Strategy Formulation for International Expansion: CBA Case Study

This report examines the international expansion strategy of the Commonwealth Bank of Australia (CBA), focusing on its plans to enter the markets of France, South Korea, and Brazil. It analyzes the structural differences between these markets, estimates their potential size and profitability, and identifies potential problems associated with international expansion. The report considers foreign exchange and trade implications, as well as the cultural aspects impacting market entry. The report also discusses future developments in each market, including strategies such as leveraging digital solutions and adapting to local market conditions. The analysis covers the importance of market research, the impact of economic factors, and the need for customized strategies to succeed in diverse global markets. The document provides an overview of the bank's services and emphasizes the importance of adapting to specific market characteristics for long-term success, making it a valuable resource for students studying international business and strategy on Desklib.

Running head: INTERNATIONAL AND GLOBAL BUSINESS
Strategy formulation for international expansion
Name of the student
Name of the university
Author Note:

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Table of Contents
Introduction......................................................................................................................................3
Overview..........................................................................................................................................4
Structural Difference of the Different Markets...............................................................................4
Estimation of the Potential Size and Profitability of the Markets...................................................6
France..........................................................................................................................................6
South Korea.................................................................................................................................6
Brazil............................................................................................................................................6
Potential Problems...........................................................................................................................7
Future Developments.......................................................................................................................7
Brazil............................................................................................................................................7
France..........................................................................................................................................8
South Korea.................................................................................................................................8
Consideration of Foreign Exchange and Trade Implication............................................................9
Cultural Aspects Impacting Entry...................................................................................................9
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

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Introduction
The Commonwealth Bank of Australia is a multinational Australian bank having its
headquarters in Sydney. Its business is spread over a wide range of markets across the world.
These include New Zealand, Fiji and some other selected Asian markets, the United States and
United Kingdom (www.commbank.com.au). The bank was established in the year 1911 and was
turned into a public company in the year 1991. The bank provides a number of different services
that includes financial services, retail business, fund management, institutional banking
activities, insurance services and many more as such. It is the largest company listed in the
Australian Securities Exchange and has a wide range of banking products under its belt. The
mentioned Australian bank has been gradually increasing its presence outside the shores of
Australia and is pursuing fresh opportunities in distant lands. The management of the bank has
plans to enter new markets in Asia and other markets of different continents to explore new
opportunities. The international expansion of the business will make it one of the top ranked
banks in the globe and increase its profit margin (www.commbank.com.au). While resources and
capabilities are certainly important, recent work on the following have implied that the strategies
are modified according to the characteristics of the particular context in which the organization
operate. The host country where the business decides to make an entry and the native institutions
of that particular country plays an important role in the formulation of the key strategies to be
successful in the long run.
A proper analysis of the theory developed specifically out of the changes to global
markets has shown very little development of the standard theories of market segmentation,
proper pricing and appropriate pricing methods and distribution channels which was the main
theme of the local marketing theory (Ferreira et al. 2014). The markets nowadays are well
assessed before a firm actually starts operating. Because of the scientific and well calculated
assessment made by the organization, the company will not face any major difficulty after they
enter into the market.

