Analysis of Banking Industry and Financial Environment

This assignment requires students to analyze the banking industry, incorporating various academic sources and case studies. The report should examine the strategic environment analysis of Islami Bank Bangladesh Limited (IBBL), explore the effects of FDI on environmental degradation in France, and discuss the competitive advantages of shadow banking industry using Porter diamond model. Students are also expected to analyze a real-world company, Maybank group, as a holistic perspective on sustainable banking operating system drivers.

PROJECT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Overview of Santander Bank......................................................................................................1
Establishment of Santander Bank in France association with Foreign Direct Investment (FDI)
.....................................................................................................................................................1
PESTLE ANALYSIS .................................................................................................................6
PORTER'S FIVE FORCES.........................................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Foreign Direction investment has crucial role for the economic growth of economy. It is a
way of investors to invest at all level of domestic savings. The benefits of foreign direct
investment are to attract the capital, knowledge and increase in the balance of payment. This
present essentially provides an analysis of a specific organisation which is going to expand its
business activities in relation to the particular country (Shahbaz, Nasir and Roubaud, 2018). In
addition to this, company chosen in this assignment is Santander Bank and country where they
are looking to expand is France. Thus, this report will provide the complete analysis of business
environment of France in which establishment of bank in France related to FDI. Further, the
pestle analysis and porter's five forces will be done which help in analysis of external and
internal factors on the business environment.
MAIN BODY
Overview of Santander Bank
Santander Bank is formerly Sovereign Bank, is wholly owned subsidiary of Spanish
Santander Group. It was founded in 1902 and its headquarters is located in Boston,
Massachusetts, United States. Band has $57.5 billion in deposits. Operated about 650 retail
banking offices and over 2000 ATMs and employees approximately 9800 people. Santander
Bank offers array of services related to finance and products including retail banking, corporate
banking, mortgages, capital markets, credit cards, insurance, trust and wealth management.
Santander Bank is looking to expand the business in France (Overview of Santander Bank,
2017).
Establishment of Santander Bank in France association with Foreign Direct Investment (FDI)
Establishment of company is setting up an organisation, registration of firm, formation of
company is a process aimed to open a company as well as run business under a legal entity.
Santander Bank is looking to expand the business in France as they want to establish the business
in another country. There are many reason why Santarder Bank has chosen France for its
establishment (Faria, 2016). The foreign direct investment attracts many organisations to invest
within the country as Franc is one of the top ten world economic powers as well as it has many
asserts to attract foreign direct investment. Sandardar Bank provides all types of services and
products in France like finance and products including retail banking, corporate banking,
mortgages, capital markets, credit cards, insurance, trust and wealth management.
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Here is the tabular presentation that shows the inflow of Foreign Direct Investment by
various nations:
Investing Countries in France Contribution in % (2017)
United Kingdom 34 %
United States 13.5
Finland 6.4
Italy 1.8
Ireland 1.7
Japan 1.2
Netherlands 14.0
Spain 6.4
Switzerland 3.2
Hong Kong 1.7
Table 1: FDI inflow from different counties in France
The above tabular and graph presentation depicts that there are 10 main countries which
are investing in the France economy (Foreign Direct Investment in France, 2017). There
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United Kingdom
United States
Finland
Italy
Ireland
Japan
Netherlands
Spain
Switzerland
Hong Kong
0
2
4
6
8
10
12
14
16
Contribution in % (2017)

contribution is also remarkable. With this, table it is clear that Santander Bank could also expand
there business in France as the 13.5 percent of contribution is made by United States which is 3rd
largest contribution.
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Here is the tabular presentation that shows the different industries that have invested in France
economy are as follows-
Investing Industries in France Contribution in (%)
Real Estate 14 %
Finance and Insurance 12.8 %
Computer, optical and Electronic Goods 10.2 %
Refined Petroleum Goods and Production of Coke 7.5 %
Storage and Transport 5.9 %
Information & Communication Technology 2.9 %
Pharmaceutical and Chemical Industries 9.4 %
Agree Food Sectors 12.7 %
Repairs and Trade of Vehicles 5.9 %
Technical, Specialized and Technical Activities 3.6 %
Table 2: FDI inflow from different industries in France
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The above tabular and graph presentation clearly shows that the banking industry has
great contribution for the France economy. Approximately 12.8 percent of banking sectors has
invested in France market and it has second rank (Foreign Direct Investment in France, 2017).
