Case Study: Selecting a Trade Banker

Q1. - There are two major schools of thought relative to the establishment and management of
international banking (trade finance) relationships with financial institutions. One approach suggests
that domestic banking and international banking ought to be kept distinct and separate, to minimize
risk to the company, and to ensure that no single financial institution has excessive leverage against
a company. The second approach suggests that an integration and holistic approach be taken,
where a company establishes a one-stop shop relationship with its bankers. Which approach is best
suited to Technon?

First approach suggests that domestic banking and international banking ought to be kept distinct
and separate, to minimize risk to the company, and to ensure that no single financial institution has
excessive leverage against a company.
In this approach Technon can handle both banks that is the domestic Credit Union as well as the
international bank separately and distinctly. The international bank can act as a Primary bank and
handle all international transactions and also help Technon to expand to other markets as well,
where as the Domestic Credit Union can handle the domestic affairs and local transactions of the
company which it was handing until now. With this approach there will be individual control of
Technon over each of the bank and can expand to foreign markets without worrying about the
domestic market as it is already being handled by the previous bank who was already taking care of
it since starting. The local bank already knows the companies trading policies in domestic market
and since it has also helped the company to expand since beginning the bank can be trusted that it
will be beneficial to the company in medium term as well as the way of operations will not change
and old health terms and relations will be maintained. Also the international bank can focus solely
on the international market expansion and with its established network and policies it will reduce
the burden of Technon and will be beneficial in expansion.

The second approach suggests that an integration and holistic approach be taken, where a
company establishes a one-stop shop relationship with its bankers.
In this approach the domestic and international markets will be combined and managed by one
single bank. There will be a measure transformation in the operating policies and trade ways of the
company which may also impact the local clients. With a new bank handling all the transactions
suddenly, it will be a revision of almost all the trading patterns and the Technon will have to survive
a major change. This will reduce the burden of managing two separate banks as it will be a one stop
shop but effects of changing all the trading patterns are uncertain in medium term banking and
might also hamper the local business of the company.

In our opinion the first approach is best suited as :

 Technon also does not want to leave the Credit Union as it has helped them grow.
 Domestic trade and finance will remain same and will reduce effects of company’s
expansion on the local market
 Technon can manage both international and domestic transactions separately providing a
better control on each bank
 No bank will have a single leverage over the company
 Each bank will focus on their specific markets
Q 2. What should the primary decision drivers be for Technon at this stage of its
evolution?

At this initial stage of expansion Technon should focus on the following decision factors:
 It should consider a bank which is showing interest in Technon’s business idea and is
willing to support the company.
 It should focus on the bank that has some solid trade finance credentials and has an
experienced and expert department in this sector which would provide services to the
company that are beneficial in expansion.
 Since it is company’s first venture into foreign market it should select a bank which
already has experience in international trade finance and business.
 The bank to be selected should have demonstrate a fair way of operation and its
transaction charges and fees should be clear , feasible as compared to other banks in
market and no extra costs or hidden charges should be added at a later stage.
 The bank selected should have a branch in Canada , a remote office or a banks
representative should be available in the home country as the company is more
comfortable dealing with a bank having links in Canada
 A bank that could offer a variety of finance options
 Bank that could offer variety of finance options as required by the company beneficial
for both parties, at this initial stage of expansion and also offers finance solutions for
various sectors of trade like supply chain, marketing, production etc
 The bank should have relationships and contacts in the target market which will make
it easy for both the bank and Technon including professional team in dedicated sectors
with high technology, and has unrivalled contacts in target market, with motto of
future expansion.
 Since the company has outsourcing of its components in china and programmers in
india, and they also have a focus of expanding in asia with india and china as major
markets hence bank should also have contacts in these two countries aswell.
Q 3. Articulate the case in favour of each bank as a potential service provider to Technon. Note
one negative characteristic.
Technon international needs a financial services provider with international banking and
export finance expertise to expand further in international market. They have option to choose
one of the following banks in order to deal with their financial aspect of international
activities . The following paragraphs states each bank’s favourable and non-favorable aspects.
Firstly, Technon can choose a Canadian bank, Canadian Trade Finance Bank is one of the top
two in Canada. To start, It has strong trade finance stop and it is expert in trade finance. Also,
it’s price is clear and competitive and company is also at ease dealing with a local Canadian
bank.
On the other hand, CTFB feels Technon is a small business for them. Also, CFO of Technon
senses that their products and services are basic and the advisory services which company
need would be limited.
Secondly, UK International Bank, top player in global trade finance. It can cover any transaction
of the company having team of experts with world class technology. It can also provide
solution for open account and supply chain finance. Additionaly, it had extensive
correspondent relationships and contacts in Asia which company need in order to expand in
United States, China, India and European Union. On the top of that, UIB understands that
Technon don’t need to stop its dealing with custom union.
While, UIB has a premium price for the services it provides. Also, Technon is too small
company for this financial institution.
Lastly, A regional bank of United States, Frist Trade Bank is a mid-tier bank centered around US
Midwest. It is niche provider of trade services having strong relationships with several
Canadian businesses seeking to establish operations in the US.
On the flip side, its advisory capabilities are limited. Also, it has no Canadian presence to date.
To conclude it can be said that each of the three banks has their own benefits and drawbacks.
It would be wise to analyze and compare each one of these banks as this decision will later
give high returns. Hence it would be wise to thoroughly scrutinize and take a decision
Question.4 - Select the recommended solution for Technon.
Answer.
The decision of choosing the bank will be a big step towards the future of
Technon, as Technon has a lot of business outside the Canada. Technon being an
emerging company of Canada shall be looking at all of its options.
Technon is a Canadian company, so working with a bank which is local but deals
all over the world is a good option. But CTFB feels that Technon is a small
business. CTFB also will not give all the services that Technon needs. Technon
needs a lot of advisory and CTFB made it clear that it will give only limited
services. The only advantage CTFB has is that it’s local and dealing with a local
bank makes Technon comfortable.
The next option is the First Trade Bank USA [FTB]. FTB has it’s business only in
the United States and not in Canada. And whereas, Technon is a company going
to all parts of the country and a bank like FTB will only limit Technon’s
boundaries. What FTB has to offer is only in the US so it is not the ideal bank for
Technon.
Looking over one of the other options is the UK International bank [UIB]. UIB is
based in the United Kingdom but it works all over the world and is globally
recognized leader in international finance and as given; the UIB account
representative in Canada said that the bank could offer any trade finance
available in the market. UIB has several world class teams in various parts of the
world, including Asia which is the market Technon would like the most to expand
in. Thus, it has an edge over the other options.
As a consultant retained to advise the CFO of Technon I would like Technon to
commit to UIB as its bank for international banking. UIB has the most reach
around the globe and as Technon wants to expand all over the world UIB will be
the most suitable option to choose for the betterment and growth of the
company as It is not only giving out the best options but it’s also flexible
compared to FTB and CTFB. Furthermore, I would like to throw some light on the
fact that not only UIB has the best options to choose from but it also is giving the
best rates.In conclusion, choosing UIB as the bank for international banking and
export finance expertise is the right way to go for Technon.