Strategic Management Internationalization

Strategic Management Internationalization

1. Section A - Question 1

2. Why Internationalization?

In 1990s, the home market of Allied Irish Bank (AIB) was saturated; there is limited growth potential in home market. AIB make a strategic move to increase earning and enrich the competiveness of company by going internationalize. There are many advantages for company internationalize. Economies of scale from access to more customers and markets. Cross subsidization between countries. Diversify macroeconomic risk in one country. Crossover customers between markets, reputation, band identification.

3. UK Market

AIB enter into UK market by using a niche strategy, it focuses on customers such as SMEs, professionals and not-for-profit organizations. Rather than compete on cost or price, it provide first-class service which tailored to fit the values of clients and to make terms of service and product whenever possible.

 Value added

 It earned a reputation for quality service by its relationship-oriented approach. By the year end 31 December 2005, it made a profit before tax of €322m.

 Suitable or not

 This strategy is suitable because group lack of the scale to compete directly with larger banks in the markets. Group can afford to focus on niche market and operates as a full-service local bank and offers a full range of first-class banking products.

 Risks and disadvantages

 Disadvantage of providing tailored service is cost very high, and it is not guarantee that all tailored service will success and make profit. For example asset management business, Govett loss for some years and did not see to return to profitable in near future.

 Comments on the problems

 Pitfalls of market development strategies
 How to dealt with these downsides

 If one of the product not success in the market, either change strategy to resolve the situation, or give it up as soon as possible to stop the loss. Such as selling Govett to Gartmore Investment Management plc.

 US Market entry strategies

 AIB enter into UK market by using merger and acquisition strategy, group acquire the US regional bank First Maryland, and expand it in US.

 Value added

 Allfirst Financial Inc. became top 50 US bank in 1999, and had financial assets of €21.4bn.

 Suitable or not

 Acquisition is the fastest way to get into overseas market, acquire company which already in business and with local knowledge.

 Risks and disadvantages

 Acquire foreign company may face problem such as difficult to control, such as Allfirst involve in a fraud case.
 Group requires implementing a series of control system to monitor performance of overseas company.

 Comments on the problems
 Pitfalls of market development strategies
 How to dealt with these downsides

 Poland Market entry strategies

 AIB enter into Poland market by using merger and acquisition strategy, buying WBK in Poznan and strengthened its local branding.
 Value added
 It generated €132m of profit for the group.
 Suitable or not
 This strategy is suitable and using the opportunity of invited for project to twin with a Polish bank to tutor it in free market principle and practices.

 Risks and disadvantages
 Comments on the problems
 Pitfalls of market development strategies
 How to dealt with these downsides

 Singapore Market entry strategies
 AIB enter into Singapore market by strategic alliance with Singapore-based Keppel Tat Lee Bank.
 Value added
 It make €93m profit for the group.
 Suitable or not
 Risks and disadvantages
 Political reason of not welcome of foreign bank, impending government-backed consolidation of Singaporean financial services industry.
 Comments on the problems
 Pitfalls of market development strategies
 How to dealt with these downsides
 Withdrew from direct involvement in Singapore banking market at early stage.
 Allfirst fraud case
 Governance, Control, Ethic
 What went wrong
 Why went wrong
 How to avoid
 How governance make different
 New system or change
 Good objective
 SMART strategy
 Apply to whole group and divisional objective
 Strategic development plan
 TOWS
 Suitability, Feasibility, Acceptability
 Ansoff
 5 year plan

4. Section A - Question 2
5. Section B - Question 7
6. Managing Change

Management implementing strategic change may face resistance from internal or external stakeholder. In 1993, a study conducts by Hammer and Champy claims that 70% of reengineering project fail. Handling resistance is an important factor in planning stage and also important at implementation stage.

7. Stakeholder and Cause of Resistance

The most common stakeholders that may have resistance during change are employee, customer, and business copartner.

For people to resist of change because fear of the unknown, fear of failure, disagreement with the need for change, losing something of value, and leaving a comfort zone false beliefs, misunderstanding and lack of trust, inertia.

Fear of the unknown. Change means uncertainty and uncertainty uncomfortable. Do not know what the situation may often occur, leading to increased anxiety. Resistance to change is one of anxiety and mitigation actions.

Fear of failure. The new order may require the skills and abilities may be beyond capabilities of people. There is resistance to try a new approach, because people know how to operate in the existing order, but fear they will not be able to the new skills and behavior that will be required of them.

Disagreement with the need for change. People may think that the new direction is a wrong direction.

Losing something of value. People want to know how changes will affect them. If people believe that they will close down, resulting in the disappearance of the change in their resistance.

Leaving a comfort zone. People are afraid to pursue what they want, because it would force them to stretch their comfort zone. This is just a natural thing to postpone frighten us, to avoid goals, requires us to leave our comfort zone and take risks.

False beliefs. In order to make people to relax and avoid taking risks, many people fool themselves into thinking that everything will be a day of work itself.

Misunderstanding and lack of trust. When people resist change, they do not understand its meaning, and make them feel that it is not worth the candle. This situation often occurs in the absence of trust between those who initiate the change and employees.

Inertia. All organizations subject to a certain degree of inertia, and strive to maintain the status quo. Changes need to work, usually of great significance. So, do not underestimate the power of fatigue and burnout.

8. Overcome Resistance

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