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Market Structures of France

Write an essay on a critical analysis of the three potential international markets (France, Brazil and Japan).

This report provides a critical analysis of the three potential international markets (France, Brazil and Japan) where the bank can expand its banking services to customers. The analysis looked at the sizes of the economy in terms of Gross Domestic Product, the government policies, infrastructure and general banking sectors of different countries. The analysis also looked in depth at cultures of people from the three countries (France, Brazil and Japan) because culture plays a critical role in international business management.

The report found that France is more advanced in terms of infrastructure compared to the other two markets. In terms of technology Korea was ahead whereas in terms of population and growth market potential Brazil emerged on top. Analysis of stock market performance in the two countries was also done revealing some key investment insights which I believe is helpful to the management. The report was concluded and recommendations were given based on the existing facts and information collected during the analysis. The report recommends that the bank should invest in Brazil because of the enormous potential and business prospects that the country offers.

France is one of the leading economies in the world and in terms of ranking it sits at position six in the world economy. The country has a population of approximately 66,000,000 people and 65% of the population aged between 14 to 65 years (International Monetary Fund, 2013). Such a population shows that majority of the people are active and working, and this provides a better market for service businesses (International Monetary Fund, 2013). Some key sectors of the economy such as telecommunication, electricity, railway and aircraft are controlled by the government (Meyer, 2014).   

 Majority of the population in France is medium and high-income earners and therefore there is a low rate of poverty and higher purchasing power among the people (Organization, 2009). Property rights and contract enforcement in the France is very strict and therefore the market structures highly support the formation of mergers, and implementation of contracts (International Monetary Fund, 2013). There is high tax rate for foreign corporations and companies in France, which make the cost of doing business for a foreign corporation very high.

Last year, France banking sector had 383 banks offering services and among the 35 leading banks in the world, five of them are from France, and this makes the country one of the major European countries with a compact banking sector in the market (Organisation, 2009). The market has a high rate of capitalization among the European countries due to the high number of banks in the economy. In terms of labor, France has more than sufficient qualified people to work in the market with an unemployment rate of 10%. The high number of trained people in the country implies that banking business cannot lack qualified experts to work in the banks.

Market Structures of Brazil

Brazil has an approximate population of 202 million people in the world which offers a very large market share for the products and services. The market growth rate is high because looking at the GDP of the country indicates that many sectors of the economy continue to grow, and these businesses need services (Meyer, 2014). The large number of people and a lot of businesses offers good business opportunity for banking business. The country has a higher per capita income with more than half of the people living above the middle class earning an income of $11, 500 to $29,000. (Int'L, 2015).The size of Brazilian market has grown rapidly, and this provides many opportunities for global banks.

 The banking sector in Brazil is one of the most stable in the South American countries. Due to the strong financial sector, there is a high rate of inflow of foreign direct investment, and this has further strengthened the national currency of Brazil.

The banking sector of Brazil is characterized by acquisitions especially for private banks even though two government-owned banks continue to dominate the market. Furthermore, the Brazilian government does not regulate the sector and therefore there has been a high rate of borrowing among the people in the banking sector. Brazil's market is dominated by services sector that accounts for 67.5% of the country's GDP, and this market sector employs up to 66% of the total labor force (Int'L, 2015). This is an indicator that the government programs support the services sector including banking and therefore it is easier for a service business such banking to succeed in Brazil (Int'L, 2015).

 South Korea is a free market economy with few regulations that allows companies to do business with little interference. Therefore, Korean economy is heavily defined by South Korea due to the robustness of different sectors that continue to expand including manufacturing and services. The Korean market is structured along technological advancement, and most of the services offered in the country are through the use of technology (Christiansen, Turkina & Williams, 2013). The market is further dominated by large family owned corporations and boasts some of the world’s leading technology firms namely LG and Samsung. Presence of large technology companies provides good business opportunity for service sector businesses such as banking.

Regarding political stability, Korea is slightly stable due to the totalitarian nature of North Korea and the ever rising tension between South and North Korean countries (Christiansen et al., 2013). The Korean market is open and free, and this makes it vulnerable to market shocks because there are no strong institutions to protect the country from such shocks. Furthermore, the population of Korea is aging at a high rate which implies that there is a less active young population to work in the various sector of the economy (Yu, Wai-Kee & Kwan, 2014). Acquiring banks in Korea is a risk because the bank risks lack of innovative young people to work in the banking sector thus increasing the cost of labor acquisition.