Thus, As per the data, Santarder Bank can also expand there business in France.
In addition to this, In France, banking sector is one of the leading private economy
industries. There is 4.9 percent of total value added in France, which included approximately 65
percent for the baking sector. Moreover, another strong point of expansion in France is that there
are productive and skilled workforce which is another advantage for Santarder Bank. There are
diversified economy which is full of broad scope of actors ranging from giant multinational to
high technology starts up (Yackee, 2016).
On the other hand, government of France is also very well aware of raising Foreign
Direct Investment (FDI). Government has gone through many reforms in last years with the
intention of revitalizing the federal economy as well as gaining attention of foreign investors.
Government has minimised various formalities for the establishment of foreign companies which
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Investing Industries in France
Real Estate
Finance and Insurance
Computer, optical and Electronic Goods
Refined Petroleum Goods and Production of Coke
Storage and Transport
Information & Communication Technology
Pharmaceutical and Chemical Industries
Agree Food Sectors
Repairs and Trade of Vehicles
Technical, Specialized and Technical Activities
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
Column B

is another benefit for the Santarder Bank in its expansion. The termination of solidarity tax, the
establishment of tax credit programmes of 20 billion EUR, creation of research tax credit as well
as incentives for small start-ups and innovative firms. These are all positive points for Santarder
Bank for its establishment (Musa and Hassan, 2016). However, government of France gas also
pass the law which states that organisation of France as well as foreign companies access same
benefits of subsidiaries offered by the government.
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PESTLE ANALYSIS
Pestle Analysis is one of the best model which is used by organisation to extract the
impact of external factors affecting the business operations and its functions. Organisations
which are operating in the country as well as who are looking to expand the business in the
nations, requires to analysis the impact of external factors affecting the business. Santander Bank
is also looking to expand the business in France, so they also use Pestle Analysis tools in order to
examine the impact of external factors which are as follows-
Political Factors: In the western world, France is one the most important nations and it
plays a significant rile in the global affairs. It is a founding member of United nations along with
it also serves as one of the permanent member of Council of UN Security. The decisions of
Santander Bank is effective because France is one the major allied of US. France also have good
and stable political condition which is also one of the best advantages of bank to expand the
business in the country (Khan Hossain and Rabbi, 2018). France is a developed nations as there
is no political battles, no conflicts, no wars etc. the factors which impact on investors positively.
On the other hand, the negativity of political condition of France is that the gap of poor and
wealthy people is continuously rising because of disreputable politics of France. Thus, the
decision of Santarder Bank is correct as political factors are majorly supporting the expansion.
Economic Factors: The ranking of France in terms of economies in world in under top
ten list. The Gross Development is one of the best indicator that shows the economic condition
of the country. The GDP of France in 2017 is $2,543,763.485 which has raised to 1.5 percent
($2,582,501 million) in 2018. This is also one of the best factors that shows Santarder Bank can
expand its business in the France. Further, the level of poverty is also controlled as it is fallen by
60 percent over 30 years (Islam and Mamun, 2017). In addition to this, in the industry of
Automotive, Railway and Aerospace, France is leading across the worlds as this is also one of
the best opportunity for Santarder Bank as they could also provide there services and products to
the companies of these industries. In 2019-20, France is hoped-for to see a cracking pace of
economic growth close to 2 percent. On the other hand, the negative factors of France economy
is that nation has the highest corporate tax rates across the world which has become the major
obstacles to attracting FDI in the French economy.
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Social Factors: France is one of the modern economy across the world. The total
population of France is 63.5 million and it is famous for perfume, cars, language, cuisine and
fashion. The living standard of people living in France is also very high. The impact of social
culture forces on banking sector is very deep as the frequent changing social trends as well as
preferences of people influence the growth and business of banking brands. The attitudes of
people and consumer demographics towards the financial services has also changed a lot as how
people come and use baking options (Tan, Chew and Hamid, 2017). The high living standards
means the high income group people and advance usage of technology which is also a great
opportunity for Santander Bank to grab and expand. They can provide fast internet banking
facilities and ATMs at near distance's so that more customers base will be increase.
