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Movement of companies. A case study: Deutsche Bank

Essay 2008 6 Pages

Business economics - Business Management, Corporate Governance

Excerpt

Nowadays the movement of a company abroad has become a very complex question. A business organization has to understand that the international environment has changed in the past twenty years. Today the global economy operates all around the world. There opened new, interesting markets e.g. China or Russia. The figure of international companies has risen faster as originally expected. Kotler et al (2001) argue many other industries as well as the global financial system have become more difficult to understand. According to Valdez (2000), in 1999 Deutsche Bank was ranked number one of the world’s largest banks by assets with $865bn. Today its ranked number 6, but only number 23 according to profitability. It can be said that Deutsche is an investment Bank which deals with the needs of high net worth individuals e.g. deposits, loans and investment advice. Furthermore it is one of Europe’s most powerful and successful banks. However, in 2003 Deutsche Bank has threatened to move from Germany to the United Kingdom (UK).

In 2003 The Sunday Times reported that plans exist to move from Germany either to Switzerland, USA or UK because of Germany’s anti-business culture and the complicated impractical laws. (online) Some of the international experienced managers would support the concept. An added reason given by a manager from Frankfurt (Main) headquarter is the poor performance of German companies which sounds like an excuse to move abroad. Rapid decisions are very difficult just as to be flexible. It seems that Deutsche’s manager wanted to benefit through a relocation to New York or a huge merger with a Swiss bank e.g. Credit Suisse. The BBC (online, 2003) observed one day later that Deutsche Bank has indicated the movement. (online) Although the bank has become globally it is a historically grown company with its origin in Germany.

Which factors influence a company decision to move abroad? Deutsche Bank has been well positioned to compete in global affaires. How did they achieved that status? The aim of this essay is to reply to the complex question whether to go into the international arena or not.

It is useful to study the assets and drawbacks of moving in a foreign country. Kotler et al (2001) state that international competitors offence the domestic market by making better products or lower prices available and achieving higher brand awareness. Foreign markets often present higher profit opportunities than the national market. Sometimes clients move abroad and require international services. Those points might influence a company decision to operate globally. However, there are many who said it is easier and safer to work in a local marketplace because it is not necessary to learn another country’s language and laws, to accept political, legal and cultural difficulties or to change products to suit other customer expectations. (Kotler et al, 2001) Those facts on the other hand speak against moving internationally.

The history of Deutsche Bank has to be taken into consideration. Deutsche Bank has to deal with risks to be more copetitive. What about the demanded international experience of the Deutsche Bank managers? Do they have sufficient knowledge of regulations and political environments in the UK? Can they understand the customer behaviour in other countries?

Can Deutsche offer similar effective organisational structures and services as they do in Germany? There exists certainly commonness but what are the economic differences between Germany and the UK?

The following paragraph suggests the history of the bank to understand its development. (online a) Deutsche Bank was founded 1870 in Berlin to encourage the internationalisation of trade. It opened a branch office in London in 1873 which became Deutsche’s most important foreign agency until 1914. Within the company there always was a strong relationship between Germany and the UK. In 1957 the Norddeutsche Bank AG, the Rheinisch-Westfälische Bank AG and Süddeutsche Bank AG formed the Deutsche Bank AG, a joint stock corporation. In 1989 Deutsche Bank AG aquired Morgan Grenfell Group to expand its presence on the London capital market. It is obvious that the bank has been become more and more accepted in the global financial market. Since 1994 Deutsche Bank’s management has been developed its investment activities. (online b) The next paragraph announces more in detail how Deutsche acts on the global financial market. Today, with around 7000 employees in London, Deutsche Bank AG is a “leading global investment bank, with a strong and profitable private clients franchise.” (Ackermann, 2007a) The employer Deutsche Bank AG engages 75,000 people in 75 countries, that represents over 50 % outside of Germany.

In October 2007 the Deutsche Bank AG strategy orientates to give attention to the Central and Eastern European business because it is an important market which can be developed in the future. Furthermore with the acquisition of New Europe Capital Partners (NECP) the company wants to grow its business relationships. (online c) In the press release from 10 October 2007 Deutsche Bank gave information about the engagement of the former president of JP Morgan’s Russian operations, Miklos Kormos. This is a classic example of how Deutsche recruits new international experienced managers who provide the company with their knowledge to expand the bank’s capital market share. Moreover the Headquarter in Frankfurt (Main) focusses other branches e.g. the insurance industry. In the recent past its Global Market division has gained Abbey Life Assurance Company Ltd from Lloyds TSB Group, a strong competitor in the UK. (online d) According to Michele Faissola (2007), Head of Global Rates and Member of Global Markets Executive Committee, it means a further step as a leading supplier of capital markets solutions to the insurance business. It might lead to the conclusion that Deutsche Bank has the required expertise for a global player. However the economies of Germany and the UK seem not to be the same.

There is a comparison necessary between both countries, Germany and the UK, to get a much more detailed look into the conditions of the economic systems. Tayeb (2000) points out the powerful relevance of the states on business. It is important to know that the workforce in Germany and in the UK as well is able to compete in international businesses, means that their qualification skills with modern communications are ideal to do commercial operations. Another interesting fact is the variety of language in Western Europe which makes it economically more competitve than in the USA or Japan.

Due to their geography Germany and the UK profit from this linguistic diversity because they receive more cultural experience and different point of views from managers of various nations. Pugh (1998) notes the contrast of the financial systems of Germany and the UK as on the basis of bank and market. In the UK firms run a search for long-term finance in the stock market because it has a key influence in Great Britain and is high developed unlike in Germany. (Hutton, 1995) In contrast german banks have very close long-term financial relationships with firms. That appears to be a widespread point of view with a intense connection orientated in a longer future than in UK which means the German companies try to orientate on more securities. The world competitors take more risks to be more flexible. Ackermann (2007b) recognizes that the European Union countries benefit from the dynamic European financial market because of its larger competition. That is why both countries profit by their rivalry. The Chief Executive Officer (CEO) of Deutsche Bank AG explains why the company is so successful.

Deutsche Bank provides its customers with a wide range of banking services. (online a) According to the brochure Deutsche Bank at a glance (2007) their private clients are supplied with account-keeping, cash and securities investment advisory and asset management. That is why many have chosen Deutsche Bank as a reliable bank. Its corporate and institutional customers quotes payment processing and corporate finance support which in general appears to the company philosophy. That confirms the five core businesses Global Markets, Global Banking, Asset Management, Private Wealth Management and Private and Business Clients. Every single department cares about problems and tries to improve the company businesses. Stagnancy means regression in comparison to the competitors of the modern financial branch. Deutsche Bank managers have recognised todays importance of moving forwards.

Finally the study of Deutsche Bank AG’s global performance clarifies the smart decision of the management to remain true to themselves. Its country of origin is Germany, the headquarter is in Frankfurt (Main) and the brand’s name Deutsche Bank AG is world wide associated with Germany. As many authors say, the image of a company nowadays is much more important than its proper performance on the market. (Kotler et al, 2001) Although Deutsche is often in the news the company’s progressions and achievements are remarkable. It has become the dominant bank on its domestic banking business and has challenged the difficulties of the global financial market. (BBC, 2005)

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Details

Pages
6
Year
2008
ISBN (eBook)
9783640202348
ISBN (Book)
9783656554899
File size
447 KB
Language
English
Catalog Number
v118133
Institution / College
Cardiff University
Grade
A
Tags
Movement International Business Management

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Title: Movement of companies. A case study: Deutsche Bank