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04/12/2012

Dissertation Chapter 2 - Marketing Strategy In China


Chapter 2 Literature Review

 

 

Bank sector

Throughout the period since World War II, credit unions, savings and loans, mutual funds, and other nonbank financial-service providers have posed a significant challenge to banking's leadership as the premier lender, savings depository, and payments agent for households and businesses. Instead of chartering many new banks and thrifts, governments settled on a plan to lower the barriers to competition between existing banks and thrifts, so that these long-separated industries could offer many of the same services. This meant giving thrift institutions, which then had far fewer service powers than commercial banks, new commercial and consumer loan and deposit powers as well as access to trust services and credit cards. In contrast, commercial banks already possessed most of these new services and thus gained little except for the lifting of federal ceilings imposed on the interest rates attached to bank deposits from the deregulation movement (Canals, 1997). The ranks of banking's competitors were further swelled when companies began selling deposits, insurance, and other services by telephone, fax machine, and personal computer to households across the nation. At roughly the same time some industrial and service corporations launched credit card programs as a supplement to their main business lines, while insurance companies developed a full line of financial services for large corporations previously the mainstay of bank lending and leasing programs (Smith & Walter, 1997).

Despite rapid ATM growth, full-service banking offices advanced from less than forty-six thousand in 1980 to more than sixty thousand in 1994 and may continue to grow for a time alongside computer networks and automated machines to benefit those customers who do not trust or understand the new information technologies and to serve as a necessary platform for the sale of an ever expanding range of bank services, from credit and savings to retirement planning and risk management. Sustained prosperity often seems to breed contempt for prudent and careful lending practices. Moreover, a nation's overall prosperity masked serious economic problems in selected regions of a country where the collapse of real estate and energy markets resulted in a glut of nonperforming loans that overwhelmed the capital of both large and small banking organizations. Anxious to find new capital in order to rescue troubled banks and thrift institutions, many states passed liberal interstate banking laws in an effort to encourage outside banking companies to enter and bring their expertise to bear upon the problems at hand (Ashdown, 2002). The high-net-worth private banking client is likely to remain an important factor in international banking for the foreseeable future, although the pattern of wealth ownership will probably shift steadily from inherited wealth to that created by the current generation. The passing of property rights from one generation to another is constantly subject to fiscal and political challenge. At the same time, newly created wealth appears ever more acceptable alongside market-oriented economic policies (Rose, 1997).

Economic structures are becoming increasingly competitive, which simultaneously diminishes the chances of successive generations successfully retaining the wealth earned by their forebears and increases the chances that the newly wealthy will be sharper thinking and more international in outlook. Private banking players will have to adapt to these changes, remembering that their fate ultimately will be sealed by the quality of the human resources they are able to attract to what essentially remains a people business (Macesich, 2000).  Retail banking is one part of the financial services industry that does not lend itself particularly well to globalization. Some retail activities such as traveler’s checks and plastic are important exceptions. Others are highly idiosyncratic and local and this requires a great deal of adaptation of competitive advantages in products and processes. Indeed, the key success factors in retail banking may in the end be more related to a keen awareness of the market than to technology and systems. Nonetheless, it is clear that international and even global niches exist in specific retail financial services, ranging from mortgage and consumer lending, stockbrokerage and mutual funds, to family financial planning. The jury remains out on whether there is a role for truly global retail financial services players in the future. And it is clear that global branding is possible in the financial services sector as well. So far, only American Express and perhaps Citicorp have succeeded in developing a global consumer franchise. Achieving and preserving credibility on the part of central banks and monetary authorities is indeed critical. Some observers argue that the monetary authorities actually limit the scope of their discretion by adhering to a fairly restrictive rule or set of rules governing the determination of the money. Indeed, the type of behavior necessary to convince the public of the authorities' determination could most likely resemble a nondiscretionary path. The fact is that a major difficulty in designing an optimal monetary arrangement is that people do not know enough about the rate at which the credibility of monetary authorities is eroded by the exercise of discretionary power (Osano & Tachibanaki, 2001). The banking sector differs in varying countries. One banking sector that has unique features is the one in China.

