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Santander Bank has been the company selected for this case of study. Due to the length and extension of Santander's international expansion, this work particularly focuses on a specific geographic expansion: Europe, and particularly in the last twenty years of expansion in European continent. Secondly to discuss and explain the motivations for this international expansion, and the strategy used to achieve the objectives of the expansion, discussing if this strategy was correct and if others could be more effective. Thirdly to define the challenges of the expansion in this period and determinate if they have been addressed or not and finally to elaborate a critic and own conclusion about all as noted above, explaining the effectiveness of Santander in this part of its geographic expansion. The choice of Santander bank is because, from my point of view Santander is a good example of how to make a successful international expansion and in a record time. Since the internationalization process started in 1947 the result is that sixty years later Santander is the eighth bank capitalization in the world with presence in 40 countries with 11,000 branches and 135,000 employees serving 69 million customers (Santander, 2012). Thus it is necessary now explain a bit of Santander´s expansion history. Although from its creation, it has an international projection, it did not establish foreign operations for almost a century after its creation. Santander was established in 1857 in Santander. During the first ninety years of its creation, it focused on growth in Spain. In 1924 it established the first bank office outside of Santander, and continued to expand nationally through bank acquisitions or office openings. It is possible to divide the process of Santander´s expansion in three areas or times, firstly Latin America, then Europe and later Asia. As was noted above this case of study focuses on the last twenty years in Europe, so only important events of others geographic expansions will be mentioned. It was not until the eighties when Santander focused its expansion in Europe. The entry of Spain into the European Economic Community (EEC) in 1986 and the transformation of the EEC into the European Union in 1992 induced to Santander, as well as other Spanish banks, to develop strategies to adapt to environmental change. While Spanish competitors of Santander bank focus on purchases and acquisitions of other banks in Spain to gain size and
Santander received Totta and Azores. Santander acquired a controlling share in Banesto. in collaboration with the Royal Bank of Scotland it purchased NatWest. In 1987 it bought the CCBank financial and credit card operations of BankAmerica in Germany. with increased participation in 1990 to 55% and 75% in 1993. the intervention of the Bank of Spain in the Spanish Banco de Credito (Banesto) provided an opportunity for national expansion. Monetary Union in 1999 again created an incentive to redefine the position of Santander in the European market. The alliance started with the exchange of 5% of capital in 1988 and Santander increased its participation to 9. and a joint venture to buy pension fund in countries where they did not have as greater presence as the United States. Banco Santander merged with Banco Central Hispano. Santander bought to Paribas its subsidiary in Belgium. Credit du Nord. focusing first on establishing a presence in Europe. The alliance was strengthened with the creation of a joint venture in Gibraltar between Santander and Royal Bank of Scotland in 1988. it bought the participation of group Champalimaud in Totta and Azores. In 1988 it established an alliance with Cariplo in Italy. In 1999. Santander already had offices in the UK. and established an alliance with Royal Bank of Scotland. Santander bought Abbey National in the United Kingdom. buying the rest of the bank and integrating it with Santander in 1998. with exchange of shares. Following the merger it was renamed Santander to Banco Santander Central Hispano (BSCH) and became the largest bank in Spain. Banesto´s operations in Latin America are of little importance to Santander. In 2004. This partnership becomes a key for Santander´s European strategy. which was created in 1991 following the merger of Banco Central and Banco Hispano Americano. controlling by Banesto in Portugal.face European competitors.99% the same year. In Switzerland. which had the position of sixth largest bank and second largest . This alliance in Europe was supplemented by acquisitions and new operations (Anon. despite opposition from the Portuguese government. in 1988. In 2000 Banco Santander created an alliance with Societe Generale of France. France and Germany. by contrast. which made the Royal Bank of Scotland in the second largest bank in the United Kingdom. Santander bank follows a different path. the office affiliated was converted to a bank. 2008). Although initially Santander did not focus on growing in Spain. In 1988 it bought 10% of the Bank of Commerce and Industry in Portugal. In 1999. Also in 1988..Thus In 1999. Thus in the mid eighties. In the purchase of Banesto. In 1994.