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Overview
Structural Difference of the Different Markets
The main aims of the Commonwealth bank of Australia are to establish its influence in
the different strategic locations of the World. This includes the Asian market and some selected
markets of Europe and South America. Apart from targeting the developed economies of France
and South Korea, it has plans to establish operations in the developing economy of Brazil. The
plan of the organization is to develop some specific and well designed financial plans according
to the demands of the market (Geringer et al. 2016). The organization has to make sure that they
have the adequate strategies in place for each of the selected countries namely France in Europe,
South Korea in Asia and Brazil in South America.
Starting with the cultural capital of Europe, France is one of the largest and most
powerful economies of the modern world. It occupies the 8th position in terms of economic
prowess of the globe. It also attains its position because of its position within the European
Union strong economic zone. In general the commercial environment of the mentioned country
is favorable for the companies that have plans to establish their business in the country. Though
there are some striking cultural and social differences which will create some issues for the
management of the Commonwealth bank, it will not pose a serious problem in the development
of the organization in the market (Papadopoulos and Heslop 2014). The people in France have
the interest to try out new products and explore other opportunities that come their way.
However the presence of a strong national feeling makes them more inclined towards the local
companies. According to, Geringer et al. (2016) the competition in the banking sector can be
fierce because of the presence of a large number of developed and proven banks in the markets.
Like the other European countries the traditional distribution channels are being dominated
gradually by digital and sharing economy. This makes competition even fierce for the
organization. The management of the bank must make sure that they introduce the business in
France which will provide all digital solutions to the consumers of the bank (Peteraf Gamble and
Thompson 2014). Just because of the digitalization of the modern French banking system, the
non-financial agents are regularly being offered incentives to function more transparently and
efficiently to help the bank to provide the services to the consumers.

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Unlike to the developed market of France the Brazilian market is yet to reach its maturity.
The Brazilian market is believed to be having a bright future and thus there has been a recent
spurt of the industries as well as the financial companies to open their establishments in the
country. The hosting of two of the World’s biggest sporting events namely the Fifa World Cup
2014 and the Summer Olympics of 2016 has pushed for a major economic boost for the South
American Country. The initial figures stood at a staggering $24.5 million increase in the
economy by the year 2025. The management of the Commonwealth Bank has decided Brazilian
market more because of the estimated annual visitors visiting the country. The mentioned South
American Market follows the structure of a free economy which helps the business to perform in
a open manner (Gonzalez Dabic and Kiessling 2015). The market economy and the economical
out base of the country is mostly dependent on the modern forms of technology. Commonwealth
Bank thus has to apply similar technologies to immediately capture the market.
The $ 1.8 trillion GDP of South Korea makes the country the 11th largest economy of the
World. Korea’s main strength lays in different areas of technological and engineering expertise
namely Shipbuilding industry, steel, petrochemical, electronics and many more as such. The
Unique industry standards, transparent set of guidelines to be adapted by the companies to do
business in the Korean mainland, competitive domestic market and the presence of latest
innovative technologies have made Korea one of the favorable countries for financial investment
(Gonzalez Dabic and Kiessling 2015). The presence of large scale industries has been one of the
main reasons for the proposal for the establishment of the mentioned Australian bank in Korea.
However in the recent times the Korean market is experiencing a downturn financially which has
taken a serious toll on the banks present in the Asian country. Though there have been constant
efforts of the Government of the country to stabilize the system some major issues have led to
the continuation of the gloomy phase. However Commonwealth bank being one of the topmost
banks can implement adequate strategies to ensure the success of the business in the following
market (Piekkari Welch and Welch 2014).
International expansion of the banks thus can involve a lot of different activities and
modes. This can involve acquisitions, joint ventures, trade agreements, start-up’s and many more
such related procedures. The banks thus choose different options while they decide to enter into
new markets. The marketing research that will be carried out by the organization will thus find

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out that unlike the markets of Korea The market of Brazil and France are quite well developed
and organized in nature.
Estimation of the Potential Size and Profitability of the Markets
The Commonwealth Bank of Australia has plans to expand its business to new markets
including that of Brazil, France and South Korea (Xie Batra and Peng 2015). Some of the main
banking products and services will include, loans, savings account, current deposits, hedging
solutions, share market transactions, mobile banking services and many more as such.
France
Some of the main factors that will help to estimate the size and profitability of France are;
1. Presence of the country in the strongest economic zone of EU
2. Third largest economy of Europe and 8th largest of the world
3. Future market growth as a result of BREXIT
4. Moderate but effective GDP growth
South Korea
Some of the main factors that will help to estimate the size and profitability of South Korea
are;
1. One of the potential economic super power in future
2. Presence of the Mixed economic system is a large advantage
3. Liberal Market
Brazil
Some of the main factors that will help to estimate the size and profitability of Brazil are;
1. Latest policies have brought reform in the financial system of the country
2. Presence of large scale industries will help to increase the financial business of the bank