Banking in China

In most market economies when borrowers cannot meet their debt obligations for two consecutive months’ lenders call in the loans and eventually force the borrower to foreclose and liquidate the assets placed on collateral for the loan. And in most market economies, government regulators monitor closely the financial performance of thrifts, especially their reserves, shutting down the insolvent ones. In most market economies, banks screen prospective clients and set lending rates according to their ability to repay loans. As a rule this is not the case in China, when price destruction and slower economic growth worsened the economic conditions of SOEs (Arayama & Mourdoukoutas, 2000).  In an effort to keep SOEs afloat and preserve employment for millions, Chinese bureaucrats have been overtaken by growth hysteria, turning to infrastructure projects to make up for the slowdown in export growth and the shortfall in foreign investments. With eroding tax revenues, government bureaucrats have found monetary policy and banking credit in particular the sole vehicle of financing such projects. In fact, government bureaucrats have been ordering state banks to expand their credit to already-bankrupt SOEs by Western standards, precipitating rather than ending the banking crisis (Alexandroff, Gomez & Ostry, 2003). 

In industry and commerce the state-owned sector is shrinking, with many of the state-owned industrial enterprises a third or more operating at a loss and producing products that no one wants to buy. Much cotton yam, for example, is made with antiquated machinery and is of a low quality unsuitable for export goods, thus wasting scarce raw cotton supplies. Many in the leadership understand that the critical next stage of the reforms is to withdraw state subsidies and cheap capital from failing government companies but so far have been unwilling to face the daunting obstacles to such fateful changes. Standing in the way of reforms are: remnants of socialist ideology, especially at the center, while the provinces and localities are keen on privatization; huge inter enterprise debts and their un repayable bank loans; lack of a social security system for redundant workers, and hence fear of worker unrest; immature legal and banking systems unable to discipline enterprises; and weak labor and housing markets. There are some experiments underway to separate state ownership from management, but it is still very unclear how this will operate. Debate over privatization is also debate over the future of the state (Kiggundu, 2002). American aid encouraged the establishment of commercial banks to assist. Although official patronage was often useful, the largest part of Chinese-owned modern industry was privately owned and the entire foreign-owned sector was private. Private Banks existed alongside the more powerful government banks, while domestic commerce was almost entirely in private hands. American aid encouraged the establishment of commercial banks to assist medium-and small-scale enterprises. In general, the initial capitalization of such enterprises came from relatives or friends (Dipchand, Mingjia & Yichun, 1994).

Taking 1980 as an example, medium-and small-scale enterprises shared only 32.75 percent of the total loans from Taiwan's banks, while the island's large enterprises enjoyed the lion's share of bank loans. Banks for medium-and small-scale enterprises were established to avoid having these businesses resort to underground banks. Government support for family farms, single-unit banks, and independent retailers was a vital influence in the evolution of those industries. In other instances, new economic relationships, such as franchising, enabled small firms to take advantage of the growth of large corporations. The underlying theme of all these studies is the adaptation of small business to the rise of big business (Gardella, Leonard & McElderry, 1998). During the late 1950s, many old commercial banks were closed and most of their archival materials transferred to the research unit of the Shanghai Branch of the People's Bank of China. Archives of the native banks were likewise placed with the same unit. Although this research unit houses around 1,200 volumes of materials, these documents are still not available to the public. The same unit also houses 3,479 volumes of materials on forty-seven Chinese and four foreign insurance companies. These archives include private correspondence, operational reports, insurance contracts, regulations, minutes of the board of directors, personnel reports, and introductions to the insurance business. They contain a large quantity of the private correspondence of the Bao Hua Insurance Company, including books, auditing reports, and maps of Shanghai and other port cities. The pawnshop archives contain the debit and credit accounting books of dividends, cash diaries, and contracts. The Trust Company's Archives contain several minutes of the board of directors, lists of shareholders, operational regulations, telephone books, personnel records, and salary records (Wasserstrom, 2002). The growth of business in China affected and influenced how the country’s banking system changed over the years. Banks and Financial institutions in China provide services similar to their foreign counterparts. Whether it is in China or not, banks offer varying kinds of services that caters to the different needs of their clients.

