Dissertation Chapter 1 - What are the Main Strategies for Bank of China to Develop International Business?
What are the Main Strategies for Bank of China to Develop International Business?
1.0 Chapter 1 Introduction
Traditionally, banks have economic functions including issuance of money, netting and settlement of payment, credit intermediation, credit quality improvement and maturity information. According to Holley (1997, p. 2), international commercial banks are now having an expanded role as opposed to their traditional roles. That traditional role basically refers to financing developing countries. However, commercial banks were never intended for long-term financing of capital projects. It is in this sense that commercial banks are gaining reputation nowadays as commercial banks aid transactions despite the borders.
Apart from this, banking channels are also becoming wider since it is now comprised of branch, banking centers or financial centers, computerized telecommunications such as automated teller machines and electronic transfers, banking logistics, telephone banking and online banking. These are perceived as either causation or resultant, or both, of globalization. How globalization affects the services of the banking industry is now at forefront of international debates. Global integrations is now regarded as the globalization of financial services including banking services. According to Berger et al (2002) basic to all banks are both nationality and reach. There are specific aspects contributing to the globalization of banking services such as technology, increasingly complicated customer requirements and needs and sustainable growth brought by competition. In the last three decades, many states and government embrace the idea of lifting important international banking regulatory barriers, making possible the transfer of cash as well as information via technology from geographically dispersed locations (Berger 2003).
Such condition also facilitates the international banking arena to evaluate and manage risks in a cost-effective manner. In the process, costs of supplying banking services across borders are effectively reduced. Further, the globalization of financial industry was “forced by the increasing international activities and trade of multinational corporations” (Krugman and Obstfeld 200, p. 649). While also, proponents of globalization perceived wider integrations as an opportunity for the banking industry to grow much further particularly through penetrating new markets and ground-breaking technological innovations which could enhance and advance banking services delivery. Globalization, nevertheless, had provided that banking industry a total restructuring in terms of providing economic and commercial services.
International strategies can be viewed as outcome of the interrelationship between industry characteristics, strategic flexibility and organizational capability (Segal-Horn and Faulkner 1999, p. 1). International strategies are defined as the strategies organizations use if they have domestic market operation as their primary market and converge into offshore markets as accessories, options and alternatives. The strengths companies can draw from international strategies include the independence of the country market while providing local needs and services offshore, maximize and centralized operational scale, the limitations of the direct presence in overseas markets with respect to sales and marketing and build and develop interdependent networks worldwide (p. 9). The weaknesses of international strategies is that it involves modern factors of production, different types of international trade; international polices, regulations and laws compliance; the role by the governments and the role of risk in international strategy.
To further enhance the company’s position in the international market, some companies are employing different strategies at corporate and international levels. The basis for decision-making is the product itself and the international scope and the process on how the company attempts at improving or adding values that are created by the business units such as the branches (Johnson and Scholes, 2002). To focus on value-adding elements, brand strategies are further pursued. Brand strategies are used to create a unique identity that will differentiate an organization from the competition. Brand identity of a company or the source of a promise to the customer will be repeatedly communicated. Prior to communicating the brand identity, there is the need for determining the brand objectives to have a clear definition of what the brand needs to achieve (Lake, 2009).
1.2 Statement of the Problem
International strategies and definitive branding strategies are important in building the competitiveness of the business. It is in this sense that Bank of China has been investigated. Despite the fierce competition in the global financial market, how the Bank of China will thrive through its international and specific brand strategies and whether Bank of China Guangxi branch competitive enough to penetrate the global financial market are not explored. Competitiveness is the ability and performance of a firm towards acquiring sustainability, growth and development. As such, there is the need to determine the level of competitiveness of Bank of China Guangxi branch to distinguish the strategic capabilities that could bring global success for the company.
Other questions that are explored include: How does Bank of China conduct both strategies in work processes? Specifically, how international strategies correlate with brand strategies? These are the questions in line with how Bank of China Guangxi brand will compete with foreign banks. Competition means to utilize strategies that are difficult to imitate to acquire sustainable competitive advantage. And so, how are international strategies and brand strategies will bring sustainable competitive advantage to Bank of China Guangxi branch must be also investigated. Another question yet to be answered is: Are international strategies and brand strategies will bring success to Bank of China Guangxi branch with reference to the competition?
1.3 Aims and Objectives
The investigated the competitiveness of Bank of China Guangxi branch and its desire to compete internationally. Also, the study explored the employed international and brand strategies of Bank of China. In lieu with this, other research objectives are accomplished such as:
- Determined how these strategies impact the competitiveness of Bank of China Guangxi branch
- Determined how, through these strategies, Bank of China Guangxi branch will compete with foreign banks
1.4 Justification of the Study
The study is a significant endeavor in gaining in-depth understanding of the main strategies in developing an international business. In this study, recommendations for new strategies are included, all of which are supposed to be of importance to Bank of China. This research has also been significant to the field of banking research as it may unravel useful strategies not only for Bank of China but to all banks that are planning to move into the global context. Moreover, this study is an important contribution to a body of research on strategizing in the global market. The study is also significant to MBA students as it may serve as useful reference for future researchers and those who will seek information about international branding strategies. Overall, it may help boosts the growth of global banking research.
1.5 Conceptual Framework
1.6 Scope and Delimitation of the Study
This dissertation will investigate competitiveness of Bank of China Guangxi branch specifically in area of international competition. Respondents will be only asked about the employed brand strategies of Bank of China and working in the organisation will definitely influence their responses to the questions. A questionnaire was developed for this which includes the impact of brand strategies on competitiveness mostly with questions that are not immediately addressed in other studies. The outcome of this study only pertains to the primary data gathered from the result of the questionnaires that will be conducted by the researcher.
1.7 Limitations of the Study
The study is limited on the main strategies that Bank of China applied so that it can operate internationally. The utilisation of a case study company may be also a limitation because of the fact that it cannot make generalisations. The study cannot also generalise with relation to the Chinese financial industry as well. The study is also limited on the pieces of information that the respondents are willing to disclose. It is limited to the respondents’ capability to answer such questions. The survey process itself could have hindered the collection of results.
1.8 Definition of Terms
1.9 Chapter Outline
The study is composed of five chapters. This chapter consists of background of the study, statement of the problem, importance of the study, scope, delimitations and limitations and conceptual framework. The second chapter reviews project management, the marketing strategies commonly applied in the financial sector particularly of the banks and how they make their market-related decisions. Methodologies used for this study are discussed in the third chapter while the results of the survey were presented in the fourth chapter. The fifth chapter summarises the study and provides conclusions and recommendations.