Technological Factors: This is one the factors that influence the business decisions of
the organisation in baking industry. The forces of this factor is not only affecting banking sector
but it is influencing the entire industry operating the business environment. In terms of
technological advancement, France is one of the most popular country because it has recognised
history in the areas of space, IT and science technology. The internet users are also very large in
comparison to other nations as approximately 87 percent in 2017 people are operating internet.
Now, smartphones to rescue is in trends as now banks and customers both have equal rights to
handle the funds (Saha, 2018). Santarder Bank could also provide all these facilities in France so
that customer base is increases. E-banking is very essential element that baking organisation
needs to provide for better customer satisfaction. The innovation or technological advancement
has brings lots of changes and make it very simple for the users to make purchase without
required intrusion from banks.
Legal Factors: This is one of the most critical factors that influence the operations and
function of banking organisations. In France, there are some strict laws regarding consumer,
privacy, trade and laws structures in order to confirm framework within the sector. It is very
important for Santander Bank to follows all these laws for legal practices in the country. Further,
there are some labour laws which is also one of the most important element that bank need to be
consider because France government are very concern about the rights of labours (Martin and
et.al., 2018). Santarder bank is presently following all these laws and legislation in United States
too, so it is not very complex for them to operate in France.
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Environmental Factors: France is suffering from many types of pollution because of
heavy industrialisation. With the usage of technologies, especially mobile applications for
bankings, the use of paper is being minimised to a great extent. Santander Bank has opportunity
to attract the customers by providing 85 to 90 percent of online services for banking so that paper
usage is controlled by which degradation of forest is also controlled. Santarder Bank can
provides facilities to customers to purchase online by applying credit credits, online buying of
cheques and all other issues can be answered through mobile phone (Vintilă and et.al., 2017).
With these techniques, the individual environment footprints are minimised to the great extent.
PORTER'S FIVE FORCES
Porter's five forces is a strategic management tool in order to analyse industry as well as
understand underlying levers of profitability in a given sector. This theory is based on the
concept that there are five forces which identify the intensity of competitiveness as well as
market attractiveness (KAR, 2015). Santander Bank also used this framework by which they can
identify the level of competition in the market. There are fives forces in this model which are as
follows-
Bargaining Power of Suppliers: The power remain medium to high. This is the forces or
pressure which is exerted by the suppliers on the business. It represents the extent to which the
suppliers can impact on the prices. It is true that capital is the fundamental resources for
Santander Bank along with there are four major suppliers which are loans and mortgages,
Customer deposits, loans from other financial institutions (Abdolshah, Moghimi and Khatibi,
2018). These are the suppliers of bank and it is very important to make a good relationship with
them. In order to control the powers of these suppliers, Santarder Bank have to make contracts or
agreement with many suppliers so that if they exert pressure, they can switch to others.
Bargaining Power of Buyers: The power remains to be high. It is the pressure exert by
the buyers on the company. In France, there are so many organisations in banking industry which
resulted in high cost of switching. Customers put pressure on the company that they exert
pressure to reduce the price of interest loans, 27/7 customer support services, fast processing of
loans etc. In order to overcome the pressure, Santander provides banking services not in so high
prices and not so low, they will provide reasonable prices to grab the large number of customer
base (Riasi, 2015).
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Threat of Substitutes: The threat of substitutes is also high. It is because of so many
banks in France are already operating with huge customer base. Moreover, banking industry does
not also suffer from the threat of substitutes from there rivals bit they also face competition form
non-financial rivals. Santander Bank faces threats from insurance, fixed income securities and
mutual funds as they also provide non-banking services (Holtbrügge and Friedmann, 2016).
Thus, in order to overcome the threat of substitution, Santander bank provides all types of
services whether it is banking or non-banking services to customers at reasonable rates.
Threat of New Entrants: Threat of Entrants in banking industry is medium to high in
France market. It is because of attracting Foreign Direct Investment of France which attracts new
investors to invent their capital in the market. 12.8 % of banking institutions are operating which
are all from another nations. In order to overcome the threat of new entrants, Santander bank
could grab adequate customer base.
Threat of Competition: Threat of competition is also very high in banking industry at
France it is because there are 400 banks already operating. There are some major players which
has grab the huge amount of market share in the market like BNP Paribas, Credit Agricole, CIC,
Caisse D'Epargne, Credit Mutual and many other small banks too. Thus, the threat of
competition is very high. Thus, in order to overcome the threat of competition, Santander Bank
could use Cost leadership business strategies in order to gain huge amount of market share by
attracting more customers (Numa, 2017).