Services of banks

Banks are institutions that allow for  storage of money, the money stored is then deposited or invested into other financial activities. Banks serve as a collection agent that can be used to serve as an alternative form of paying someone. Banks have various services that make it easier for clients to pay others without the physical cash. Consumers' lifestyles, technology evolution, economic forces, new market entrants and the need for businesses to collaborate are changing the product offerings of financial services firms. The services of bank added to the process of globalization, financial management and the introduction of newer technologies help banks reach for higher profits and better image in a market Schuster, 2000). For many firms, a legacy rooted in traditional banking often frustrates the organization's ability to fashion products that meet the current desires of customers. This product latency is an inability to alter well entrenched business processes and incumbent bureaucracies that offer a stable structure in which to work. These components of business have traditionally provided the means in which a financial services firm could operate profitably and reflect the primary element of the value proposition presented by banks that appealed to customers and, more importantly, to their money (Findlay & Warren, 2000).

Stability, structure, security, and safety best describe the inherent value proposition of twentieth-century banks.  A safe intermediary that stores money until it is needed to transact business, providing a fiduciary conduit to markets beyond where one does business, is no longer a guaranteed proposition for sustaining long-term value. The biggest challenge that financial services firms face is the lack of a clear value proposition, especially because the role of an intermediary is being redefined and customers have reservations about the associated rising fees. Generations of financial services firms have labored under the concept that a bank is a stand-alone entity servicing a specific market requirement, without considering that the integration of additional related services fosters the need to think along the lines of a digital value chain, not simply reapplying technology but fundamentally rethinking how to derive value. As members of a value chain, firms should be examining the incremental value they add to a transaction (Cranston, 1997).  Providing a distinctive value-added service will be an essential ingredient to competing as the traditional functions of financial services intermediaries become commoditized by technology. Traditionally, businesses exist for the principal purpose of finding and serving customers, satisfying a desire or a need. Profit results from fairly pricing the delivered satisfaction and controlling cost. Many financial services organizations have misinterpreted the concept of a value proposition as being merely a low-cost provider, and have failed to understand that a value proposition is the synergistic relationship between market-driven pricing, quality, timeliness, availability and any factor deemed valuable by the customer, and the cost of providing those valued factors and the incremental profit that can be achieved in excelling at any one of the factors (Divanna, 2002). 

The value proposition of the digital value chain extends this traditional view of business, using technology as a prime but not exclusive vehicle for doing business, redesigning business explicitly for the digital marketplace, while leveraging the role of digital assets. Financial services firms must expand the definition of a digital value chain to include non-digital processes, and balance both a virtual delivery of product offerings with the physical delivery of services, resulting in a click-and-mortar strategy. Financial services firms must re-examine the value they add to transactions and determine what the primary added value is, if it will remain valuable over time and if it is perceived by customers as a clear differentiation in the market. Financial services organizations are presented with a wide range of opportunities to leverage these technologies into product offerings that supplement everyday lives and streamline core banking services (Selgin, 1996). Pervasive technologies provide a financial services firm with the opportunity to rethink what they offer, how it is delivered and, more importantly, why a product or service offering is valuable to a customer. The long-term implications of these technologies are to change the view of technology as an asset and begin to manage it as a liability. This is not to say that technology should be treated as a liability; on the contrary, the management of technology should be as if its value declines over time. Banking services are important intermediate inputs to other sectors of an economy. Such services facilitate transactions and allocate financial resources, and provide services to manage risk. They need to be supplied in a competitive, efficient and stable environment. Governments impose restrictions on trade in banking services to achieve various objectives. Some restrictions may aim to restrict trade deliberately, while others may be imposed for prudential reasons. Prudential requirements are usually necessary to ensure the efficiency and stability of a banking system (Gup, 2003). Banks provide almost all kinds of payment or financial related  services, and a bank account is important because it is indispensable for most businesses, individuals and the government.

