The Major Factors of the Credit Agricole - Essay Example

The Major Factors of the Credit Agricole Introduction Increasing competition and volatile markets have forced many organizations to look for new ways of doing business. In order to create more value and diversify the risk, organizations have expanded into international markets. Expansion into international markets however, presents unique and new challenges to the firm so that firms have to look into different factors before deciding to enter into such markets.( Czinkota, & Ronkainen,1994) Credit Agricole is one of the largest retail banking groups in the world and is the largest banking group in France. The overall structure of the firm is such that it is owned by many smaller retail banks in France and is offering retail banking services not only in France but at international level also. Primarily focusing on the rural areas as its target market, bank has also presence in the cities and is now operating in more than 60 countries of the world. Such huge international presence therefore outlines a very significant expansion of the firm in international market. The overall strategy of the firm in terms of international expansion has largely been focused on the acquisition of smaller banks in different European countries as well as countries from other parts of the world. Such expansion strategy outlines that the firm has taken an aggressive approach to extend its presence in the international market. This paper will attempt to discuss the major factors which have impacted the Credit Agricole in terms of its expansion into the international market and developing its international marketing strategy besides discussing as to how the firm has evolved and developed its international marketing strategy. Credit Agricole- A Brief History Credit Agricole is considered as the green bank of France because of its support and stronger roots in the agriculture sector of the country. It is also because of its overall business philosophy that the firm mostly operated in the rural areas of the country with little presence in the urban areas. Credit Agricole is unique in the sense that its ownership structure is really different and its owned by many smaller banks. Bank’s historical roots are relatively richer given the fact that it was established in order to allow the extension of credit to the farmers so that they can boost their productivity. One of the reasons as to why the agriculture was lacking in productivity in France was the lack of credit to the farmers and as such they were unable to purchase better seeds and other tools in order to better cultivate and increase their productivity. The overall success of the bank is therefore often considered as a result of its relationship with the farmers at the individual and collective level thus increasing its penetration into the market. Credit Agricole was established in order to extend the flow of credit to the farmers so that they could obtain better raw material in order to become more productive. Bank further increased its activities in order to fulfill the wider requirements of its customers and branched out into different other businesses also such as asset management etc. The real expansion for the bank started during late 1960s when French government allowed the bank to expand its operating activities and also include other banking activities to become a bank offering universal banking services. Since the bank specialized in the agriculture lending therefore it had developed relative expertise of the sector and also rolled out its own subsidiaries in businesses such as food processing etc. Further, the continued expansion of the bank further allowed it to extend its loans to the companies also thus its overall scope and breadth and depth of the activities was increased consistently to push the bank to become a universal bank. Under the direct auspices of the French government, bank was able to completely monopolize the lending sector to the small farmers. It was only after that the government started to reduce its monopoly power and allow it to develop as a universal bank that the Credit Agricole seriously started to consider the expansion in the international market. With the unification of the EU countries and removal of the trade barriers, Banks got an excellent opportunity to expand itself into the European market besides also entering into other markets. As such Bank is now operating almost sixty countries through its various subsidiaries as well as strategic partners.1 The next section will discuss as to what major factors have affected the creation of company’s international marketing strategy and how the bank evolved such strategy. However, before discussing the same, it is important to discuss the international marketing strategy of the bank. International marketing strategy of Credit Agricole The overall competitive nature of the environment as well as the increasing competition has required the organizations to view their international marketing strategy in an entirely new manner. (Bradley, 2005) It is argued that the organizations, in order to become successful at the international level, have to undertake a complete change in the way they tend to approach the issue of international marketing strategy. Due to the increasing importance of this factor, international marketing strategy is also considered as one of the key elements of generating the competitive advantage at the international level. (Ranchhod,2004) Over the period of time, Credit Agricole has developed the expertise in direct and relationship marketing because of the overall nature of its business. (Business Decision Group, 2009). Since it was actively engaged into the marketing to the individual farmers therefore direct marketing was the effective tool which was utilized by the firm initially at the domestic level. Credit Agricole also seems to carry forward this strategy in the international market also and has effectively utilized its local knowledge with the help of the direct marketing. It is also important to note that Credit Agricole is owned by 39 banks therefore its distribution network is also based upon utilizing the existing strengths of these banks. Bank seems to carry