to interact with consumers of . different religions or different social norms) has an importance in service sector that does not always exist in manufacturing. There are various reasons why Santander pursues this strategy: the cultural distance (different languages. In two years. in 2011 the retail banking business of the Scandinavian SEB group was acquired in Germany through Santander Consumer AG. for some analysts. All these latest transactions demonstrate the financial strength of the Spanish bank. the institution has agreed operations by billions of euros in a strategy that. Thus. since the crisis began. it completed the acquisition of Alliance & Leicester British through the exchange of one Santander share for three of A & L. indicates the weakness of Spain. In 2010 an agreement was reached whereby Santander acquired the branches outside Scotland of the Royal Bank of Scotland (RBS). According to the motivations of Santander to expand to Europe. or the desire to grow geographically are important reasons for any company. Thus the first investments are not centered in near countries and subsequent investments are not made in distant countries. E. and not in Europe. Therefore. but it can be said as well that the constant trips outside of Santander illuminate signs of how difficult it is being played at home (Santander. 2001). in collaboration with Royal Bank of Scotland and Fortis of the Netherlands it made the biggest banking takeover in the world with the purchase of ABN Amro in the Netherlands. it is obvious that minimizing costs. just the opposite. So the question is why Santander started its expansion in Latin America. In the next year. The service sector companies need to understand the cultural patterns and social tacit and explicit other cultural elements like language. 2008. obtaining more customers. In 2007. 2002). dividing the operations of this bank in the world. different ethnicities. and finally it invested in U. later continuing to invest in European countries where there is greater cultural distance. 2012) and (Botín. and Polish bank Bank Zachodni WBK was also purchased.. appear to be the determinants of selected countries (Cardone-Riportella & Cazorla-Papis. the acquisition has not decayed. well a good explanation of this. can be that Santander started investing in Latin American countries first because they are culturally close to Spain. geographically farther than Europe.S and Asian countries where the cultural distance is greater. optimizing competitiveness. maximizing efficiency.mortgage company in the country. cultural distance and government behaviour in terms of regulations.
As the motivations and the reason of Santander´s European expansion have been explained. 2004). (2005) indicated that the likelihood that a bank will establish a branch as opposed to a subsidiary is driven by a number of factors including: home- . Dell’Ariccia. one bank has limited access to certain financial markets and therefore must use the services of another bank to conduct certain transactions. a subsidiary bank is incorporated in one country. operating a foreign branch bank may be considerably complicated because of the dual banking regulations that the foreign branch needs to follow.U or Asia. Foreign Branch Bank. so this method is used by Santander mainly in E. The analysis of Cerutti. including those in differing countries. in other words. As a result. 2004). In this case. while industrial costs geographic of distance influence in the internationalization transport products exported. Under the strategy of market development used by Santander. correspondent banking implies a relationship between at least two banks. Santander uses this method in specific countries where different causes cannot introduce. the political distance will have more weight in the service industries because these industries are many highly regulated and require permits or licences to operate. However. the company must understand and build relationships with government. The European Union provides Santander with access to all European countries. A type of foreign bank that is obligated to follow the regulations of both the home and host countries. it is possible to distinguish some particular strategies depending on the cases: Correspondent Banks. In contrast. Third. Multinational corporations (MNCs) may utilize these banks for conducting global business. it is necessary now to describe what strategies Santander have chosen to complete it (Dobson. service companies the geographic distance has a different importance due to often have to physically move to the country of destination to provide the services.services and offer the same quality in the foreign country and the country of origin. an affiliate works in a similar manner except it is not wholly owned by a parent company and operates independently. Starkey & Richards. and Martinez Peria. Starkey & Richards. Subsidiaries and Affiliates. Second. but is either partially or completely owned by a parent bank in another country. 2004). in manufacturing the company may not need to understand the cultural patterns (Dobson. Banks often open a foreign branch in order to provide more services to their multinational corporation customers (Slager. relations which are different depending on the country.
Santander received support from its partner Royal Bank of Scotland in return for the assistance rendered from Santander to Royal Bank of Scotland in its purchase of NatWest in the UK (Rodríguez Inciarte.e. The likelihood is that without this collaboration Santander could have not achieved its objectives of expansion as fast as was achieved. the key of Santander´s expansion. Portugal. Santander is the eurozone’s leading bank and is among the top 15 financial institutions worldwide in terms of market capitalisation. provided Santander with the media and the size needed to continue its European and international expansion (Anon. To sum up it can be said that Santander has developed an accelerating internationalization: Firstly an expanding branch network in main financial. in the purchase of Banespa. In Spain the merger with Central Hispano in 1999. a Brazilian investment bank. In addition.. i. Germany. Germany and Poland. economic and off shore centers. well after twenty years of expansion. According to the question of what were the challenges of the expansion and when were they addressed.e: In 2000. examples of this collaboration can be easily seen. 2005). parent banks’ type of operations elsewhere (i. like the joint venture in Gibraltar or the several cases of mutual help. etc).country regulations on how banks are allowed to operate overseas. Acquisitions or mergers. Rome). Paris. involves a potentially long term investment of funds. The bank is the leading financial institution in Spain and Latin America. facilities and resources by two or more companies to a combined venture. Portugal. 2006). and the type of risks that banks face in the host markets. a number of relatively large acquisitions and finally a consolidation or restructuring: integration activities in organization focus on internal growth. the desired degree of penetration in the host market. entry restrictions and taxes in host countries. its Consumer . On the other hand the strategy of subsidiaries is most often used by Santander in farther markets such as Latino America or Asia. Santander uses foreign branch bank only to ensure its presence in major economic and financial centers ( London. Strategic alliance and joint venture. Thirdly a focused expansion. in Europe is the method more used to introduce in other countries (Italy. and holds important positions in the United Kingdom. All involved will have an equity stake in the new venture. In this case it is necessary to mention the joint venture with The Royal Bank of Scotland. mainly by acquisitions.. Netherlands. which benefits all companies. relatively smooth integration except capital market activities. Secondly a broad expansion. their past expansion strategies).