Market Structures of Japan

Due to high government regulation in the financial sector and ownership of key areas by the government, there is market stability in France fostered by the political stability due to peace that France enjoys. Development of the manufacturing sector in the country also boasts the potential growth of France as an economy, and once the economy is booted, banking sector also gets a boost (Int'L, 2015). However, France has well-established banks that are dominant and offers stiff competition in the industry. Furthermore, high domination of the government and many regulations deter foreign companies from investing in the economy and therefore the potential of growth in size and profitability of the banking sector is limited for banks that seek to enter the French market.

Currently, the Latin American economies are in danger due to the slowdown trend in their annual growth rate of Brazil and Venezuela as at the end of 2015. In the past, the economies were growing at an average rate of 4.2% from 2004 to 2013 but by 2014, the rate dropped to 1.3%. In the same year of 2015, Brazil’s economy grew by only 0.1 percent which is one of the worst ever performance for a Latin American leading economy in history since the year 2009.

According to GDP forecasts, the Brazilian economy is expected to fall by 1.2 percent in the year 2016 which is a worrying trend. The trend is supported by the fact that most asset managers have moved swiftly to liquidate their assets in Brazilian financial institutions which are an uncommon scenario. There is a looming danger of instability in the banking sector because government has failed to control credit creation by state-run financial institutions. There is a high rate of borrowing in the financial institutions that are owned by the government and part of the borrowing is funded by public money. This puts the private financial institution at a risk of being thrown out of business and therefore institutions that want to grow in Brazil are put at a risk. 

Regarding loan growth, the Brazilian economy has been slowing down in the recent year of 2015. In 2014, the Brazilian GDP slowed down despite the fact that the loans increased. The credit growth rate began to slow down in the first half of the year 2015 which affected the profitability of the banking system. In the first half of 2015, credit growth rate was estimated to be 1.05 percent compared to 2.7 percent in 2014. Despite the economic slowdown, banks continue to make profits which predict a good prospect for banking business.

Potential Size and Profitability of the Markets

The Korean economy is Information technology driven and has a very high level of creativity. In the world of technology, the company has developed financial technologies that aid in banking service delivery (“International Business Publications”, 2012). Furthermore, in the recent years, there has been some strict regulations of the credit creation in the financial sector. These strict rules have brought sanity in the Korean banking industry which has seen the sector grow rapidly (Yu, Wai-Kee & Kwan, 2014). Furthermore, due to a high level of technology creativity in Korea, many corporations continue to channel their resources to Korea for investment in technology (“International Business Publications”, 2012). This influx of foreign direct investors in the Korean economy offers a great opportunity for businesses providing services such as banking and financial advisory.

However, the recent regulations passed by Korean regulators that allow non-financial institutions to hold more than 50 percent stakes in the internet-only banks is a big blow to the banking sector. These adjustments encourage mobile banking and financial institutions reducing business for banks because many people will shift to internet-only banking system rather than visit banks for the services. Therefore, there is high growth potential in the banking sector in Korea for already established banks but for those new banks it is a big challenge. 

In France the main problem that foreign banks may face is compliance with the existing regulations for the banking sector. The French government is so strict in the banking sector following the financial crisis that hit the sector in the year 2008 (Roett & Brookings Institution, 2011). Banks need to only offer a limited amount of credit to customers, and this is a stumbling block for new banks that need to expand their operations into France (Gup, 2007). In France, there is a possibility of strong competition from the non-bank institutions that offer credit to people and businesses because the law allows for non-banks to provide finances to businesses and people freely (“Department, 2013). Due to high competition in the provision of loans, banks have to lend money to businesses at a lower rate thus making less profit. It is also difficult for foreign banks to acquire local banks because local banks in France are well established and furthermore the regulations are a stumbling block.