Advertisements and business

Within the liberal paradigm, power is understood as diffused and society is composed of groups with competing interests. The communications media are seen as reflecting reality, or perhaps distorting it for specific purposes. The relationship of the media to the society is that of a corrective where the media has social responsibility to act as a watchdog or fourth estate, a position that includes even advertising. The relationship of the media to social or behavioral change is seen as potentially positive; thus, if advertising is not responsible it must be brought into line used for pro social purposes. And finally, ideology is understood as beliefs along a political spectrum, but it is not theorized in any special way as a social practice to be controlled (Page & Tosh, 2005). All take a highly critical view toward advertising and apparently are either rejected out of hand or perhaps unread by advertising researchers. Yet their research is highly suggestive, both for criticism and for industry-related needs in the complex international environment. Advertising is one of the prime products of a postmodern world, where the production of consumable objects is being increasingly abetted by the production of productions, that is, the production of markets with specific knowledge and needs (O'Shanghnessy, J. & O'Shanghnessy, N, 2004).

Advertising research in an era of multinationalism and the increasing success of monopoly capitalism, and the rhetoric of freedom and democracy, must be able to deal explicitly with profound contradiction, rather than rewrite contradiction as outlayers or as unaccounted variance. Advertising is a particularly rich field through which to explore intertextuality. Advertisers are constantly looking for ways of gaining the attention of audiences through clever, thought-provoking advertisements. One way to do this is through reference to other media texts (Kruger, Rayner  & Wall, 2004).There are several benefits to the advertiser from adopting this strategy. First, it situates the audience inside the joke, feeling pleased and included because they get what is happening. Second, by association it imbues the advertised product with the often powerful connotations of the original text. Some of the clearest examples of intertextuality within the media can be found within advertising. However, the intertextuality of advertising campaigns such as this one may also offer audiences enormous pleasure because they allow them to celebrate and share their cultural knowledge. This point may be extended, since the intertextuality of advertising not only involves an audience's recognition of references drawn from popular culture, but also what may be labeled high culture, as some campaigns use images from fine art, opera and classical theatre (Englis, 1994). Whatever the cultural source of the intertextuality present in many advertisements, it undoubtedly offers audiences a range of pleasures, and in doing so creates meaning in a number of ways. It may be argued that the referencing in so much contemporary advertising potentially empowers consumers, as it allows them to exchange their knowledge of other cultural references in a social context such as the workplace, when discussing the previous evening's television viewing (Hood, 2005).   

Advertisements are signs, and through their systems of codes is a powerful carrier of ideology. Ideology is one of the key concepts of Media Studies, and advertisements are key texts in any analysis of the way in which ideology works. Advertising can create a mythology to surround a product. This has been pre-eminently true of the Belgian lager Stella Artois, for which a long series of advertisements set in historical contexts and celebrating the drink have been created. The effect is really to provide a bogus pedigree or manufactured ancestry; the product is encased in a nimbus of ancient-seeming tales that attest to its astonishing status, tradition and exclusivity (Barthel, 1998).Any brand that continues to be associated in advertising with something desirable like a luxurious, exciting lifestyle will be infiltrated by some of the prized qualities: the desirable associations become attached to or fused with the brand in forming its image (Alwitt & Mitchell, 2005). The danger is that these associations will identify the brand indelibly with a particular generation, so the brand ages and loses its appeal to the young. The critique of the current state of international advertising research reveals that international communication theory has been disregarded. Many of the concepts that contribute to the first dominant paradigm of international communication are commonly but naively applied in both social psychological and culturally oriented advertising research. That these concepts, and their underlying assumptions, have been questioned and expanded, and in some cases discredited or replaced in international communication research, suggests that conclusions reached may not be helpful in understanding advertising's relationship to the international market place or the consumer (Cronin, 2000).Advertisements give a unique identity to a business and it makes sure that a firm would be known by more individuals, Advertisements help a business sell a product through making use of various concepts such as nostalgia, symbolism and cultural differences. Advertisements try to endear a business to the society and the concept that is dearer to them.