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Potential Problems
Commonwealth Bank of Australia is similar to all the other banks of the world in facing
crisis situations while establishing their operations in new places around the globe. Some of the
common problems are;
1. The local success strategy of the bank may not be successful in international markets and
thus they have to formulate a totally new strategy for expanding
2. Serious legal and regulatory issues can deem the possibilities of the banks to earn profits
3. It is not possible to meet the demand of the international customers every single time
Future Developments
Brazil
The financial market of Brazil is already well developed and apart from such a
development the market offers more development in the future. The mentioned South American
country is one of the few in the list of countries that still faces the effects of the recession and has
been struggling to meet the demands of the modern market. The IMF (International Monitory
Fund) has provided an estimate that the country will finish last in the list of the most slow
among all the developing countries in the coming few years. The inflation rate of the mentioned
South American Country has been on a stagnant rate for quite a while now and the government
along with the Reserve bank of the country has been unable to deliver exact solutions to remove
the current mess (Xie Batra and Peng 2015). But according to different experts there had been
such cases earlier where the country has gone through similar situations and recovered quite fast.
Such a special ability has eased the pressure out of the investors and new business bodies and are
thus targeting the country for establishing their business. The management of Commonwealth
Bank of Australia have decided to embark upon their business journey in the country by
implementing some special banking practices. These are as follows;
1. Presence of the bank in the social media of the country and connecting with the new
generation
2. Introduction of mobile and internet banking facilities
3. Customization of currencies

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4. Entering into agreements for acquiring small business ventures like financial firms or
mortgage firms
France
The economic growth of the mentioned European country will see a robust growth of 1%
in the financial year 2018-19. This will happen just because of the stronger external demand,
growth in other activities li8ke tourism business opportunities, low rate of tax and job creation.
Despite the reduction in the business and the capital income taxes, a stronger deficit growth
should be helpful to bring down the budget deficit to just 3%. The presence of the country
within the strongest economic zone of the world helps the country to be the best market for
foreign investment (Zheng 2017). The competitive nature of the market has been another plus
point for the country to be successful in attracting financial and other forms of industrial
organization in the market. The presence of a large number of financial sectors, research and
development centers, consumers and start up initiatives helps and will also help the country to be
an ideal centre for foreign direct investment.
The marketing team of the company has started a detailed market research in France and
they hope to start their operations in the market as soon as possible. However the management
has to make sure that they keep themselves updated with the latest technologies of the market
and also the different new inclusions within the market. Commonwealth Bank of Australia seeks
to establish a longstanding understanding and trust with the new customers and ensure their
sustainability in the market.
South Korea
Among the implementation of the new financial policies by the government of South
Korea in the year 2005 two of the policy measures deserve special attention because of their
large scale impact on the domestic market of the country (Zheng 2017). The first one being the
overseas investment promotional plan whereas the second one involves the imposition of certain
clauses on limits to financial account transactions. The following were considered to two of the
boldest steps that have led the country’s economy to the position in which it stands on the
present day. The Korean government after formulating such policies has implemented other such
policies that have equally contributed to the success of the country. In South Korea Banking is

