International Business: Monzo's Strategy for Expansion into Germany

This report examines Monzo, a UK-based challenger bank, and its potential international expansion strategies, specifically focusing on entering the German market. It details the rationale behind internationalization, highlighting benefits such as accessing new customer bases, diversifying market offer...Read More

International Business

EXECUTIVE SUMMARY
This report is in the context of challenger business named Monzo based out of United
Kingdom, in the context of the chosen business organisation this report covers all the strategies
that the business of initiated in order to expand its business into new foreign market. This report
covers all the barriers that the business will face, the internationalisation approaches and how the
new market business will drive success.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................4
MAIN BODY..................................................................................................................................4
Provide a brief overview of the chosen organisation...................................................................4
Rationale for going international.................................................................................................5
Critically discuss which country you would recommend them to enter and the rationale behind
the decision..................................................................................................................................5
Discuss typical barriers that will be faced as the organisation expands internationally..............7
Based on your analysis, critically evaluate a relevant implementation approach for the
internationalisation process for the specified target market........................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
Internationalisation of businesses is the process where in the business opt for trading over
foreign land. Trading over foreign land or the internationalisation of businesses benefits
organisations in different other ways such as improving the profitability, sales margin, market
share and becoming a market leader in the specific industry. But before businesses goes
internationalisation there are different barriers and challenges that a business has to face
pertaining to the cost incurred, the resource requirement and other related barriers. Thus, for
successful internationalisation businesses must have suffice resources and capabilities for
expanding the business over the foreign land. Taking Monzo as a chosen business organisation
which is a challenger bank that delivers its services over online platform. It operates in financial
services and based out of United Kingdom. This challenger bank was founded in the year 2015
by Gary Dolman, Jason Bates, Paul Rippon, Tom Blomfield. The organisation is headquartered
in London, UK. In the context of Monzo, this report covers overview of the chosen business
organisation and the rationale for going international, country recommended for the rationale
behind, barriers that would be faced by the organisation and based on the analysis
implementation approach for internationalisation process (Apetrei, Kureshi and Horodnic,
2015).
MAIN BODY
Provide a brief overview of the chosen organisation
Monzo a challenger bank that delivers online banking solutions to the customers in UK.
It also one of the earliest app-based bank in UK. The main motive of the business is to deliver
financial solutions to the its customers, give them fair solutions and transparent information to
make banking better. The business focuses to deliver banking solution and excellent community
features that everybody can access. The business is situated in London, also have offices in
Cardiff and collaborating with a lot of people around the world (Buckley, 2016). Number of
employees in the organisation is more than 1600. The total users recorded in this online bank is
5.46 million. It also offers financial solutions to the businesses in UK. Where in the businesses
have to open Monzo business bank, better account visibility and control over the money. It is a
fully regulated bank, where in this small business formulates high Street businesses banking

regulations similar to the way large business in the country does, businesses can open a bank
account from the Mobile phone itself. With high end customer experience, where in the users can
get 24×7 services. The marketing objective of the business says users can transfer money very
conveniently to any bank around UK. All the notifications of the bank transactions would be
reflected in the supported electronic gadgets within few seconds. Users can also keep their
money aside as savings (pots) provided by the bank. For businesses, wherein the business
account can be accessed from anywhere with the supported electronic gadgets, it renders
integrated accounting tools and helps to track in app invoicing and digital results. The 24×7
services of the customers include services where the customers do not need new branches or
appointments, the business promises to deliver financial solutions for any problems, the users
can even chat by using the app any time or even call or mail whatever preferred (Child and
et.al.,2017).
Rationale for going international
Just the way the business is serving the users in UK, after internationalisation experience,
it can explore new market access to millions of customers. It will also support the business to
diversify its market offering and gain better revenue. Monzo is successfully operating in UK
with stable financial position and millions of users of the application in the home country,
looking business overseas would offer better opportunity and business success. Accessing new
customer base business would help to invest in new product lines and better sales margin.
Exposure to new market changes would take the business to diversify its current market offerings
and further help the business in order to enhance its revenue. It can also acquire great talents,
access to advanced language skills and diverse educational backgrounds. Gaining competitive
advantage is another merit of expanding the business into foreign land with new customers and
new market. The business can get opportunities for enhancing its reputation and goodwill of a
global brand by offering solution to its international clients. This brand goodwill of the business
will help to acquire a new customer base and brand identity and when developed credibility
internationally (Chow and Schoenbaum, 2020).
Critically discuss which country you would recommend them to enter and the rationale behind
the decision