In Brazil, there is a potential economic slowdown as evident from statistics of the country’s GDP and a growth rate that have been slowing down in the recent years (Int'L, 2015). Banks will be negatively affected by the economic slowdown because savings and investment depend on the level of economic growth. With a slowing economy, the banking sector in Brazil is at a risk of running at a loss because the amount of loans issued to customers keeps reducing with time (Int'L, 2015).

Furthermore, the great relationship that Brazil enjoys with the United States may make it difficult for another international corporation from a different country that wishes to invest in Brazil to accomplish its strategy (Int'L, 2015). Since this bank is an Australian bank, it will be difficult for the bank to gain a substantive market share in the banking sector given that there are already United States banks dominating Brazil and many other companies that originate from the U.S. (Int'L, 2015).

In Korea, banks have a problem of keeping up with non-financial institutions that have been allowed by the law to offer internet-only banking services (Yu,Wai-Kee & Kwan, 2014). Such institutions enjoy a large share of potential bank customers which gives a more challenging task for the new bank that wants to gain access to the Korean market.

Furthermore, Korea is an Information technology driven economy which requires that any firm that seeks to enter the market must have a good technology strategy for it to succeed otherwise it will be difficult. There are also strict barriers to entry of new firms into the Korean economy because of the existing regulations that seek to protect local companies. The tight regulations in Korea act as a deterrent for a foreign corporation seeking to get access the market and acquire some local businesses (Yu,Wai-Kee & Kwan, 2014).

Analysis of future development

French banking sector is already dominated by large government-owned banks and private banks that have large asset bases to compete with anybody who comes to the area as a competitor (Crane, 2000). Banks offer loans at a cheaper interest rate as witnessed in the loans given to SMEs (Trumbull, 2012). Banks in France offer loans to SMEs at an average rate of 4.90 percent which is lower than the rate offered by banks in the Euro Zone countries (Trumbull, 2012). Due to the above reasons, it is clear that banking sector in France is already established and therefore leaves little room for growth in the future.

In Brazil, despite the slowing down of the rate of economic growth, commercial banks continue to make huge profits on financial services they offer to customers through lending and financial support services (Becker, n.d.).The return on equity for big private banks in Brazil reveals that the sector continues to enjoy high profitability despite the general economy slowing down. The banks recorded the earnings per dollar invested rate of 20 percent which is twice that recorded by most of the United States banks (Becker, n.d.).

Furthermore, due to lack of regulation by the government, banks in Brazil enjoy high profits by charging higher interest rates on loans they offer to customers (Cyree, Huang, & Lindley, 2011). Banks have also an option of buying government bonds to protect their investments from market shocks and through this programs they make more money while at the same time keep their investments safe (Cyree, Huang, & Lindley, 2011). From these statistics, it is clear that there is potential for growth in Brazilian banking sector. Banks seeking to acquire banks in Brazil have an upper hand of succeeding because of the higher profits enjoyed by the existing banks in the economy.

For financial sector of Korea, there is potential for the banking sector to develop more regarding financial technology and sector in general. The only obstacle to the future development of banking system in Korea is the heavy regulations put in place by the government to protect the local companies which bar entry of other banks that might be more efficient in terms of providing financial services. Therefore, future development is only possible if the government lessens barriers to entry into the market. International banks seeking to access Korean market find it hard because of the existing tight barriers for entry of international corporations.

French foreign exchange market operates efficiently and the stocks are trading at a profit. In this country banking, a business can operate very well because there are no fluctuations in prices of financial assets which are important for any financial institution (Christiansen, Turkina, & Williams, 2013). In Brazil, the current stock market is among the best stock markets in the world which are only second to Argentina. Even though the economy is headed in a slow down direction but the stock market performance is good. The good stock market attracts investors who increase the prospect of the need for banking services and also the stock exchange business is facilitated by banks (Gup, 2007). Korean stock market is not stable because of its vulnerable nature due to lack of policies to protect the market. Therefore, the banking business in such an economy is very risky due to the unpredictability of the market.

French people love and are proud of their language and therefore for any business to succeed in France, employees of the company must know how to speak French (Crane, 2000). France is also a country that is strict on rules, and therefore, a company that seeks to establish a business there must abide by the rules without exemption (Crane, 2000). Stricter government regulation deters any foreign bank from acquiring local banks in France and further more the tight lending rules also deter new banks from expanding their operations via credit expansion.