Bank of China

The Bank of China Limited was established in 1912, it specialized in international banking activities under the KMT government. In May 1949, when Shanghai was liberated, the People's Government took over the bank, confiscated its assets, and restructured the management team. In November 1949, the head office was moved from Shanghai to Beijing, and in October 1953, the Government Administrative Council designated BOC as a specialized bank to deal with foreign exchange under the leadership of PBOC (Li, 2002). The Bank of China (BOC) was primarily concerned with foreign exchange business, while in the rural areas, credit cooperatives operated under trying circumstances to mobilize rural savings for rural development. The Bank of China was established in February 1912 and was operated jointly by the Chinese government and merchants from a head office in Shanghai. Its predecessor was the Bank of Great Qing, a government bank of the Qing dynasty, which was overthrown in October 1911. The bank operated as a state bank until 1928, when the Kuomintang government authorized the Bank of China to specialize in international banking activities. In May 1949, when Shanghai was liberated, the People's Government took over the bank, confiscated its assets, and restructured the management team (Lardy, 1998). 

 In November 1949, the head office was moved to Beijing, and in October 1953, the Government Administrative Council designated the Bank of China as a specialized bank to deal with foreign exchange under the leadership of the People's Bank of China. In 1979, the State Council took the bank under its leadership and confirmed its role as a foreign exchange and foreign trade bank (Garnaut & Song, 2004) The bank’s management include the President which is being supervised by the Board of Directors. The board of directors has to make sure that they manage and motivate the President so that all his/her decisions will be in line with the goals of the bank. The board of directors decides on strategies that will be good for the bank in the long term. Bank of China establishes branches in China and abroad. By the end of 1989, the bank's domestic network totaled 3,613 branches, located mainly in the country’s’ large or medium-sized cities, major ports, special economic zones (SEZs), and overseas Chinese settlements, and the domestic staff totaled about 62,000. In addition, Bank of China has branches in London, New York, Hong Kong, and other overseas centers (Yi, 1994). Together with the Bank of China Group in Hong Kong and Macao and its wholly owned subsidiaries, the number of overseas offices reached 442, with a staff of 13,577 by the end of 1989. The overall task of BOC is to accumulate, control, and utilize foreign exchange; to deal with all types of foreign exchange business; to take part in international financial activities; and to serve China's modernization construction. The bank has over 24 percent of its assets in cash and advances to other banks. Traditionally, the bank monopolized the foreign exchange business in China and other Chinese banks looked to it for foreign exchange. This privileged position is being eroded as other banks are accorded similar status. The bank has account relationships worldwide with financial claims against other banks (Chen, Dietrich & Fang, 2000).

In order to enhance the management and efficiency of international settlements and ensure the timely and accurate collection of the state's foreign exchange, the bank has computerized its system for international settlements. Bank of China extends foreign exchange loans to support export-oriented production and imports for key economic construction projects. It grants short-term foreign exchange loans to those enterprises that are deemed as creditworthy and whose products may, directly or indirectly, earn foreign exchange for China (Lo & Tian, 2005). Applications may be made for loans to support the following importing advanced technology, equipment, and materials to expand export capability, raise product quality, diversify products, and improve packaging and decoration; importing raw materials to assist in product processing; developing communications and transportation, tourism, and overseas contract projects; supporting external export processing and assembling as well as compensation trade; and  supporting short-term working capital needs for items that can, directly or indirectly, earn foreign exchange (Brahm, 2001). In line with the country's policies, BOC grants loans for construction projects and production operations of Sino-foreign joint ventures, cooperative ventures and foreign-owned enterprises employing high economic efficiency and advanced technology. Loans granted to foreign-funded enterprises include fixed-assets loans, buyer's credit, consortium loans, project loans, and working-capital loans. Loans are usually collateralized by security devices including foreign currencies, real estate, machinery and equipment, inventories, and foreign exchange securities and bills. The bank is entitled to monitor the use of loans by enterprises and to request progress reports on their projects. Breaches in the borrowing contract are not taken lightly by BOC, and several remedial and drastic measures may be taken including an order that the borrower correct its default, a decision to stop further loans, a request for repayment before maturity, a request that the guarantor repay the loan, or a decision to sell the collateral (Cao, 1995).

