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Indian financial_services

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Corporate Strategies in Financial Service Sector:
This section would try to understand the conventional corporate strategies that have been used
by giants in financial service industry, its subsequent impacts over the time and need of the
hour to sustain in constantly changing business system. Further, an attempt would be made to
find out the recent shifts in these strategies and use of alternative corporate strategies by
leading companies in financial service sector. The environment in which the companies in
Financial Service Sector operate is highly dynamic and focused towards internationalization.
Thus the management shall take in account the following interacting elements while
designing their corporate strategies:
Constantly shifting patterns of demand of services.
Optimal use of technological innovations for serving the clients globally.
Changing regulatory framework of national/international financial systems.
Based on the Dekin’s studies, there are specific trends that speciality financial services
companies follows in implementing there corporate strategies. In this section the focus would
be on the development of these trends in the past 4-5 decades and to understand the current
shift in these trends by the influence of demand, technological innovation and regulatory
framework. There are three major strategic trends that have been noticed:
Focus on concentration & consolidation
Focus on trans-nationalization
Focus on diversification
1. Concentration and consolidation:
Merger and acquisitions are the most common strategies used in the financial service industry
especially by banks in the past 2 decades. The Japanese banks were always on the top of the
list of banks in terms of assets till early 1990’s when the whole Japanese ‘bubble econom’
crashed and Japan faced a major recession. This led to more and more mergers in banking
sector. One of such biggest merger was formation of Mizuho Financial Group from Fuji, Dai-
chi Kangyo and Industrial Bank of Japan. There are many more examples of following this
kind of corporate strategy till date. However criticism is that such big mergers only
reconfigured the banking industry in spectacular way but did not have any value addition in
terms of efficiency. If we try to look into some of the major advantages of mergers that has
made this kind of strategy still valid are:
Cross-Selling: The concept of cross-selling is an old one, and is not industry-specific.
It involves pitching new products to existing clients, and perhaps weaning them away
from doing some of their business elsewhere
Distribution Channels: Use of sales force of another company in selling the products
of banks
Vertical Integration: Financial industry mergers help firms to capture another stream
of profits by combining their forces like a traditional securities brokerage firm.
Diversification: This is another motive for financial industry mergers. To add lines of
business to smooth out company profits

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New reason for Concentration and consolidation:
Credit Crisis of 2007-08: The credit crisis of 2007-08 has hastened the trend towards
financial industry mergers. Some of these mergers were hostile mergers where weaker firms
were forced to acquire by big fishes. Looking at the recent conditions, there are no signs of
this trend to disappear though the strategy cuts down thousands of jobs.
2. Transnationalization of banking operations:
In past the operations like foreign exchange dealings, credits for trade and other financial
activities in international business were carried out by banks from its domestic locations. This
trend did not change till early 1960’s, but after that banks realized the need of having their
branches in other countries as the borders were opening up for international trade and world
was fast moving towards the globalization. The Eurodollor market was growing at a fast
speed. US banks were the pioneers to adopt to this new strategy and so far Citibank tops the
chart of having most number of branches internationally. The two major events in 1970’s first
the windfall capital acquired by OPEC and second dismantling of exchange control on capital
movement by major economies worked as the catalyst for transnationalisation.
The major phases of development of corporate strategy in international banking are:
Phase I
Phase II
Phase III
Phase IV
National banking
Transnational
banking
Transnational full-
service banking
World full service
banking
Current Scenario: As a result of the globalization, all the transnational financial services
firms are adopting to the strategy of direct presence in major geographical markets with an
aim of providing local services with global resources.
Though there has been a dilemma or criticism whether such ‘one size fit all strategy’ really
works in highly differentiated world or not but during our research we didn’t came across any
major failure of such strategy by any bank.
3. Diversification into new product markets:
We can classify it as a short term strategy used by financial service sector buts a logical move
in order to cope up with the global competition. This means that companies not only operate
in their areas of expertise but supply a complete package of services thus acting as one-stop-
shop. The majority of diversifications happen as a cause of other long term corporate

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 Corporate Strategies in Financial Service Sector: This section would try to understand the conventional corporate strategies that have been used by giants in financial service industry, its subsequent impacts over the time and need of the hour to sustain in constantly changing business system. Further, an attempt would be made to find out the recent shifts in these strategies and use of alternative corporate strategies by leading companies in financial service sector. The environment in which the companies in Financial Service Sector operate is highly dynamic and focused towards internationalization. Thus the management shall take in account the following interacting elements while designing their corporate strategies: Constantly shifting patterns of demand of services. Optimal use of technological innovations for serving the clients globally. Changing regulatory framework of national/international financial systems. Based on the Dekin’s studies, there are specific trends that speciality financial services companies follows in implementing there corporate strategies. In this section the focus would be on the development of these trends in the past 4-5 decades and to understand the current shift in these trends by the influence of demand, technological innovation and regulatory framework. There are three major strategic trends that have been noticed: Focus on concentration & consolidation Focus on trans-nationalization Focus on diversification 1. Concentration an ...
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