Brazil is dominated by Catholics who value truth and therefore they have tiny tolerance for uncertainty. Due to intolerance to uncertainty, the society has set strict rules for everybody (Christiansen et al., 2013). Before the bank moves to Brazil, management must ensure that employees understand the Latin language and provide a high level of integrity to avoid clashing with the culture.

The bank management needs to consider the values of Koreans and how they relate to their culture. Koreans live according to Confucius values that promote respect, avoid extremism and working hard is the virtue of Koreans (De, 2004). Before acquiring banks in Korea, it is important that management of the bank carries a strong culture analysis to determine the cultural values and business etiquette of Koreans (De, 2004).


There are various key factors that bank management should consider before pursuing international expansion policy.  And these include stock market stability of the country, the culture of the people in that particular country, prospects for future development, potential size and profitability of the interest sector in the country, and the problems that organization might encounter while pursuing the strategy. An excellent country to invest in must have a stable foreign exchange market, capacity to expand, prospect of future development and the potential of the market size for the sector. From the analysis report, it is clear that the bank will face different obstacles in different markets but key among is compliance with the banking sector regulations that seem to be very strict especially in France and Korea.

Potential of future growth also plays a significant role in determining which market to pursue amongst the three financial markets. Therefore, the bank needs to make the above considerations before making a decision to choose which market structure suits its expansion strategy and choose wisely for profitability purposes.

I recommend that the bank enters Brazil as its next destination because of various reasons. First, Brazil has few regulations and barriers to entry into the banking sector. Furthermore, the stock market of Brazil is the best performing which implies that the bank will be able to make more profits through stock market facilitation as more investors invest in Brazilian foreign exchange market. Statistics show that in the recent past banks in Brazil continue to make profits despite the fact that the economy is slowing down and therefore it is a good country for the bank to make acquisitions.


De, M. B. (2004). Korean business etiquette: The cultural values and attitudes that make up the Korean business personality. Boston, Mass: Tuttle Pub.

International Business Publications, USA. (2012). Korea, South Investment, and Business Guide: Strategic and Practical Information. Intl Business Pubns USA.

Crane, R. (2000). European business cultures. Harlow, England: Financial Times/Prentice Hall.>

Christiansen, B., Turkina, E., & Williams, N. (2013). Cultural and technological influences on global business. Hershey PA: Business Science Reference.

Top of Form

Roett, R., & Brookings Institution. (2011). The new Brazil. Washington, D.C: Brookings Institution Press.

Becker, T. Doing business in the new Latin AmericaBottom of Form

Int'L, B. P. U. (2015). Brazil investment and business guide: Strategic and practical information. Place of publication not identified: Intl Business Pubns USA.

Asongu, J. (2007). Doing business abroad: A handbook for expatriates. Place of publication not identified: Greenview Pub.

Christiansen, B. (2012). Cultural variations and business performance: Contemporary globalism. Hershey, PA: Business Science Reference.

Meyer, E. (2014). The culture map: Breaking through the invisible boundaries of global business.

Kim, S. (2005). Internal labor markets and employment transitions in South Korea. Lnaham, Md: Univ. Press of America.

Jho, W. (2013). Building telecom markets: Evolution of governance in the Korean mobile telecommunication market.

Cyree, K., Huang, P., & Lindley, J. (2011). The Economic Consequences of Banks’ Derivatives Use in Good Times and Bad Times. Journal Of Financial Services Research, 41(3), 121-144.

Department, I. M. F. M. C. M. (2014). Republic of Korea. Washington: International Monetary Fund.

Department, I. M. F. M. C. M. (2015). Republic of Korea. Washington: International Monetary Fund.

Claessens, S., & Forbes, K. (Eds.). (2013). International financial contagion. Springer Science & Business Media.

Uhde, A., & Heimeshoff, U. (2009). Consolidation in banking and financial stability in Europe: Empirical evidence. Journal of Banking & Finance, 33(7), 1299-1311.

International Monetary Fund. (2013). France: Selected issues. Washington, D.C: International Monetary Fund.

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Trumbull, G. (2012). Credit Access and Social Welfare The Rise of Consumer Lending in the United States and France. Politics & Society, 40(1), 9-34.

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