Marketing the Bank of China

Advertising is a small field defined by expertise and exclusive to the experts. Critique maintains a more democratic approach to the concept of research through its methodology, and is especially appropriate to a practice, advertising, which is an industry in its own right and a link in the chain of marketing, connecting it to the production process of almost every other industry (Mathieson, 2005). Because advertising operates through ideas and values it imbues words and images with culturally bound meaning Due to the existence of economies of scope, a bank can often provide two services more economically than can two banks each providing a single service. This represents an important rationale for cross-selling of banking products. Since the fiduciary nature of the relationship gives the bank access to client-specific information, it has a competitive advantage in servicing the client and will not face the same search costs as other banks (Walter, 2004). To perform effectively, private bankers in competitive markets thus have to engage in more meaningful market segmentation. The simplistic distinction between haves and have nots must be developed into a far more sophisticated analysis that incorporates the differing characteristics, needs, and financial sourcing habits of specific customer groups Kalyuzhnova & Taylor, 2001).

This can help an organization focus its resources more accurately in order to target its product line, its distribution system, and its promotional efforts to particular market segments more successfully than its competitors Marketing is vital to persuade customers to stay with a given bank even when their wealth and portfolio preferences change. However, the most important component of any private banking effort is the quality of the bankers It is not easy for a private client to share confidences with his banker, so that a low turnover rate in staff is particularly important. This provides the bank with an opportunity to compete on more qualitative variables than on yield or pricing. New competitors have entered the financial services field, while others sought exit or combined with viable players as elegantly as possible. New financial products have come on-stream almost daily, their number and variety limited only by the human imagination. Artificial barriers to competition, some of which have been in place for decades, have been subject to steady erosion (Forsyth & Verdier, 2002) Competitors have bid actively for human as well as financial resources, even as product, process, applications, management, and marketing technologies have evolved faster. In short, the environment is one of vigorous competition, based at its core on concepts like institutional competitive advantage, specialization, economies of scale, and economies of scope. If the process is permitted to work itself out, a far stronger and more efficient financial system eventually evolves, where excess profits ultimately disappear, transactions costs are driven to a bare minimum, information becomes much more readily available, the basis for rational decision-making improves, and only the fittest competitors are able to prosper for very long (Colborn, 2006).  

. The process of financial allocation in the national economy will improve materially, and the gap between what the ultimate savers receives and what the ultimate investor has to pay for funds will be narrowed to the finest possible margin (Padoa-Schioppa, 2004). Perhaps even more important, deregulated financial systems will improve availability of resources to new and emerging industries, strip away resources from declining and uncompetitive sectors and firms sooner, quite possibly enhance the underlying incentives to save and to invest, accelerate technological change, bolster the ability to lay off risk and perhaps swallow economic and financial shocks with less social damage, and generally support the process of sustainable economic growth. Some firms have preferred to compete in the international equities business by emphasizing new issues and underwritings, rather than becoming quite so committed to the secondary markets. Firms with an effective corporate marketing capability, or with a special ability to place issues with funds under the firm's own management, have often succeeded in gaining mandates to lead manage public offerings of international equity issues (Angelopoulos & Mourdoukoutas, 2001). Research coverage has to be provided for, even if by different firms than the lead manager. It is possible, of course, by virtue of the relationship between banker and client, for firms without developed capabilities in research or trading, and without convincing placing power, to win mandates. But it is much more difficult to do so than in the past (Auger, 2005).  Large international equity issues can be extremely profitable for lead managers, and as a result there is always keen competition for almost every management appointment. Most of the managerships are won by firms with the ability to demonstrate across-the-board qualifications. Co-managerships and other lesser positions, however, are still made available quite often to firms with fewer demonstrable qualifications but a longer and closer relationship with the issuer. (Handa, 2000).  The marketing strategy that can be used for banks include television commercials, word of mouth promotion, newspaper advertisements and internet postings.

