Mobile banking done well

I liked this version of mobile banking facilities that I spied here in the Thai beachside village of Bophut:

While there are quite a lot of ATMs along the same street, the hotels do warn that if you lose you card in one, you may have real dramas getting it returned.  The only bank branch is about 150 metres away up on the less glamorous and traffic-filled main road.

This little van fills a neat gap in the market and gives this bank (the third largest retail bank in the country) a little step up in attracting custom (and presumably can be moved to more popular or event-specific locales when need be).

Now that’s innovativeness…

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Please don’t remember us

The effect of past FDI in a given location is an under-investigated aspect of internationalisation. This story from last week raises some interesting questions about legacy. Talking about Aussie bank ANZ it reports that:

ANZ’s mixed history in India could count against it in a three-way race for the some of Royal Bank of Scotland’s Asian assets.

It goes on to discuss the possibility that Indian banking regulators might not be too pleased to see ANZ back on the scene.

ANZ took over the Indian operations of British overseas bank Grindlays back in 1985 and ran them through to 2000 (along with other subsidiaries in Africa and Asia).

The bank was embroiled in a substantial chequing scandal involving an Indian share-trader that dragged on through much 1990s (for some discussion of this see here – although it is a startlingly complex legal affair). Awkwardly the plaintiff bank in the legal proceedings was owned by the Reserve Bank of India, the same body that will have the major say in approving ANZ’s bid (or not).

It begs the questions:

– Can ANZ distance itself sufficiently from a decade-old scandal?
– Can it make it strong case that it has better appreciation for international environments now?

The latter will be difficult as the Grindlays sale substantially reduced ANZ’s exposure to international markets, particularly in the Asian region. Indeed that was one of the main drivers of the sale, coming as it did in the wake of the Asian currency crisis.

The possibility that the article ignores (surprisingly) is whether the Indian officials (and public) might be just as annoyed by the Grindlays sale itself. ANZ could quite rightly be slammed for abandoning a large and viable bundle of assets in a time of economic crisis, and showing little faith in what would soon become one of the fastest growing and promising economies in the world.

To use a teen-flick analogy, ANZ could be seen as the jock who teased the shy, wallflower, promising much but publicly humiliating her. This shrinking violet has now lost the braces, removed her glasses and shaken out her hair to reveal herself as a real beauty. She can afford to play hard to get, and when choosing suitors the brutish Aussie has got a lot of sweet-talking and sorries to say.

Multinationals can’t afford to forget their past, or expect to be able to walk away from (or more importantly, back into) a country without folks remembering who they are and judging them in that light.

Please enjoy the firesale

Further to the question about the implications of the Global Economic Crisis on firm boundaries, it would seem that we may be seeing an increase in concentration. As more firms become distressed, the bigger (or more financially sound) players are starting to circle, hoping to pick up some juicy morsels in a fire sale (how’s that for some crude mixing of metaphors?).

A quick perusal of today’s Aussie business headlines throws up some predatory characters:

– Cashed-up Woolies on the prowl (Retailer Woolworths on the lookout)

– Mitchell returns to acquisition mode (Media planning etc giant Mitchell Communications also)

– Hart set on more package deals (NZ billionaire Graeme Hart sniffing around Rio Tinto’s packaging business (and others))

And a more international one:

– ANZ prepares bid for Asian wing of Royal Bank of Scotland

This will not be the end of such manoeuvres. There is clearly a reshaping of competitive environments afoot.

How will multinationals protect themselves?

There is a growing realisation across the business press that the Global Economic Crisis is transforming the international trade environment to one that is much more protectionist than we’ve seen in recent decades.

The general push for freer trade has been a strong driver of globalisation since the mid-1970s at least. Tariffs have tumbled along with other barriers to trade and investment. Through the GATT and WTO, and a huge swathe of other multilateral and bilateral trade agreements, goods and services have been easier to move around than ever before (particularly once we factor in lower transport costs).

While the US in not alone in imposing some trade-restricting provisions within their proposed stimulus packages, they certainly have the biggest flow-on effects in terms of triggering likely tit-for-tat responses from other governments.

The bailouts and nationalisations were seeing around the world in banking and auto sectors are conceivably just the tip of the iceberg in terms of measures that would certainly be seen as subsidies under any sensible definition. They are trade-distorting and trade-preventative in terms of impact.

As the IMF is already reporting a huge decline in international trade over the past three months, and the World Bank is forecasting more declines.

The question that is too often ignored in these discussions is what likely impact this will have on the behaviour of multinational firms. It perhaps shouldn’t surprise given the complexity of their choice sets.

Much of the protection push revolves around shielding industry and jobs in domestic economies. A sizable chunk of the firms being protected and subsidised are themselves firms who trade goods across borders, both as exports and also via imports of inputs, intermediate goods (and sometimes final goods).

Increased protection at home may shift the balance back towards domestic activity. Any advantage in international markets derived from subsidies may be undone by retaliatory responses from other national governments (lobbied by their own local players). Any rises in tariffs and other trade barriers may serve to untangle existing value chain configurations as multinationals abandon internationally distributed production processes as too costly, unwieldy and/or unpredictable.

For so long the movement of productive activities around the globe was derided as a race to the bottom. What will we call a retreat to home base?

And what about those multinationals for whom home is but a small portion of their global markets? Are they part of the protection plan of other nations? That would certainly seem to be the case in Australia.

Sticking to your knitting at Citi

A common catchcry in the strategic management literature is the phrase stick to your knitting.

This refers to the need to focus your intention clearly within a well-understood competitive domain. We might call this domain ‘an industry’, or we might call it ‘a market’, or a bunch of ‘consumers’.

The argument rests on the logic that firms often cannot replicate business models or business strategies when the underlying technology/production or distribution process differs too substantially; or put differently, when they can’t get any synergies across value chains.

This opinion spot from the Wall Street Journal makes a pretty convincing case that US banking giant Citi ignored this mantra, as they pursued the idea of a financial supermarket – a one-stop shop for everyone’s financial needs.

Citi made claims that they wanted a billion customers(!), which is a viable (if enormously hairy and audacious) goal if there were sufficient commonalities between the customers.

The reality of the financial sector is that it isn’t a supermarket or even a hypermarket. We don’t have a large swathe of relatively inert consumers picking and choosing between whatever mass-produced goods are plonked down on the shelf. Running the store is not as simple as offering shelf space and negotiating with suppliers, real estate developers and building big and efficient warehouses.

Banking works in a much complex way. Banks are, in essence, intermediaries between a range of different parties who in themselves often play multiple roles.

Thus we have firms and individuals who supply the input (money through savings and investments), and more of them again who purchase these funds (via mortgages and loans). We have more folks, again, designing complex products that may serve to generate returns and offset risks, and more again spruiking such products, or bundling them up.

And don’t forget those interested in attracting equity to their business, or in facilitating sales and purchases of other businesses. Nor should we overlook that most of roles are not mutually exclusive and the same firms may be seeking some or all services at a given time. As household consumers we play a less multifaceted but still complex role.

Citi look to have got their value chains very tangled up. They failed to adequately deal with significant (and perhaps irreconcilable) conflicts of interest. They neglected to distinguish between suppliers and buyers.

They are finally starting to extricate themselve from this mess. They have spun off their brokerage arm and rumours are flying about more to come.

It remains to be seen whether such efforts are too little too late. Without bailout money from the US government it is unlikely this strategy would have survived this long. So, remember, stick to…Follow @drsamma