The Global Market Entry Strategies Of Banks Commerce Essay

The Global Market Entry Strategies Of Banks Commerce EssayThe muser summary was enunciated to ascertain the take aims of the assembles the external milieu plays in the globose merchandise argonna. The orbicular commercialise accounting innovation strategy remains an chief(prenominal) central point in spherical grocery store as banks in an effort to enhance emergence and pick expand to other distant markets to remain war-ridden in a turbulent and ever so changing production line environment. This research took a cursory look at the various elements that determines the options available to financial institutions particularly banks as the path of insertion varies found on disparate criteria and how such ratiocinations are made, the advantages and disadvantages of joint ventures, strategical alliances and mergers acquisition were appropriately considered. These elements also includes the central theories of marketing strategic environment, the eclectic, t he melody doughwork, the institutionalization and the re seed based theories of unknown direct investment, the different market entry choice open for banks was analysed.The market conditions that influences the decision of banks in selecting markets are analysed (the internal and external conditions), the market entry partner selection criteria was enunciated. Guaranty Trust Bank Plc. has taken a look at the disadvantages of the partnership elbow room and hence opted for the choice of not adopting these styles of market entry as the countries it is participating in had not stringent protectionist regulation, all these countries of Gambia, gold coast, Sierra Leone and Liberia all needed the influx of inappropriate direct investment from neighbour nations. GTBank however opted for the establishment of subsidiaries in these countries by taking the grow brand straight into the markets of its choice, the branded products were internationalized.This gives it the leverage to curb def inite decisions and determine the steps, pace and determine the direction in which it decides to operate. This fashion of market entry strategy enhanced GTBanks chances of being innovative and to compete favourably in its continuous drive to attain maximum height in the globose melody environment it finds itself. This has contributed to the successive growth of the bank in the tungsten African sub-region. Had it opted for the partnership strategy, it would have been restricted from undertaken and exploring the market as much as requisite the partial if not, total control of the principal it so affiliated itself to. This limits its capabilities and strides to the views and acceptance of the principal partner in the host sylvan and this weakens its innovative drive.GTBank plc. in an effort to seek refinement has subsidiaries in emerging financial markets of Sierra-Leone, Liberia, Ghana and Gambia with a correspondent outlet in United Kingdom. This has brought in a revolution ary trend in the style and system of conducting banking business in the westbound African sub-region. It is along this line that this research examines the entries style and strategies employed and other considerations by the bank.ACKNOWLEDGEMENTSI would like to extend my gratitude to the following for giving me full patronise through the course of this project.Many thanks to the branch manager of GTB, and other department heads that helped me with my take in.I would also like to thank my supervisor, Barny Morris for providing support and guidance whenever I needed it.Lastly, I would like to give special thanks to my father Mr Barda, and my sister Fatima Barda for supporting me throughout my years of study.CHAPTER ONE2.0.INTRODUCTIONThe global financial meltdown has necessitated the re-strategizing of different financial institutions with Guaranty Trust Bank Plc Nigeria having to change its marketing strategies continuously and seek to internationalize by going into different for eign markets. There are two advantages that necessitated theaters involving in global marketing, the idea of sustainable growth and expansion and a tacit route for survival in the ever competitive financial business environment (Buckley and Carson 1996).Guaranty Trust Bank Plc was incorporated as a limited liability company licensed to generate commercial and other banking services to the Nigerian public in 1990, commenced operations in February 1991and became publicly quoted company on the Nigerian stock exchange in September 1996, In February 2002, GTBank was granted a universal banking license and later appointed a settlement bank by the Central Bank of Nigeria in 2003.Guaranty Trust Bank undertook its second share offering in 2004 and successfully raised over N11 billion from Nigerian Investors to expand its operations and favourably compete with other global financial institutions.The Central Bank of Nigeria raised the minimum capital base of banks operating in Nigeria to N25 billion in 2005 as part of the regulating bodys efforts to sanitize and streng wherefore the financial institutions in Nigerian, GTBank subsequently met this criteria(CBN bulletin, 2006), in post-consolidation, Guaranty Trust Bank Plc made a strategic decision to actively pursue retail banking.A major rebranding exercise followed in June 2005, and GTBank began an aggressive expansion strategy and taking the product brand to Ghana, Gambia, Liberia, Sierra Leon, and a correspondence outlet in United Kingdom (GTB Home 2011)What are the seek Questions?1What is the foreign market entry strategy that GTBank use in its quest for global expansion and growth?Did the choices of foreign market entry option work for Guaranty Trust