Monzo can expand its business to Germany, as Germany is a home country to different
small and medium organisation. With stable economic, political and technological conditions
there are fair opportunities for every business to grow in the country. The positive point about
Germany is that, the German government does not impose such strict restrictions for foreign
businesses in the country. The demographic pattern in the economy includes people with high
purchasing power, well-educated and large number of professionals working. With well-
established network of roads and great infrastructure facility makes the place ideal for expanding
Monzo in the country.
The business drivers for delivering offerings into the new market in context of the chosen
business organisation:
Legal business policies
The German government have formulated favourable policies for international businesses to
operate in Germany. Some of the legal laws framed by the German government includes
competitor laws which states to protect small and medium organisation from the competitor
exploitations, patents and copyright law helps to protects assets and ideas of the business and
other laws that facilitate growth of foreign businesses in the country (Collinson, Narula and
Rugman, 2016).
Technological advancement
Germany is counted as one of the most technically advanced country in the world. Wherein
Monzo can use such technical advanced tool in the business in order for data storing, delivering
more high-end solution, managing data privacy and online website, acquiring traffic and other
related technical solutions would greatly impact the business in order to accomplish the activity
and efficiency.
Economic development
Economic development in a country greatly affects businesses in order to accomplish success
and growth. With stable and developed economic culture in Germany, Monzo can easily access
to opportunities to enhance new capital and support growth process (Cravino and Levchenko,
2017).

Dynamic economy
With higher and technical advanced business environment, excellent infrastructure facilities at
the center of Europe. Where the per capita spending power of people in Germany is recording as
of €23,776 in the year 2020. Germany is also listed under the highest purchasing power in
Europe. Such economy culture makes ideal place for foreign businesses to operate in the country.
Business support and funding
In Germany there are different information centres that supports to deliver financial and non-
financial solutions to the businesses. Such instances would help Monzo to accomplish growth
and success.
Banking systems
Germany has well-established financial service infrastructure. All the financial systems in
Germany are bank-based. The banking systems supports more than 36,000 bank branches to
collect deposits and make loans to the consumers. Three pillar banking system is followed in
Germany which includes cooperative banks, private banks and public banks. The private banks
trolls 30% of the market the public savings connected to the local government account for 50%
bank transaction. There are no such restrictions and barriers over movement of capital, foreign-
exchange earnings are dividend (Di Giovanni, Levchenko and Mejean, 2018).
Discuss typical barriers that will be faced as the organisation expands internationally.
Germany is counted as one of the largest economy in Europe and the fourth largest
economy around the globe. It has the ability to attract the foreign direct investment from around
the globe. Where in above 45,000 international businesses are operating in the country,
employing above 3 million people. Apart from that, there is great economic capacities for
international businesses in the country. Business economy is more competitive. Nearly 4% of the
global direct investment get into Germany but operating a business in Germany can be a great
challenge for them who are not familiar with the legal and tax structures. In order to start the
business in Germany, it involves complex process, wherein businesses are required to liaise with
local chambers of industry and commerce, local offices, standards and professional association
of relevant trade. Further, in Germany there are different set of regulations and norms that works
as obstacles for businesses for entering into the market (Eicher, 2016).

Sector with relatively lowest STRI
Sectors such as courier, telecommunication, accounting services are the lowest Services Trade
Restrictiveness Index (STRI). For Monzo to operate in Germany, it needs to take local
examination and practice local. It also needs to obtain license. And all the members in the
accounting firm must be licensed professional.
Horizontal policy measures in Germany
There is Labour market test for the workers who are looking to provide services in the economy.
For the contractual services the employer might need to stay in the country for three months at
least, the independent service suppliers and intra corporate transferees can acquire the Visa for
36 months. Apart from that, it is very difficult for businesses in order to register a company in
Germany measured by number of days and it also requires different mandatory procedure. For
businesses in order to operate in Germany they need to acquire more than eight visas. The
standards are set for cross-border transfer of personal data are determined at EU level (Gligor,
Esmark and Gölgeci, 2016).
Registering property
Registering property is a challenge in Germany. For adjusting property in Germany it requires at
least 40 days to complete the whole process. Where in the foreign businesses must get
acceptance from land registry.
Paying taxes
In Germany the fiscal policies are notably difficult. Where businesses have to pay with nine tax
payment in a year which takes 207 hours and social security contribution that take 134 hours and
other corporate income tax and VAT payment that is time taking process. Looking all together,
there are a total of 14 different taxes that needs to be paid by businesses to operate in the country
(Kingsley, Noordewier and Bergh, 2017).
Getting credit
Germany is a home country to different financial businesses and it involves a restrictive legal
environment. Therefore, acquiring credit in the country is a complex process.