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slowly being converted to the way the banks wants them to be. The marketing research
conducted by the research team of the Commonwealth Bank has reported that the concept of
bank branches are slowly being replaced by the new age banking services like Mobile banking,
Application based banking, e-statements, internet banking and many more such digital
technologies (Winata Mia and Langmann 2016). The highest amount of internet exposure to the
citizens of the country amongst Asia will certainly pave the way for a totally new age financial
structure. The mentioned Australian giants must set out its business according to the demands of
the modern customers and set a step ahead for total digitalization.
Consideration of Foreign Exchange and Trade Implication
The foreign exchange considerations are one of the key to the success of a bank in the
international markets. It involves the process by which foreign currency like dollars or pounds
are converted according to the exact value of the local currency. The rates have a direct effect on
the international trade, political issues, cash flows and the profit of the banks in the international
markets (Suzuki and Okamuro 2016). In the particular case the Commonwealth bank of Australia
has to convert their investments in Australian dollars to other international currencies. The bank
usually sets exchange rates for a future date and the investors to hedge the flow of the foreign
currency in the local market.
Cultural Aspects Impacting Entry
The entry of a business in a new market is not easy at all as because there are a large
number of different barriers faced by the organization before starting their actual operations. The
globalization of the world has increased the scope and chance for the foreign business firms to
effectively expand their market and explore new horizons. The high competition in the foreign
markets is making life tough for the organizations to stay stable and earn profits from these
markets. But the new generation management of the companies is taking up the advanced
challenge and is involved in rat race amongst each other to prove each other’s supremacy. The
tactical and strategic battle in the market helps to deliver the best goods and services for the
customers. The management of Commonwealth Bank has decided to expand their operations
globally after making a huge impact in Australia, New Zealand and some selected Asian

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countries. They have taken up the challenge to establish themselves in some other countries of
Asia and also expand in the less ventured Brazil and in France. The following can be attributed
to the establishment of the 34th international branch of its rival ANZ bank in France a few days
back. The management of the company has to overcome a number of different challenges like
the socio, cultural, environmental and legal factors of each of the countries to get the taste of
success (Strizhakova and Coulter 2015). However the most important obstacle to the new
venture can be the lack of cultural knowhow which cannot be overcome easily. Language
problems, reading the minds of the customers, way of influencing the customers, local traditions
and other cultural factors can seriously act as a great hindrance to the establishment of the bank
in the markets. The Management of the mentioned bank has thus formulated a local management
team in each of the countries to make sure that the decisions can be taken easily and comfortably
without always consulting the central management. The local team will consist of local people
who are quite comfortable with the country and are better prepared for any drastic local needs.
Each of the countries has their own set of cultural identities and thus the need for
different cultural strategies by the bank (Stahl and Tung 2015). The people of the countries must
be provided adequate time to get accustomed to the foreign cultures of the bank and their way of
providing services. For example the bank has to provide instant and updated service to the
French and Korean consumers as they are quite accustomed to such services whereas on the
other hand the organization must be careful while providing services in Brazil as the country is
not accustomed to the latest forms of banking.
The main cultural aspect that needs to be maintained by the Commonwealth Bank
includes;
1. Language- Language acts as one of the main cultural barriers to the proper operations of
the business. The consumers are more comfortable if the bank interacts with them in their
mother tongue. This helps the organization to come closer to the people and make them
easily understand the products and services. The management of Commonwealth Bank
must employ local talents in the bank to get rid of the language related problem.
2. Surnames- The use of surnames is preferable in some of the countries whereas in other
countries surnames are used next to the first names of the people. This difference must be

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keenly noted by the management of the Commonwealth Bank and they must operate their
business accordingly.
3. Greeting techniques- Greeting techniques is another key cultural concept that the bank
must know to make sure that they can satisfy the consumers and the local staffs of the
employees. Formal techniques include shaking hands which may or may not be accepted
otherwise in some country. The Commonwealth Bank of Australia have to expand their
business after having a transparent idea of such different techniques.
Conclusion
The following project has been successful in conveying the readers the different aspects
that leads to the entry of a business in an international market. The investigator has provided
transparent and specific details like the problems, the market condition and the future
implications of the business. These elements act as a proper recommendation for the
management of the Commonwealth Bank of Australia. A thorough analysis of the project can
deliver some clear outcomes namely;
1. Mode of market Entry
2. The products and services that are to be launched in the new market
3. A thorough idea about the competitors in the market
4. The proper time to enter the market

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References
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