Cases of InternationalisationValentine Bitouzé, Vanessa Levrat, Laura Perenz, Kristina Schweigert, Stephanie L. Webb

Company ContextToday • Leading commercial bank in Euroland • One of the world’s ten largest banks in terms of stock market capitalisation• In 2005: award as the world’s best global bank• Bank with strongest growth over the last 20 yearsHow achieved?• Successive stages of growth with 2 waves of internationalization • Combining strong implantation in local markets with global vision and capacities• Knowledge of domestic markets, hiring local staff • Growth depending on 3 key factors:

– Customers– Net profits– Stock Market Capitalisation

• Flexible management model (seize opportunities for growth and value creation), with a constant focus on: – Clients,– Efficiency– Risk control – On-going restructuring

PESTEL

Political-Entry of Spain to the European Economic Community (EEC)-Spain socialist Government liberalization of the country’s financial sector by various measures deregulation -Spain’s Central Bank intervention to put Banesto Bank for auction

Economic -Extreme competition in Spanish financial system (e.g. savings banks)

so cost reduction, operations systems improvement and innovation-Strong competition in EU and worldwide-Euro as the EU’s new single currency in 1999

requirement of efficient and competitive financial institutions- General challenges faced by the financial sector: greater competition, slenderer margins, globalization+ need to adapt to increasingly complex customers needs

Management Issues andSolving Process

1) Consolidation of domestic market (1984- 1994)• Goal: increase profitability rather than to become bigger• Objectives: consolidate and widen customer base on Spanish

market through natural growth• Launch of massive advertising campaign: 11% interest rate • Internal growth: Acquisition of Banesto bank in 1993

now big enough to compete internationally

2) Expansion abroad Latin America and Europe (1994-1998 and 1999-2004)

• Aim: continue laying foundations of an international bank by diversifying its presence in South America and Europe

• Knowledge of local markets (hiring local employees)• Diversification of activities on different geographic sectors • Many acquisitions and investments3) Purchase of Abbey National Bank (2004)

• Improvement of commercial position (revenue & management efficiency)

• Further geographical diversification (UK market) • Synergy arises from technology and business model• Business in 3 currencies (€, £, $) • Biggest bank in LA and Europe

1) Deregulation of the country’s financial sector • Complete liberalization of interest

rates and commissions• New legislation covering pension

funds and plans• Reform of the stock market• Seen as a threat by the industry

(higher competition)• Santander seized opportunity

provided by de-regulation

2) Euro as EU’s new single currency in 1999• New market: requirement of

efficient & competitive financial institutions

Company ContextFounded 1996 by brothers Peter and Martin Groftehauge

Business sector: Service provider1. Development of innovative IT

solutions for the second hand market for automobiles

Vehicle valuation software 2. Assistance for sellers and

buyers at online car auction

Customer groups: - Private - Business (car fleet owners, leasing

firms)- Car dealers

Benefits and advantages: “Fast and Easy”, “Efficient” “Competitive”

PESTEL Economical:- Second hand car market is very big and

dynamic

Sociocultural:- Sellers and buyers want to save time and

resources, but still get a high reward- Need a secure and trustworthy trade

platform - No big cultural differences

Technological:- Wide internet penetration- Need for valuation software

Legal: - European trade laws

- Competitive advantage in core business

- Customers not only active on the national market

- Company’s structure ad-vantageous for internat-ionalisation

- Economies of scale: More cars can be sold; more co-stumers won

- Learning and knowledge sharing

- CAGE framework

Transnational Configuration- European

neutral and independent e-marketplace

- Functionally and technically identical active markets

- Differences: languages and few market-related issues

Foreign Direct Investment

- New offices in countries of market activity

- Websites for online car auction

Problems & Suggestions

Problem1. Focus on product development

but not on organisational and market development

2. No business plan, but “learning by doing” philosophy

Solving possibilities:1. Organisation and Markets

should be focus, before further internationalisation

- Financial capacity for future international expansion

- People management- Networking

2. Establish an active plan - Sweden and England need to be

more efficient

Company Context

• SAGEM SAFRAN– Merge between SAGEM and

SNECMA• SAGEM = broadband and mobile

phone• SNECMA = leading aerospace

manufacturer

– Technological innovations / early movers

• Structure:– China & Brazil Software

Development– Russia, India, Germany, France, &

China R&D– France & China Production

• Product Markets– Telephone– Multi-service networks– Defense and security electronics– Fingerprint biometrics– Avionics and on-board aircraft

information systems

• Global Positioning– Europe– Middle East– Africa– Asia (outsourcing for product

production)– Latin America (central focus on

Mexico)

SAGEM’s strategy for entering Latin American market …

• Competition – invitation to tender• Cultural aspects, management of local workforce• Geographic location – distance of the physical entities

– Example:• Sales market Mexico• Software Development Brazil• Production China

• Taxation issues and negotiations with country and local governments– Market liberalisation– Import/export tariffs

• Currency exchange rates– Consistently fluctuating ‘What you pay today may be worth more/less

tomorrow.’• Labor Issues

– Consumer and community responses• Is/isn’t locally developed or manufactured taking away jobs• Could unknowingly be providing funds for child/woman abuse

• LINK – all of these factors should be considered when attempting to enter into a new market.

Entry Barriers for New Markets

Solutions• 3 Tier System

– Company Negotiations(short-term)• Change product to meet client

demand maintain client relationship or gain new client

– Geographic Adaptation(mid-term)• Adapt process line to each

geographic region

– Foreign-Domestic Investment (long-term)• Develop an entity in charge of

Marketing, R&D, and Production for each geographic region

Problems (assumptions)

• Client accepts prototype and then asks for major changes to the specifications during/after production process– Lack of flexibility

• Limited time to produce product.– Technological innovations

• EXAMPLE:– Entering into the Mexican

market

Recommendations

COMPARATIVE CRITERIA SANTANDER AUTOCOM SAGEM

CONTEXT

REGULATION AND LEGISLATION

• Deregulation of the financial industry

• Deregulation of the European trade laws

• Deregulation Late market entry• Taxation issues

EXISTING COMPETITION

• In-country High• Globally High

• In-country High• Globally High

• In-country Low• Globally High

MANAGEME

NT ISSUES

ENTRY VEHICLES• Alliances• Foreign Direct Investment

(FDI)• Foreign Direct Investment (FDI)

• Exporting• Foreign Direct Investment (FDI)• Importing & International

Strategy*

CAGE FRAMEWORK• CULTURAL DISTANCE• GEOGRAPHIC DISTANCE• ADMINISTRATIVE DISTANCE• ECONOMIC DISTANCE

• High• High• Medium• High

• Low• Low• Low• High

• High• High• Medium• High

TECHNOLOGICAL BARRIERS • Synchronizing IT processes • Dependent upon Internet

penetration and IT stability

• Imposing own technologies• Equipment of the ‘home’ country

(developed vs. non-developed) Teledensity

SOLVING

PROCESS

MANAGEMENT OF LOCAL WORKFORCE • Headquarters with local offices managed by local workforce

CHOICE OF ENTRY MODES

• Alliances• Mergers• Acquisitions

• Establishment of new offices• Networking

• Market opportunity Mexico is the largest and most influential market in the Latin America sector