Santander has characteristics and strengths that others European banks do not have: Positioning and a brand known worldwide. constant search for products and services that meet customers' needs. are specific to each country.. their results provide a stable balance. Mexico. 2002). Finally according the effectiveness of the expansions in terms of source and core competence utilisation. according to Prahalad & Hamel (1994) when the core competence and the market already exist.000 employees serving 69 million customers (Botín. the question that is necessary to ask is: What is the opportunity to improve our position in existing markets by better leveraging our existing core competencies? Well. Strength. How has Santander been able to harmonise the technologies and skills that it already had before the expansion and the others that have been acquired? as Raven Cazurra. and are featured on 62 different indices (Botín. increase earnings. It has been explained how one national bank has become in just 25 years the eighth bank in capitalization and the first in profits in the world. and none in a third country. etc). Throughout this essay one of the most bank effective expansions in the world has been explained. in several operations in the world. Lisbon. the firm may suffer a disadvantage in a country. exploit financial and economic developments of the home country. In contrast. This can be a good explanation of Santander success. football. quite another in another country. . that it has obtained in one country. Promotion through event sponsorships and other entities (Formula 1. Maloney & Markham. The motivations of this expansion have been outlined: Follow the client. 2002). especially how to coordinate diverse production skills and integrate multiple streams of technology” Prahalad & Hamel (1990). London. Buenos Aires. regulation. first it is necessary to define core competencies: “are the collective learning in the organisation. Its shares are listed on the stock markets of Spain. with presence in 40 countries with 11. the company can use the same competitive advantage. E. New York. (2007) said: The difficulties in internationalization in terms of the ability of the enterprise to transfer resources and to give an advantage in the country. Better strategic leadership than the rest of the banks.000 branches and 135. Innovation. Sao Paulo. Which is the agenda that Santander established.Finance division operates through Scandinavia and other European countries. and Milan.
S. 799: 119-125. in contrast. Botín. discussing if was or not more effective and explained how important specific alliances to conquest the European market were. profitability. The Economist. Corporate conquistadors... 4% (Santander. efficiency. (2006). the company develops knowledge about how to internationalize. Información Comercial Española. Word count: 2675 References Anon. E. The Economist. Why Spanish companies are expanding abroad. Santander´s strategy has been explained. by increasing the number of countries where it operates. Nov 6th 2008 | from the print edition. . Feb 16th 2006 | MADRID | from the print edition. (2002). do not seem to determine Santander´s investments. cultural distance seems to be the only one that determines the selection of the countries where the company invests. Political and geographical distances. The Spanish legion.market concentration. 2012). the geographical distance has a more minor impact in the service than in the manufacturing sector.. Latin America 43% (Brazil 25%). It is clear that in the internationalization of Santander. Modern Spain has bred a remarkable range of successful companies. Thus it has been explain that the cultural distance is more important in the services sector. Finally it has been said that group results are increasingly diversified geographically: Continental Europe contributes 35% of the profit (commercial networks Spain. It has been clear as well that one of the most competitive advantages of Santander is that. herding. La experiencia internacional de Santander Central Hispano. Anon. United Kingdom 18% and U. and how to operate abroad that allows it to enter in countries that initially were very different to the country of origin. Spanish companies. 15%). how to compete abroad. (2008).
International Journal of Bank Marketing. (2007). Erasmus Research Institute of Management (ERIM)...com/csgs/Satellite/CFWCSancomQP01/es_ES/San tander-/Acerca-del-grupo/Acerca-del-Grupo-. Santander (2012). C. L. Gary Hamel. Vol. 3. Harvard Business Review.K. J. (2004) Strategic Management: Issues and Cases. & Cazorla-Papis. (2005).. 68. About the group.. M. Rodríguez Inciarte. 5(3): 10-21.. Causes of the difficulties in internationalization. Massachusetts. 19 (2): 53-68. Martinez Peria. 3753. p79-91. series research in management.. The core competence of the corporation. The internationalisation process of Spanish banks: a tale of two times. & Richards. World Bank Policy Research Working Paper Series No.H. Harvard Business School Press. Prahalad. A.. (2005).S. & Manrakhan.K. C. Gary (1990). Availabe at: http://www. Starkey. 41. 38 (5): 709-725. (2004)..santander. J. S. Cerutti. Alfred M.. . Dobson. Competing For The Future. Maloney. Prahalad (1994). Banking across borders. Boston. Cuervo-Cazurra. Hamel. Erasmus University Rotterdam. M.html?leng=en_GB Slager. G.Cardone-Riportella. corporate web. No. C. E. Universia Business Review. K. How banks go abroad? Branches or subsidiaries. Journal of International Business Studies. P. Blackwell (DSR).. La consolidación bancaria en Europa: El caso Santander. Dell’Ariccia. (2001).
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