Promotion tool that can help banks communicate

The internet is not only a promotion tool; it can help banks communicate by the use of internet messengers and similar technology. Whether one wants to admit it or not, markets, including financial markets, play a central role in any economy, whether they are liberal or centrally directed. The role of markets is that of facilitating the exchange of goods, services, information and payments (Khambata, 1996). To function properly, markets require not only rules but also an institutional infrastructure. Through the exchange of wealth this infrastructure makes possible, markets create opportunity and therefore economic value for sellers and buyers. This exchange benefits society at large because the Internet puts unparalleled amounts of information at its users' fingertips; it brings consumers almost to a par with professionals on market news and insights (Hudson, 2006). This is a statement true of traditional markets. Consequently, it exerts an enormous price pressure on intermediaries everywhere, particularly the most inefficient. It also threatens brokers' margins and all sorts of fees which they currently receive. As the marketing channels of entire industries were changing, the value chains of distinct companies would have to follow. If, indeed, the entire infrastructure of the economy were changing, clearly such shifts would not take place without substantial consequences in strategic marketing management (Chorafas, 2000).

The more perceptive observers began to question the absence of time in marketing practices. That paved way to future ideas on various forms of speed economies. In the past, marketing managers had focused on transactions, persuasion, and broadcasting, without active or reactive feedback. The new marketing managers began to focus on relationships, dialogue and interactivity, and feedback loops. As the new value chains reflected the accelerating bargaining power of the buyer such as consumers, enterprises, and corporations, intense rivalry in new and emerging industries reflected both the efforts to increase entry barriers and the attempts to raise switching costs through dense seller-buyer relationships (Guttmann, 2002). With the launch of the Web and the subsequent changes to the internet and advanced generation, it became the function of Internet marketing to sell the new media to companies and consumers alike. Since firms could exploit the Web far faster than households, the experiences in the business-to-business marketing would also lead the way in consumer marketing. To an Internet marketer, the access speed was only a part of the problem that really involved the entire graphic statement of the site. The web pages simply had to be integrated with the overall marketing communications. In terms of market valuation of Internet stocks few investors are aware of one of the key advantages of Internet companies: they have little debt. And because of the nature of IBC they will probably need, in the future, a rather limited amount of external financing, which sets them apart from the railroads, automobiles and other industries created by the Industrial Revolution. As a consequence of any-to-any real-time networks, international finance is no longer restricted to a relatively small number of large institutions (Humphrey & Verdery, 2004).

With global networks providing for rapid communications, commercial and investment banks, mutual funds, hedge funds and insurance companies, as well as multinational corporations, can enter and exit markets much faster, more effectively and at a lower cost that has ever been the case. The issue which should retain the regulators' attention is that the Internet economy sees to it that entire industries are reinventing themselves and are refocusing their activities. They are moving quickly into lucrative integrated markets and by passing current rules and obsolete procedures. The drive is to partner and acquire an IBC position, making it feasible to emerge as a leader in the market which is shaped by the Internet economy. Networks and most particularly Internet-type any-to-any connectivity have created a new level of competitiveness. Among other things, this has meant that not only banking but also other dynamic branches of industry have become global. Globality presents new business opportunities but also poses complex regulatory problems (Keuleneer, Swagerman & Verhoog, 2001). The greater freedom to communicate promoted by the spread of the Internet can be used as a competitive advantage. The builders of the new financial architecture should fully appreciate the Internet's implications for policy which could be profound, because they are leading to greater competition and market liberalization. The Internet will also impact in a significant way on both public opinion and public behaviour. The networked economy is here to stay. Under no condition can this fact be left out from the elaboration of global, financial rules and regulations. Failure to give IBC its due weight in the new financial architecture will eventually lead to anarchy. The Internet and private financial networks virtually eliminate the boundaries of time and distance. They permit institutions to expand their vital space, enter into agreements with distant entities and aggressively market their services, but thus do not by themselves contribute to global risk control. A sound global risk management policy should underline the need to map the whole market into the system (Friedman, 2002).

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