Challenges of International Banks - Essay Example

Banks have been in competition and have been making efforts to become larger either by organic growth or by mergers and acquisitions and international banking have largely become associated with thinking big with an Economist survey analyzing how size of banks matter although banks go through various structural and functional changes and with their shifting shapes and sizes, the volatility of banks may be a factor in winning markets and market share (Economist, 2006). Ten commercial banks in America control 49% of the country's banking assets and mergers have been the buzz word in the US with removal of barriers between banks and insurance companies.

Using strategy as the relevant point of discussion here, I will suggest how strategy focused on matching an organization's assets and capabilities with the external relationships and environment. Here the course models from B820 and concepts could be used to show how by placing strategy at the centre of analysis a clear relationship could be drawn between banks/financial organisations and the external environment. The questions of size and ownership have been taken by the Economist survey to suggest that big banks tend to get bigger with mergers, acquisitions and organic growth.

However it is worthwhile to ask what are the limitations to this process, and big banks tend to have bigger shares in the market and commercial banking around the world remain preoccupied with matters of size and ownership. The Economist article referred here asks whether the future bank is expected to be ten times bigger than HSBC or the Citibank. However some of the recent bank mergers in the financial environment have destroyed shareholder value and usually the medium sized banks are prized highly by stock markets.

Procurement, systems, operations, research and marketing are some of the areas on which the banking industry seems to depend on (Economist, 2006). However when diseconomies of scale creep in, there are also concealed risks and failure of internal controls, however related lines of business can create opportunities for each other. Usually banking companies are affected by external environment to the extent that the global economy calls for merger and acquisitions to help the bank gain a larger size in the market.

This all relate to the B820 models and theories studied. Survival and prosperity depend on the solutions to questions such as: which products or services to offer; whether to pursue single or multiple lines of business; which markets or clients to aim for; whether to limit activities to local markets or expand internationally; how to acquire appropriate technologies, knowledge, finance and human resources; and which skills and capabilities to develop that will be relevant to your competitive strengths now and in the