forward the same strategy forward where it has attempted to utilize the existing distribution channels of the firms which it has acquired in order to make a successful entry into the new market. Factors affecting the strategy It is important to note that Credit Agricole has extensively expanded into the Western European market owing to the high growth rates in the region. Like most other banks in the region, it entered into countries like Poland, Greece, Portugal, Spain, Ukraine etc. Entry into these markets suggests that the Bank attempted to enter into the markets where it could face relatively lower level of risk. Choice of host countries Bank has mostly entered into the European countries therefore sticking to its European roots. This decision also seems to be the result of the fact that Europe presents a known landscape to the firm where it can take advantage of certain factors such as culture, language etc to gain access to the local knowledge and expertise. (Howcroft & Whitehead, 1990). It has also entered into countries like Japan however; the predominant strategy to enter into the markets and making a choice of host countries was largely based upon the overall economic development of the country. Bank has entered into countries which were either economically developed or were on their way to achieve the higher degree of economic growth at the consistent level. Factoring in such element therefore requires that the marketing activities will be directed at the target market which is already well versed with the overall nature of the banking business and have developed a relative degree of sophistication to understand and use products and services offered by the firm. (Chee, & Harris, 1998) Selection of modes of entry In almost all the markets, Bank has attempted to enter into the markets through the mergers and acquisitions. Its preferred mode of entry therefore remained to enter the market by acquiring wholly or partially owned subsidiaries. Since the Bank has attempted to bring its expertise and skills developed over the period of time to the new markets, therefore it attempted to combine it with the local knowledge. Bank has over the period of time, adapted the direct marketing as its major choice and in order to successfully utilize this strategic option, it is always critical that the local knowledge is utilized in most optimal manner. The selection of modes of entry therefore has definitely proved as one of the key influences on developing the overall international marketing strategy of the firm. (Onkvisit & Shaw, 2008) The above discussion suggests that the Bank has attempted to combine its international expertise with the local knowledge. It is because of this reason that by acquiring wholly and partially owned subsidiaries, firm has actually tried to familiarize itself with the local market besides blending its own competencies with the local knowledge. (Keegan, 2002) In a sense the overall international marketing strategy of the bank is a blend of standardization as well as the localization through which firm has projected its universal appeal while further integrating the local knowledge. Environmental Characteristics As discussed above that the firm has chosen to enter into the markets which were economically developed with established political system and institutions in place. This was mainly done in order to reduce the risk while allowing the firm to achieve better risk diversification. Political Factors Credit Agricole has preferred to enter into the markets which were politically stable and more conducive for business. The initial focus of the Bank was on making an entry into European markets where the overall political system is more stable with little risk being posed to doing business. It is also important to note that lately Bank has started to make expansion into the countries of former Communist bloc in Europe which remained under the influence of USSR. However, since their transition to the more market based economy, these countries now pose relatively less risk as compared to making an entry into other countries. Economic factors It is critical to note that the banks from 2007 till 2009 suffered heavily due to the international financial crisis. Though these crisis are still not fully negotiated with however, many financial institutions has started to make a recovery and are on their way to become profitable again. Credit Agricole specifically faced serious challenges in Greece where it has to take on extra losses due to the overall economic situation in the country. During recent past, Greece was supported by EU countries and other supernatural bodies like IMF to steer ahead of the looming crisis of default. Economic factors can therefore certainly impact the way a firm can actually attempt to compete with its rivals. Tighter economic conditions can therefore force the firm to cut back on its marketing efforts in order to further rationalize the expenses and maintain profitability levels. Cultural factors The overall marketing effort of the Bank is based upon the direct marketing approach wherein the Bank attempt to develop direct relationships with its customers. Since the bank is predominantly a retail bank therefore it has to cater to the large and diversified groups of customers. Such diversity therefore automatically require that the bank has to take into consideration the cultural factors while developing its direct marketing and other marketing strategies so that the overall message to the customers can be communicated in an effective manner. Credit Agricole has also used psychographics in order to evaluate and understand the European lifestyle and other cultural factors to better segment its target market. (Sturdy & Morgan, 1993). Credit Agricole is also one of the top sponsors of Football teams in Europe including the sponsorship of French Football team. Since football enjoy an special position in European and other cultures, it shows that the Bank is actually capitalizing on the cultural factors which can provide it better exposure to its target market at the international level. Since the Bank has been involved in agriculture lending therefore its name is often connected with environment. Its because of this reason