Expanding National Australian Bank (NAB) Into France Or Korea: A Macro-Environmental Analysis

Factors Affecting NAB’s Operations in France or Korea

This report has the objective to present a possibility for National Australian Bank (NAB) to expanding a business into either France or Korea. This is known as one of the biggest banks in Australia in terms of earnings, capitalization of the market, and customers. This has ranked 21^st in terms of capitalization of the market around the globe. This is running operations in Australia, New Zealand, and Asia (Duca, & Peltonen, 2013). The following discussion will cover the factors which affect the operations of the bank in France of Korea including economic, political, social, and legal factors.

The macro-environment affects each business around the globe. This includes many factors and affects the business at a large level. Organizations to minimize the influences of negative aspects should understand that the analysis of the Macro-environment is important. The macro-environment affects the operations of the business. Risks associated in the economy are downfalls, potentially bankruptcy that harms businesses within the booming industry. It also affects the customer’s willingness regarding spending. Customers not purchase and not within the position to buy particular products are included within the macro-environmental risks. Rates of unemployment and tax rates are macro environment risk which affects the businesses at large levels and customers on a regular level. Customers and economy are affected through the macro environment which affects all organizations (Joslin, et al., 2014). Following are the Macro environmental risks will be associated with France and Korea.

There is an easy procedure for starting the business as all kinds of formalities can be completed as a single place that is a business formality center. This is effective to eliminate the procedure of bureaucratic which hamper startup organizations, acquisitions, and partnerships at a strategic level. A corporation that is a resident of France pays 34.43 percent corporate income tax. Foreign nations are subjected to the limited liability of tax on income which is eared in France.

The Korean government has regularly preferred foreign direct investment with the objectives to transform the nation within the top friendly economy regarding businesses around the globe. There are many incentives provided by the nations such as tax support, grants of cash, and support at site location (Kormishkina, et al., 2015). Foreign direct investment is supported by the government to promote the employment, economy, and technology of Korea.  

Economic situations in France are regularly increasing. There was a 1.2 percent increase compared to the previous year which was 1.1 percent. The economy of French has been regularly driven through domestic growth. National gross domestic products (GDP) are expected to grow in the upcoming years. The sector of Banking within France is known as one of the significant assets of the nation.

Macro Environmental Risks in France and Korea

One of the nations around the globe known as Korea has been ranked as the high-income nation through the World Bank. There is more than $ 27600 income according to gross national per capita. This nation ranked has been ranked as the thirteen largest economies around the globe. This kind of ranking is based on parity of purchasing power and gross domestic product. More than 150 British organizations are working in Korea. Famous organizations are Standard Chartered, Jaguar, Burberry, Land Rover, and many more. This nation is known for its high growth within the market. The market in Korea is regularly increasing since 2009. The level of education around the nation is high as more than seventy-four percent of population undertakes the education at the post-graduation level. This present that will be enough opportunity for the businesses to appoint skilled labor that required to work within the industry of banking (Hwang, et al., 2013).

The economy of the nation has been grown with a rate of 2.7 percent that is expected to grow regularly. This nation is known as the home of a leading organization such as Hyundai, Samsung, and LG. The parity of purchasing power of a single person is standing at $37000.

In France, banks have to deal with regularly increasing number of European and global level regulatory requirements and a heavy burden of a tax. Many businesses within France are regularly increasing and developing using the financial markets. Banks are playing an important role to support them and providing an important source of financing.

The rate of Crime within the Korean nation is low. The government of Korea severely prohibits evolution form arming them. The nation still has organized crime that made up of criminal business which can earn money very fast by prostitution, loans at a private level, contracts for constructions, and many more.  

There is spoken language at an official level in France is French. This is important for the people that want to employ in France muse be enough capable to speak the French language fluently. This will create the easiness for the employees to communicate with customers and provide the services to potential customers. People value their French language and use it for international dealings of business. Everyone within the businesses of France also speaks English but still prefers to complete the dealings of business in the French language. This is important for foreign banks such as NAB to hire French people in strategic partnership and acquisition.

Starting Business in France or Korea

Banks in Korea have a smaller size compared to the other international banks that also provides the international bank’s opportunity to a dominant sector of banking in Korea. This is important for the international bank to seeking many opportunities in Koreas and spread the wings within the market by developing a strong footing by mergers and acquisitions (Rasheed, et al., 2015).

It is also denoting better regulations with the robust protection of rights regarding the property. There are more than 400 banks in the nation. The system of banking is categorized into four units that are deposit banks, banks of investments, bank of France, and banks which offer loans at the medium and long term level. One of the important organizations known as the Bank of France plays a vital role through formulating monetary and credit procedures and policies by ensuring the smoothness for the national banking system and set rates of interest. There are many leading banks in nations which are BNB Paribas SA, Societe General, Credit Agricole, and BPCE. Many large numbers of banks signal cut-throat rivalry within the industry of banking. This also presents the presence of marketing regarding the products of banking in France.