Based on your analysis, critically evaluate a relevant implementation approach for the
internationalisation process for the specified target market.
There can be different international approaches and business expansion method that can
be used by Monza in order to enter into German markets, these are discussed below in brief:
Corporate expansion
Corporate expansion is defined by expanding the physical outlet of the business in other
geographical area. The association can use corporate expansion as a method to enter into German
market by opening new branch in the country. Corporate expansion is also a better method apart
from other expansion methods such as franchising, with the help of corporate expansion in the
business can enjoy full control over all the activities and internal management. In corporate
expansion there is also limited number of risk involved, businesses can take sole decision
without the interferences for the third party, also businesses can conveniently wind up the
business, control over reliability and trust over the business activities and serves other merits to
the business. Corporate expansion supports the businesses in order to enjoy hundred percent of
the profit where in the business do not have to share with any franchisor. Businesses can also
access control over the intangible and tangible assets. Does it can be said that with the help of
corporate expansion Monzo can fully control over the business activity and scrutinise the
performance of the business in the economy (López‐Duarte, Vidal‐Suárez and González‐Díaz,
2016).
Joint ventures
Joint-venture can be determined as a kind of business agreement wherein the partners joins hands
for pooling and identifying the resources for the business activity. Monzo can use joint venture
as a part of business expansion to new market. For expanding the business in country like
Germany where it is difficult to acquire suffice fund and other resources. Monzo can partner with
leading business investors in Germany in order to finance the business activity. Joint venture
would also greatly benefit the business where in the business do not have to worry and
overburdened for bearing responsibilities and other core business obligations as in joint ventures
all the cost, profit and expenses of the business is being distributed among the partners. As
Monzo is a banking business, thus, it can partner with leading banking businesses in Germany
for acquiring business growth and profitability in the market (Malyarets and et.al., 2017).

Agency relationship
Monzo can make agency relationship with agents residing over Germany. Where the association
have to find out reliable and popular agents in the country. Agency relationship is another
business expansion method into foreign land, everything is being burdened to the shoulders of
the agent, apart from that, the popular and experienced agents in the country would be able to
manage the business activity in a more appropriate manner as they are well familiar about the
culture and the economic and population pattern in the country. Agency relationship is like
contractual agreement where Monzo can even end the contract as per the agreement whenever
wanted or after a certain time period. The popular and experienced agents in the country would
also help to rightly managed marketing, support to acquire other legal documentation such as
visas or licenses or others, they would also help to drive traffic and other different benefits to the
business. Monzo must identify the most reliable and experience agent in the market who can
stand out as per the contractual agreement and address all business requirements in the market.
Managing and expansion process in house
The another method of global expansion is to opt out for in-house approach which defines that
businesses need to establish their own mobility structure on the basis of the business
requirement. This method is most relevant and useful as it defines the exact pathway where a
business wants to go. In this method, there is a requirement of immense research, preparation and
commitment. For example, Monzo must plan a global mobility structure wherein the business
should consider factors such as employment versus immigration, physical presence, financial
regulations, employment management and others. In managing an expansion process in house
method businesses must set a clear path and define the organisational objectives of the global
expansion, conduct the research defining that what kind of actions and measures that needs to be
considered and taken, and reviewing the business activities (McGaughey, Kumaraswamy and
Liesch, 2016).
Licensing agreement
Licensing agreements are methods that involves limited risk for global expansion. Licensing
agreement is a contractual agreement which can be exclusive, non-exclusive, exclusive for
certain locations or events. The licensor in the agreement does not need much financial