that the Bank has taken extra care in dumping and disposing off the material used in its advertising billboards and other media. Bank has collaborated with firms like EcoAct to actually remove the Carbon footprints of the different operations used during the advertising and marketing efforts. (Credit Agricole, 2010) It also indicates that the Bank is quite sensitive about its external environment and takes into consideration different factors such as cultural and environmental concerns while devising and delivering its marketing message to its customers. Development of International Marketing Strategy Though the firm has adapted the localization strategy while developing its international marketing strategy however, it attempts to use its skills and knowledge developed at the international strategy. Since the firm has historically developed its expertise in direct marketing due to the overall nature of its business, therefore it has carried forward the same strategy to the international market also. It’s however, critical to note that the Bank has taken into consideration the local factors also in order to convert its marketing message according to the local conditions. A closer look at the acquisition strategy of the Bank would also suggest that the firms acquired by the Bank were allowed to retain their own brand name as well as the franchise in each of their regional markets. (Lambkin, 2008). This strategy therefore suggest the Bank has actually attempted to allow its subsidiaries to retain their local characters while at the same time further integrated its international expertise developed over the period of time. This suggests that the firm’s overall corporate strategy has played a significant part in shaping its overall international marketing strategy also. Bank, over the period of time, has developed a unique strategy of retaining the local character of its subsidiaries while at the same time transforming their culture with its corporate culture. Bank has also adapted a fragmented marketing strategy wherein it has divided its customers into different groups and developed the products according to their social and economic status in the society. In France, it has launched a product which was specifically targeted for the top 20% wealthiest segment of the society. (Blakey, 2009). Conclusion Credit Agricole is one of the leading retail banking groups in the World and is the largest banking group in France. Originally formulated to fulfill the borrowing requirements of the smaller farmers in order to improve their productivity, Bank soon developed itself into a universal bank offering many other services. Credit Agricole remained under the control of French government however, it was subsequently privatized also. Over the period of time, Bank has expanded itself into other international markets and is currently operating into 60 countries. Firm has adapted the entry mode of acquiring the partially or wholly owned subsidiaries in different parts of the world however; it is mostly concentrated in the European Union region. This strategy suggests that the firm has taken an approach where it has only entered into those countries which are politically stable and pose relatively few challenges in terms of political hostility towards the businesses. Further, bank has also attempted to enter into those markets where the economy is developed and the chances of growth are relatively higher. The international marketing strategy of the firm is a blend of standardization as well as the localization. Bank has allowed its subsidiaries to retain their original brand name however; it has also attempted to bolster this through its internationally developed strategy of direct marketing. Direct marketing has remained one of the preferred methods of advertising for the Bank due to the nature of its business. It is also important to note that the Bank has considered the impact of factors such as culture and environment while developing and implementing its overall marketing message to its target market. Bibliography 1. Howcroft, B., & Whitehead, M. (1990). The Single European Market: The Challenge to Commercial Banking. International Journal of Bank Marketing, , 8 (3), 11 - 16. 2. Lambkin, M. (2008). Rebranding in the banking industry following mergers and acquisitions. International Journal of Bank Marketing , 26 (5), 328 - 352. 3. Onkvisit, S., & Shaw, J. J. (2008). International marketing:strategy and theory. New York: Taylor & Francis. 4. Sturdy, A., & Morgan, G. (1993). Segmenting the Market: A Review of Marketing Trends in French Retail Banking. International Journal of Bank Marketing , 11 (7), 11-19. 5. Czinkota, M. & Ronkainen, I. (1994) International Marketing Strategy: Environmental Assessment and Entry Strategy, The Dryden Press. 6. Ranchhod, A. (2004) Marketing Strategies: A Twenty-First Century Approach, Prentice Hall 7. Douglas, S. and Craig, S. (1995) Global Marketing Strategy, McGraw-Hill 8. Czinkota, M. and Ronkainen, I. (2007) International Marketing, Eighth Edition, Thomson. 9. Bradley, F. (2005) International Marketing Strategy, Fifth Edition, Prentice Hall. 10. Chee, H. & Harris, R. (1998) Global Marketing Strategy, Pitman Publishing. 11. Keegan, W. (2002) Global Marketing Management, Seventh Edition, Prentice Hall. 12. Business Decision Group. (2009, March 3). Synergie GIE Innovates with cross-channel relationship marketing In 8 Crédit Agricole regional branches. Retrieved Feb 26, 2011, from Business Decision Group: http://www.businessdecision.com/Actualite/321/synergie-gie-innovates-with-cross-channel-relationship-marketing-in-8-credit-agricole-regional-branches/crm/543-business-decision-group-news.htm 13. Blakey, D. (2009, October 19). B is for bank, says Crédit Agricole. Retrieved Feburary 26, 2011, from Retail Banker International: http://www.vrl-financial-news.com/retail-banking/retail-banker-intl/issues/rbi-2009/rbi620/b-is-for-bank,-says-cr%C3%A9dit-agr.aspx 14. Credit Agricole. (2010, August 11). CRÉDIT AGRICOLE CIB CHANGES ITS IDENTITY IN AN ENVIRONMENTALLY FRIENDLY MANNER. Retrieved Feburary 27, 2011, from Credit Agricole: http://www.ca-cib.com/news/credit-agricole-cib-changes-its-identity-in-an-environmentally-friendly-manner.htm Read More