There are more than 158 licensed banks within the nation. It composed of 91 mutual savings banks, 52 commercial banks, and 5 specialized banks. Bank of Korea known as the central bank of the nation and liable to maintain the stability of price. The banking system of Korea is weak because of the weak sentiment of customers and rising risks occasioned through policies within the nation and around the globe. There are many leading banks within the nations known as KB financial group, Shinhan financial group, Korea Development Bank, Hana Financial Group, Industrial Bank of Korea, and many more (Dvorský, et al., 2017).

Competition

There are more than six banks of France that have systematically important presence around the globe.  In France, final firms are accounted for 4.5 percent of the total value which is added in France. The banking industry generates 4.5 percent from 60 percent of total national income. There are more than 370000 people are employed by the banking industry that represents more than 2.3 percent of private employees within the nation.

Resident’s corporations that run the operations within Korea are changed on their global income. Non-residential corporations are only charged with the Korean base of income. Organizations which are non-Korean and not have the stable establishment are charged with the holding tax on all separate item of Korean source of earnings. Tax rates of corporate income are 10 percent on earning of 200 million. These rates shift to 22 percent of entire earning which crossed 20 billion. Organizations pay local income tax rates of 1 percent on earning of 200 million. The rate will be 2 percent of the income of the organization crossed to 200 billion. The rate will be 2.2 percent of the income of the organization crossed to 20 billion (Strathdee, et al., 2015).

Economic Situations in France and Korea

France has been rated as the high-income nation with a population of more than 6.7 crores people. It has a gross national income of 38950 per capita. This is ranked as the biggest economy in the European Union. There is a friendly environment for businesses, good facilities to the public, and an effective framework at a legal level. It overall presents good European standards. The main segment for business in France are tourism, transportation, banking, processing of food, chemicals, and textiles (De Castro, et al., 2014).

Korea provides benefits from more than fifteen agreements regarding free trade that present there will be regularly increased business between South Korea and other nations. Increasing activities of businesses will imply the more activities of banking. An agreement has been signed by the EU and Korea regarding free trade which will make it easy for the many organizations to enter within the market of Korea (Claessens, et al., 2013).

Acquisition strategy

National Australian Bank can effectively enter with the congeneric merger with many other banks which are already running the operations in France. This will be easier and effective for the business to get the entry within the market of France because of the limited cost of investment. The organization will be enough capable to gain the access and market share within the nation and attract the customers who are using the services of banking in France. France is ranked as the middle-income nations and turns out as an important nation for foreign expansion. The population is in good number that promises the growth for the bank. This will be turning out best for the bank. The congeneric merger will allow the organization to attract and retain customers. The presence of a bank will be effective through the congeneric merger and run the operations comparatively within the market. This will be effective for the business to intensify efforts of marketing to attract more customers from the current market players.

Strengths	Weaknesses
· Developing markets · A huge number of sources · Stability of politics at a geographical level	· Less focus on invention · The efficiency of labor at a lesser level
Opportunities	Threats
· Government stimulation on the economy	· Development in neighboring nations · Undermines authorities

Strengths	Weaknesses
· Diversification at a higher level · Resource availability at the upper level · Developing markets	· Inefficient labor · Gape in regular innovation · Excess depends on foreign investment
Opportunities	Threats
· Export of products at a higher level	· Neighboring nations · Undermined authority

 

Particular	France	Korea
Political stability	Political stability at a high level	Political stability at a high level
Economic opportunities & growth	Economic growth is high with good rates of exchange	The economic growth rate is moderate with the low rate of exchange
Social environment	The population is high with a good growth rate	Population is low
Legal Environment	Discrimination	Antitrust law

Level of likelihood	Level of consequences
	Insignificant	Minor	Moderate	Major	Severe
Certain	Medium	High	High	Extreme	Extreme
Likely	Medium	Medium	High	Extreme	Extreme
Possible	Low	Medium	Medium	High	Extreme
Unlikely	Low	Low	Medium	High	High
Rare	Low	Low	Low	Medium	High

Assessment of risk	France	Korea
Political	Medium	Low
Economic	Low	Low
Social	Low	Medium
Technological	Medium	Medium
Legal	High	Medium
Environmental	Low	Low

Level of risk assessment	France	Korea
Political	1	2
Economic	2	1
Social	2	1
Technological	1	3
Legal	1	1
Environmental	3	1
Total	10	9

Conclusion and recommendations

In the fame of conversation, it can be determined that the National Australian Bank will gain more opportunities within the market of France through the congeneric merger. The market of France is more attractive compared to the other nations as it provides more opportunities for growth within the competitive environment. The analysis present that the government of France is also supportive of the organizations to enter and run the operations to serve more people and earn suitable profits.

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