requirements in order to acquire new acquisitions and development. There are different models
that comes under licensing agreements that involves franchising and private labelling. Using
franchising model, Monzo can collaborate with other businesses established in Germany and
access them control to operate the business determined in the contractual agreement. In
franchising business must also render the franchiser a predetermined profit and rights to carry the
business as per the contractual terms. Private labelling can also be a model that can be used by
Monzo that involves providing the technology or the products to the foreign organisation for the
sole purpose of carrying sales under the company’s logo and brand name (Nambisan, Zahra and
Luo, 2019).
Partnerships
Partnership or strategic alliances with local businesses residing over specific country. It is an
another method of international expansion that can be used by Monza. Strategic alliance is
between two companies that works for mutual benefits. Monza can work with local business
operating in the baking industry in Germany that have good understanding and experience in the
sector within the target market and well defined knowledge of the culture followed in the
country. Partnership is a valuable international expansion method that requires less capital
involvement. Although, partnerships also have a major limitation that is accessing lack of control
over the business.
Merger and acquisition
Merger and acquisition is a method of international expansion where two business firms merge
or one consolidates another. Merger and acquisition method is a quick in method for entering
into new market as businesses either merge or take or other businesses that are well-established.
Monza can use merger and acquisition method while entering quickly as possible into the
marketplace. Though it is also a riskier and expensive method where there are 40 to 60% chances
of this method failing in the marketplace (Picciotto and Mayne, 2016).
CONCLUSION
Thus, in the light of the above discussion it is clear that internationalisation of businesses
have a significant impact on the overall business performance. For internationalization into
foreign land, the business has to select a new market and identifies all the possible opportunities

that the business can explore in order to enhance revenue generation and business growth in the
new market. There are a different trade barriers and restrictions faced while expanding the
business into new market, businesses should analyse and evaluate all such factors and make
effective business strategies to sustain in the new marketplace. Apart from that, businesses must
also evaluate the right expansion strategies into new market that would serve the business in the
long term.

REFERENCES
Books and Journals
Apetrei, A., Kureshi, N. I. and Horodnic, I. A., 2015. When culture shapes international
business. Journal of Business Research. 68(7). pp.1519-1521.
Buckley, P. J., 2016. The contribution of internalisation theory to international business: New
realities and unanswered questions. Journal of World Business. 51(1). pp.74-82.
Child, J. and et.al.,2017. SME international business models: The role of context and
experience. Journal of World Business. 52(5). pp.664-679.
Chow, D. C. and Schoenbaum, T. J., 2020. International business transactions: problems, cases,
and materials. Wolters Kluwer Law & Business.
Collinson, S., Narula, R. and Rugman, A. M., 2016. International business. Pearson.
Cravino, J. and Levchenko, A. A., 2017. Multinational firms and international business cycle
transmission. The Quarterly Journal of Economics. 132(2). pp.921-962.
Di Giovanni, J., Levchenko, A. A. and Mejean, I., 2018. The micro origins of international
business-cycle comovement. American Economic Review. 108(1). pp.82-108.
Eicher, S. ed., 2016. Corruption in international business: The challenge of cultural and legal
diversity. CRC Press.
Gligor, D. M., Esmark, C. L. and Gölgeci, I., 2016. Building international business theory: A
grounded theory approach. Journal of International Business Studies. 47(1). pp.93-111.
Hannibal, M. and Knight, G., 2018. Additive manufacturing and the global factory: Disruptive
technologies and the location of international business. International Business
Review. 27(6). pp.1116-1127.
Kingsley, A. F., Noordewier, T. G. and Bergh, R. G. V., 2017. Overstating and understating
interaction results in international business research. Journal of World Business. 52(2).
pp.286-295.
López‐Duarte, C., Vidal‐Suárez, M. M. and González‐Díaz, B., 2016. International business and
national culture: A literature review and research agenda. International Journal of
Management Reviews. 18(4). pp.397-416.
Malyarets, L. and et.al., 2017. Theory and practice of controlling at enterprises in international
business.
McGaughey, S. L., Kumaraswamy, A. and Liesch, P. W., 2016. Institutions, entrepreneurship
and co-evolution in international business.
Nambisan, S., Zahra, S. A. and Luo, Y., 2019. Global platforms and ecosystems: Implications for
international business theories. Journal of International Business Studies. 50(9). pp.1464-
1486.

Picciotto, S. and Mayne, R. eds., 2016. Regulating international business: beyond liberalization.
Springer.