin Bank. These “Big four” institutions control 70 per cent of Korea’s banking industry. Quite noticeable is the fact that Hana Bank, Kookmin Bank and Shinhan Financial bank are majorly owned by foreigners[Jus16]. Rankings of the banks in 2014 by the World Bank had a list of the most effective banks in terms of the assets owned: Woori Finance Holdings, Shinhan Financial Group, Hanan Financial Group, KB Financial group, Industrial Bank of Korea, Korea Development Bank, BS Financial Group, DGB Financial Group (DGBFB)[Jus16]. The Woori bank which is the largest commercial bank in Korea has a customer base of more than 20 million customers and an employee count of 15000. The Shinhan Bank (subsidiary of the Shinhan Financial Group) which ranked second in performance has a consumer base of 22 million customers and 13,400 employees. This bank has 925 branches spread out across the country[Ana16]. The Analysis of the French Market situation Banking in France is quite advanced with the country being a global economic and financial giant. The largest banking institution in France, BNP Paribas is worth more than £2.0 Trillion in assets. The bank is also one of the top ten banks in the world. As of 29th April, this bank had its market capitalization valued at £ 60 Billion. The CIC group which also has an impressive global footprint has a substantial market share in the French banking industry with its 3.5 million customers served through its 2100 branches spread all over France[Ban16]. The Credit Agricole S.A (CASA) is another of the world’s top ten banks that operates in France. CASA boasts of a 50 million customer consumer base and is found in 70 countries in the world. Societe Generale which has over 3000 branches in France and 5,300 branches across the world is another banking institution that is well established in France[Ban16]. The generally appearing scenario is that France has a number of very powerful banks that are already globalized. The bank rankings according to World Bank are as follows: BNP Paribas, Credit Agricole Group, Societe Generale, Groupe BPCE, Credit Mutuel Group, La Banque Postale and HSBC France all in order of their performance from the best[Ban16]. Conclusions for each markets The Brazilian Market In trying to make an entry to the Brazilian market, the Bank of Queensland is required to develop enough muscle to compete with the existing banks. As seen, the banks in Brazil have over the years managed to merge and acquisitions that have seen the formation of higher concentration firms that a lot more powerful. This creates a very competitive environment which requires the entry of a foreign bank with such a bang in order to displace some banks or carry away its customers. The Bank of Queensland can also capitalise on serving the northern and north east regions which have poor banking infrastructure. In their entry in these regions the bank of Queensland should be devoted towards creating a working and viable business structure in order to see them serve the unbanked. With 26 million households being unbanked, an opportunity still exists for entry into the Brazilian banking industry, but this would also call for the Bank of Queensland managers and professionals coming utilizing their unique take over model. The Korean market The Korean market is seen as one that is dominated by several banking institutions. There are four banks dominating the presence of the 19 banks available in the country. The dominant banks are well structured with their branches being quite well spread out in the country. The Woori bank which was ranked the highest in assets holdings in 2014 has over 925 branches. The bank of Queensland on the other hand has approximately 300 branches. This means that for the Bank of Queensland to come up strong against the dominant banks, it should develop its networking capabilities right from its home ground. The Korean market may appear to be quite a closed one but the fact that they have foreign-owned banks translates to the fact that the Bank of Queensland has an opportunity to create its presence. This may however require the bank to be specific in service provision such as offering the best foreign exchange services in Korea[Jus16]. The French Market France is in itself a financial giant and is amongst the top ranking nations in the world that are doing very well economically. This could reflect two things about France: one is the existence of a ready market requiring to be tapped with the right strategy and two is that France could already be a saturated market requiring no more entries to serve the available consumers. The banking situation in France is well defined with there being the existence of over 22 banks all of which have been founded over a long period of time. Many of these banks are those that French citizens are already fond of .There is also the presence of banks that rank among the top ten banks in the world. This is a clear depiction of banks that have managed to set trends in the domestic scene before extending their prowess to the global scene. The national footprint of major banks is also well established. Societe Generale for instance has 3000 branches distributed all over the country. This portrays this industry as one in which little space is left for the entry of foreign banks. Most banks found in France have both domestic and international presence which clearly shows that they have managed to hone the expertise