Bank in its quest for global expansion and growth?Did the Market entry option strategy contribute to Guaranty Trust Bank competitiveness?Global marketing entry strategies hasBM1been an underlining component part towards sustainable growth, expansion and survival of all financial institutions in the wBM2orld, the rationale behind this research is to ascertain the importance financial institutions like GTBank derive from theirglobal entry strategiesBM3in the bid for competitiveness in the global financial markets.The last global financial crisis that led to several multi-global financial institutions like Goldman Sachs and Lehmann Brothers went give a federal agency and how a financial institution like GTbank may use its market entry strategies to effect and continue its quest for sustainable growth and continuous expansionSceptics believe the doomsday was just postponed and not averted entirelyBM4hence there is still a continued global feeling of another more clinical meltdown envisaged in the nearest future. For its continuing sustainability and expansions, GTBank choice of market entry strategy is vital so as to consolidate or plan its freeing strategy as well.Financial institutions are said to be the engine room of all economic activities such as borrowing, investments, consumption spending, net exports, net government spending, and foreign exchange. This research will shed light on how Guaranty Trust Bank Plc stimulated these economic activities in different countries and enhances its growth by its choice of market entry optionsThe aims and objectives of this ResearchThe aim of this research is to look into the global market entry strategies, and how invaluable these strategies are to the overall groundwork of guaranty trust bank market entry strategy as it seek to expand into other territories.Objectives of this research areTo review the global market entry strategies.Examine the actual and potential effects of global market entry strategies on Guaranty Trust Bank.Examine the extent to which Global market entry strategy improves growth and sustainable expansion of Guaranty Trust BankMethodologyThis research is based on a case study approach and is largely qualitative and primary data will be used as interviews wi ll be conducted of six person in different departments of GTBank and data from educational Journals, periodical, educational Textbooks, Studies and Reports of institutions, Newsletters, internet sources in addition to erstwhile various related published educational sources will be extensively used.establishment of this ResearchThis Research is organized as followsChapter one contains the introduction to the study, which incorporatesAims/objectives of the studyAn outline of the research methodological analysis to be used in satisfying the aimsResearch questionsA brief outline of the subsequent chaptersChapter two consists of literature review and theoretical frameworkThis chapterSummarise what other studies have done, their methods their allows, and case studiesChapter three contains methodology of ResearchDescribing the data, providing descriptive statistics intimately the data (charts and tables), explain data collection, explain the analysis of the data.Chapter four is the discu ssion of findings.Chapter five contains recommendations and conclusionCHAPTERTWOBM5INTRODUCTIONRugman (1996) state that global market entry strategic decisions are taken by flyings due to economic reasons either for the purposes of expansion and sustainable growth or for the purpose of survival in a volatile competitive market environmentBM6In the last decade there has been alarge significantBM7increase in cross-border entriesBM8by banks,it has been acknowledged thatinter inBM9recent years has exceeded the combined total of numbers ofpartnershipBM10formed in decades (Aimin 2001, et al).BM11The over saturation of financial institutions in Nigeria led toBM12several banking groups to attempt expanding in provision of services to neighbouring countries and beyond.Craig and Douglas.,BM13(2006BM14) argued that market entry strategies are shaped by the dynamic interplay of the driving and restraining forces of globalization, with increasing and rapid technological advancement, the marke t need of the local economy, the firms seeking leverage, the quality of product introduced and the world economic trend while the restraining forces are organizational culture, market difference, direction myopia, barriers and national control.BM15As banks seek fast growth globally, the choice of market entry strategic mode became an issue, as it is an important decision for banks seeking global participation and competitiveness (Buckley and Carson 1996).The selection of an appropriate market entry mode in a foreign market may have considerable effect on a firm either it necessitates growth or causes extensive damage to a firms sustainable growth and survival(Davidson, 1982BM16Gatignon and Anderson, 1988BM17 Root, 1994Terpstra and Sarathy, 1994BM18). The subsequent selection of an discrepant entry mode may block opportunities and hinder growth by limiting the array of strategic market entry options available to the firm (AldersonBM19, 1957)This could result in considerable financi al losses to the firm, including the firms exit from the foreign market, an example is the Merrill Lynch failure in Japan in the 1980s, in its attempt to bring down the private client services market, the mode of market entry was at variance with the Japanese protectionist foreign firm regulations at that time which was highly repressing of foreign firms(Hill, 2002).BM20GTB plc. in its quest for global expansion and sustainable growth must undertake an extensive market