Multinational Banking in China
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Multinational Banking in China

Theory and Practice

Chen Meng

Multinational Banking in China examines key issues in the market entry and development of foreign banks in the People’s Republic of China using data collected from 37 in-depth interviews and questionnaire surveys.
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Chapter 7: Environment, Adaptation and Competitive Advantages

Chen Meng


INTRODUCTION Following the discussion of market entry and strategies of foreign banks, this chapter pays attention to the interplay between determinants and banking strategies, and to banking competitive advantages that shape and differentiate entry strategies. The dynamics of adaptation in a host market are the result of various combinations of stimuli. This factors are attitude based (managers’ attitude), internal environment based (strategy, resources and new management), external environment based (environment and acquisition opportunity) and performance based stimuli. In a more dynamic external environment, it appears that attitudes play a more important role in determining the internationalization path (Calof and Beamish, 1995). The right attitudes should help firms move more directly and appropriately along the internationalization path. Firm characteristics include items such as firm size and degree of international experience, while the environmental factors typically include items such as the cultural distance between markets, the nature of the competition in the market and the stage in the product life cycle (Lawrence and Lorsch, 1967; Venkatraman, 1989; Carpano et al., 1994). The institutional environment of China influences the investment behavior of foreign banks. Banks in their international expansion make incremental adjustments to the changing conditions of the bank and its environment. Changes in the bank and its environment expose new problems as well as opportunities. Constraints on the solution to the problem are the lack of business routines in management and the lack of market information (knowledge) and the uncertainties thereby associated (Johanson and Vahlne, 1977). Knowledge is a key...

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