CONCLUSION
The above report comes to conclusion that foreign direct investment plays a crucial role
in the development and growth of the company as well as economy. It also very essential that
FDI of the economy should able to gain the attraction of foreign investors. Further, the report
also provides clear estimation of the impact of external factors which affects the operations and
function of the organisation by using Pestle Framework. In addition to this, the impact of
external competitive forces was also included in this assignment which shows that baking
industry is facing cut-throat competition in France.
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REFERENCES
Books and Journals:
Abdolshah, M., Moghimi, M. and Khatibi, S.A., 2018. Investigating Competitive Advantage in
Banking Industry Based on Porter's Generic Strategies: IRANs Newly-Established Private
Banks. International Journal of Applied Management Sciences and Engineering (IJAMSE),
5(1), pp.52-62.
Faria, J.R., 2016. Location clusters, FDI and local entrepreneurs: consistent public policy.
Journal of the Knowledge Economy, 7(4), pp.858-868.
Holtbrügge, D. and Friedmann, C.B., 2016. Does location choice affect foreign subsidiary
success in India? An empirical study based on Porter's diamond model. International
Journal of Business and Emerging Markets, 8(1), pp.3-29.
Islam, F.R. and Mamun, K.A., 2017. Possibilities and Challenges of Implementing Renewable
Energy in the Light of PESTLE & SWOT Analyses for Island Countries. In Smart Energy
Grid Design for Island Countries (pp. 1-19). Springer, Cham.
KAR, A., 2015. Retail Banking in the Contemporary Financial Environment. JOURNAL OF
SOCIAL SCIENCE RESEARCH, 9(1), pp.1792-1795.
Khan, M.R., Hossain, S.K. and Rabbi, M.M.I., 2018. The Strategic Environment Analysis of
Islami Bank Bangladesh Limited (IBBL).
Martin, N.C., Igboanugo, D., Freeman, E., Oddih, C.S., Sajjad, M. and Sajjad, M., 2018. A
Theoretical Insight on E-Banking (Internet Banking) Framework in Developing Countries.
In Proceedings of the International Conference on e-Learning, e-Business, Enterprise
Information Systems, and e-Government (EEE) (pp. 68-75). The Steering Committee of
The World Congress in Computer Science, Computer Engineering and Applied Computing
(WorldComp).
Musa, M. and Hassan, S., 2016. Host country macroeconomic determinants in the choice of
location by the world largest FDI exporters. Актуальні проблеми економіки, (9), pp.31-
38.
Numa, G., 2017. Charles Coquelin and Jules Dupuit on banking and credit. Journal of the
History of Economic Thought, 39(2), pp.239-256.
Riasi, A., 2015. Competitive advantages of shadow banking industry: An analysis using Porter
diamond model. Business Management and Strategy, 6(2), pp.15-27.
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Saha, A., 2018. Analysis of Banking Industry & Janata Bank Limited: An Internship Report.
Shahbaz, M., Nasir, M.A. and Roubaud, D., 2018. Environmental degradation in France: The
effects of FDI, financial development, and energy innovations. Energy Economics, 74,
pp.843-857.
Tan, L.H., Chew, B.C. and Hamid, S.R., 2017. A holistic perspective on sustainable banking
operating system drivers: A case study of Maybank group. Qualitative Research in
Financial Markets, 9(3), pp.240-262.
Vintilă, D.F., Filip, C., Stan, M.I. and Ţenea, D.D., 2017, October. A POLITICAL,
ECONOMIC, SOCIAL, TECHNOLOGY, LEGAL AND ENVIRONMENTAL (PESTLE)
APPROACH FOR MARITIME SPATIAL PLANNING (MSP) IN THE ROMANIAN
BLACK SEA. In International Conference on Management and Industrial Engineering
(No. 8, pp. 653-666). Niculescu Publishing House.
Yackee, J.W., 2016. Do BITs ‘Work’? Empirical Evidence from France. Journal of International
Dispute Settlement, 7(1), pp.55-71.
Online:
Foreign Direct Investment in France. 2017. [Online]. Accessed through:
<https://en.portal.Santandertrade.com/establish-overseas/france/foreign-investment>.
Overview of Santander Bank. 2017. [Online]. Accessed through:
<https://www.Santanderbank.com/us/personal>.
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