of their employees to be competitive internationally. The French market does not rank well in the consumer readiness in relation to the Bank of Queensland possible globalisation prospects, and entry to France would require an entry strategy that is well structured. Recommendations The Bank of Queensland can go to the heights of successful globalisation and have a global footprint if well calculated steps are taken to ensure that the bank does not succumb to the competition it faces in its prospect foreign markets. A three step globalisation process is recommended in order to ensure that no stone is left unturned in what can be termed as a sure process towards its growth. This process is based on the building of strength at each step of development in such a way that the bank is assured of being competent at each level of the development. Step 1- The development of the bank’s capabilities domestically While the Bank of Queensland has managed to build its good reputation in Australia, a plan to have it globalized would be based on taking that a notch higher. This means that this bank has to be rated as the best bank in Australia and granted leadership in the domestic market share. In order to achieve this, the management and professionals at the bank should develop a concise business model that should reap massive success in Australia alone[Ped09]. This model should be able to bring the Bank of Queensland to the capacity of an international bank. With this, the bank will imparted the necessary skills to its employees and they will have horned their expertise to operate in the international level. Step 2- The Exploration of the available options The bank of Queensland, after having achieved complete domestic control can then move on to the next step of the internalization process. The second step is all about the exploration of the existing banking opportunities existing for them to take over.[Ped09] The markets addressed for this case of internationalization are Brazil, France and Korea. As seen in the analysis of these three markets, there are available opportunities in these countries, but they differ in their scale. The bank of Queensland would have to establish available resources available for the globalisation venture. In Brazil, there is an opportunity to serve an unbanked population in the north and north east region municipalities. In Korea, there is an opportunity to provide specific banking activities such as foreign exchange provision. The French market is open to banking activities majorly, but heavy capital investments have to be made to increase the financial muscle of the Bank of Queensland in order to increase their financial capacity to compete with globally ranked banks. In the event that the Bank of Queensland is able to acquire enough funds, it can build a stable model in France that can form the foundation of take-overs in other parts of the World. Step 3- Making large scale entries and integrations The third step comes after the identification of the available opportunities in the prospect foreign markets. This steps largely involves the organisation of the body that is planning to spread its services to the international market[Ped09]. Upon the identification of the opportunities ready for exploitation in Brazil, France and Korea, the bank of Queensland should take active steps towards the actualization of their objectives. This includes creating a team that will deployed to these foreign countries. The heads of the teams should comprise of the employees of the Bank of Queensland who well understood the business model they are utilizing. Such would be best selected from each branch that the bank of Queensland has in Australia. In order to back up the prowess of the selected employees, the bank of Queensland needs to put together the available IT resources necessary for their effective service administration in the foreign markets. This also goes for the consolidation of their funds. They should at this stage look into their financial power. In the event that there are better performing banks in the foreign markets, the bank of Queensland should devote themselves to the acquisition of funds from more powerful financial institutions to fund their venture. In this scenario, the following actions are pertinent to achieving this third stage effectively: i) The bank should ensure that there is a solid IT team on the ground to take over the Brazil’s unserved regions. This would be in a bid to create their strength in these regions before going on to compete with the other banks already existing in the country. ii) The delegation of a hefty amount of funds for the French market which requires that any bank ready to stay afloat in the competitive financial waters be well prepared financially. iii) The creation of a team that is specific to address the need to exploit the opportunity of provision of foreign exchange services in Korea. The best analysts should be selected from the larger pool of BOQ’s employees. This third stage upon implementation will also see to it that the Bank of Queensland will eventually shift its attention back to the domestic strength to increase its operational strength then pass this on to the foreign markets once more. References The162: , (Queensland, n.d.), Lau14: , (Clause, 2014), IFC11: , (IFC, 2011), Jus16: , (Landed, n.d.), Ana16: , (Readiness, n.d.), Ban16: , (World, 2016), Ped09: , (Pedro Parada, 2009), Read More