research analysis toBM21study the foreign business environment it intends operating in asScottBM22(1981) observed that the best way to organize a firm depends on the nature of the environment to which the firm operates. APESTLEanalysis is done to ascertain the viability and profitability of the intended local market before choosing an appropriate market entry mode based on that.Kotler (1998)BM23defined PESTLE Analysis as a utile strategic tool for understanding market growth or decline, business countersink and di rection for Operations. Williams and Green (1997) suggested that the PESTEL Analysis also allows an Organisation to have a competitive advantage over other firms in the industry and this technique is used to evaluate and identify the Political, Economic, Social, Technological, Legal and Environmental factors in a given economy that would affect the operation of an organization.Source Johnson scholesBM24(2008)The political factor is always necessary to be evaluated, in order to know the favourability of the political climate to market growth and development in a particular country, as the stability of government, its revenue enhancement Policies, and Attitude towardsforeign investment is crucial to the survival of the firm. The foreign governments economic framework is accessed to measure the state of the economy by considering the GDP statistical growth, the charter level, the disposable income, Unemployment rate, business cycle and viability of participating in the country. The r ate and growth of population is also measured to determine changes in the tasteBM25and preferences of consumers, changes in the life style of consumers and the level of education of the populace, which would have a great effect on the demand of the products or services provided by GTB plc.The laws and regulations that exist in the foreign business environment is gauged to ascertain the legislative constraints or changes, such as health and safety legislation, working regulations or restrictions on company mergers and acquisitions, minimum wage cap. porter (1996BM26) believed environmental laws and regulation help push firms towards innovation that will reduce their cost against the cost of keeping to the regulation. The PESTEL analysis is a very relevant and useful tool in analysing the external business environment as Henry. (2008) posited that it allows the firm full and informed knowledge of the foreign business environment the firm intends entering, and contributes to the come ly understanding of the competitive nature of the business environment that may affect the firm.HiebingBM27et al (2011) advanced that, the nature of the competitors in the market, the consumers and government actions contributes in the development of a sustainable competitive advantage over its competitors. From researching the business environment, the firm might be able to see disguised opportunities (Zheng,.2009)Other scholars Williams and Green (1997) considers PESTLE analysis as a waste of time since the business environment is unpredictable such analysis might become needless, as the business environment is considered uncertain. The business environment is uncontrollable hence the probability of situations arising that cannot becontrolledBM28FOCAL THEORIES OF MARKET ENTRY STRATEGIESThere have been different debates on the best entry mode option firms should use to enter foreign markets most of these theories are focused on the manufacturing domains with a peripheral research done on the services sector (Ekeledo and Sivakumar1998BM29).A financial institution like GTBank Plc offers products as well as services. There are several theories of foreign direct investment as it relates to the market entry strategies of firms and financial institutions, but for the purpose of this research 3 related theories will be analysed.The Business Network theoryBM30as the business environment is crucial for the banks strategic participation, theinstitutionalization theoryBM31that focuses on the difference between the institutional laws, culture of the home or host country, theEclectic theoryBM32as this looked at the concept of determining factors that categorized a firm as a host or source firm, and the resource based theory that look at resources as the main reason firm enter new foreign markets.The joint venture market entry mode, the strategic alliance market entry mode and the mergers and acquisition entry mode is also reviewedBM33. Carson (1993) opinedthe conceptuali zation of the business network theory is primed that the business market environment focuses on particularized relationships between suppliers and the consumers as the two actors in business. At the heart of this approach lies the assumption that suppliers and customers are engaged in long-lasting relationships that they consider to be important for their business as empirical data related to some one thousand business relationships in European markets showed that most firms operate in markets where a limited number of customers account for a considerable proportion of the firms sales (Hakansson 1982 Turnbull and Valla 1986).Theinstitutionalizationtheorydeals with the difference between the institutions in the country of origin and in the receiving subsidiarys country by understanding the complex differences between national business systems through gaining an understanding of institutions governing the way product labour and financial markets work and the way institutional sectors relate to one another ( Baptista, 2009)Such cross-national differences place various degrees of constraints on the international dissemination of practices within multinational firms (Fermer et al 2005). It has been proposed that the key variant in this context is institutional distance (Kostova and Zaheer 1999). This comprises the differences in the regulation, normative and cognitive institutions between countries, for example corporate tax policy, peoples attitude to gender issues, and knowledge about possible environmental threats.Dunning (1980) introduced the concept of an eclectic theory of foreign direct investments often referred to as the OLI paradigm, which refers to the determining conditions for a firm to be a source or a host, these acronyms stands for Ownership advantages which allows a firm to overcome the disadvantages of a foreign location, this can be a product, or a production make for to which other firms do not have access, such as patent or trademark, Locati on considerations such as input costs, strategic interaction or trade policy which make it more profitable to produce in a country than to export to it and Internalization gains which makes it more profitable for a firm to undertake foreign production itself rather than dealing with a foreign partner more familiar with the local environment (Sodersten, Reed 1994).Markusen (1995, 1998) reviewed the OLI paradigm by listing major characteristics of firms as, that multinational firms are associated with high ratios of research development relative to sales, employ large number of scientific, technical workers as a constituent of total work-force, tend to have a high value of intangible assets, are associated with new and technically complex products, are negatively associated with plant level scale economies, are associated with product differentiation variables such as advertising to sale ratios, that the size of a firm is minimally unimportant to be considered a multinational and th at multinational firms tend to be older more established firms (BM34Marrewijk, 2002).Itaki (1991) argued that the concept of the eclectic theory is however flawed, as a result of the pleonasmoftheconcept of ownership advantage, it is assumed redundant because it originates fromtheinternalization and integration theories and that firms tend to acquire and exploittheownership advantages and thattheownership advantage includesthecostofits acquisition and that afterward paying forthecontributionofallthefactor inputs, the firm makes super-normal profit that remains inthefinal results simply fromthefirms organizational powerinvarious departments or sub units andthe issue oftheinseparabilityoftheownership advantage fromthelocation advantage is another matter of note.The resource-based theory of foreign direct investments views firm-specific resources such as assets capabilities, as the focal drivers of a firms international business strategy, scholars such as Barney (1991), Bharadwaj et al, 1993, and Grant (1991) even though affirming the theory as the most effective theory of international business strategy considers the theory as largely conceptual and descriptive.Root, (1994) urged financial institutions and Banks entering foreign markets to decide on the most suitable entry strategy, the market entry option selection is interpreted to mean an appropriate means for firms to enter foreign markets to participate in international businesses by exploiting their advantages.Banks also need to set up ownership, either as a wholly owned subsidiary, in a joint venture, or in strategic alliance.There are several mode of market entry strategy adopted by banks whenBM35entering a new market as the entry mode choice is not inevitably straightforward.A bank may pursue different market entry routes in different foreign markets for different banking reasons.There are often constraints to foreign entry in the banking sector which home governments try to regulate in other to pro tect the home banks, which add to the complexity of choice of market entry strategy.BM36Joint ventures are considered as the best global market entry strategy and the most cost effective means of expanding to foreign business environment (Hunt and Morgan.,1995) It has been suggested that joint ventures occur as a result of the perceived insistence of nation government to gain international firms for the purposes of foreign direct investments (Buckley and Carson 1996).Firms ordinarily though form alliances for the singular reasons of value chains and different product offerings. Joint equity are basically the type of joint venture nations governments do encourage because of the gains that can be offered in terms of shared technological advancements to the local firms.The advantages of joint venture to banks is that it addresses the issue of uncertainty by the combined creation of observe mechanism that could align such uncertainties for the partners, to reveal information, share te chnology, make decisions together and pursue certain goals collectivelyVernon (1983).This assertion was agreed upon by Pfeffer and Salancik(1978) who renowned then that if the problems firms face are competitive and symbiotic, then it can be presumed that joint ventures are undertaken to reduce uncertainties and promote stability in the business environment.Gringer (1991), Beamish and Danks(1987) noted that globally majority of banks establishes business partnerships when the perceived additional benefits outweighs the expected extra cost after undertaken a cost-benefit analysis. It was established by Harigan (1988) that firms form partnership for strategic reasons and argued that joint ventures can exacerbate competition, stabilize profit level, and precipitate in structural changes in vertical integration, technological scale of economies or industry traits.Blodgett (1991) noted that joint venture market entry strategic option could be advantageous in form