Case Studies BBVA and Callaghan (PDF)

Internationalization of Businesses: Management and Strategies (EUS) 2024-2025 Case Study 1: Reasons that triggered BBVA's internationalization toward Latin America Source: Adapted from González and BBVA in Pla Barber and León Darder (2016) and BBVA official webpage (2023). BBVA is a global financi...

Internationalization of Businesses: Management and Strategies (EUS) 2024-2025 Case Study 1: Reasons that triggered BBVA's internationalization toward Latin America Source: Adapted from González and BBVA in Pla Barber and León Darder (2016) and BBVA official webpage (2023). BBVA is a global financial group, with a diversified business that offers financial services in 31 countries to more than 80 million clients. It has a solid leadership position in the Spanish market, is the largest financial institution in Mexico, and has leading franchises in South America and the Sun Belt region of the US. In addition, it has a relevant presence in Turkey (through strategic investments in Garanti Bank), and operates in an extensive network of offices worldwide. Francisco González, president of the company until 2018, pointed out the following as the fundamental reasons for its international expansion into Latin America in the 2000s: Latin America is an emerging region with prospects for strong development and expansion of its markets. The Latin American population, estimated at 500 million inhabitants, will continue to increase to almost 700 million in 2050. In Spain, population growth will not exceed 800,000 inhabitants in the same year. Negative correlation between the Spanish and Latin American economic cycles, a highly desirable aspect in terms of risk diversification in a business as cyclical as banking. Furthermore, the macroeconomic evolution of Latin American countries is more heterogeneous than one might think at first glance. Therefore, this effect can be achieved within the continent itself, by establishing a presence in various countries in the region. The privatization and deregulation processes have been one of the key factors to explain the choice of the moment of the acquisition of Latin American credit institutions by the large Spanish financial groups. The presence of foreign banks has provided greater prospects for financial stability, a much-needed asset in emerging economies. Latin America starts from very low levels of banking use. Deposits over GDP reached 17% at that time in Venezuela (a country with the lowest degree of banking coverage) compared to 71% in Spain. Numerous studies reflect that the processes of economic and financial development are linked. Therefore, the convergence of these economies towards the income levels of the most advanced countries will lead to a growing and diversified demand for banking services. Bank margins in Latin America are much higher than in developed countries. High interest rates prevail due to the greater risks involved in operating in these economies. Price factor or “market share cost”. In 1998 the cost of 1% market share in deposits rose to 1,143 million dollars in Germany compared to 84 million in Mexico. This lower disbursement, associated 1 Internationalization of Businesses: Management and Strategies (EUS) 2024-2025 with a significant takeover in a shorter period than the construction of a branch network would require, allows BBVA to gain size to replicate the leadership position it already has in Spain. Case Study 2: The Spanish Callaghan successfully bets on internationalization Source: Adapted from Pla Barber and León Darder (2016). By 2016, the Callaghan footwear firm exports 30% of its production, is found in more than 3,000 points of sale on all 5 continents, and has also begun to open its own stores in some of the countries to which it exports. In China it has more than 35 stores in the country's main cities and, in Italy, it has recently begun to open its own stores. In Spain, Callaghan footwear has always been sold in multi-brand shoe stores and department stores, but now, after the success of the Callaghan stores in China, the company has decided to franchise its own brand shoe stores. Its expansion abroad has been progressive, starting with the countries closest to Spain, such as France or Germany, to later spreading to more distant countries, such as Japan. Its founder, Basilio García, points out the following as the main reasons for the internationalization of his company: The idea of making an effort in exporting crystallized when we realized that products from other countries were beginning to colonize us; so we decided to do the same and tried to defend ourselves by starting to sell abroad. Exportation is, above all, a necessity; It is a challenge that any Spanish company that wants to have a future must take on, since this is framed by the global village and by the fact that in the coming years, Europe will become a domestic market. So whoever does not export will be out of the game. When addressing emerging countries, in which quotas and tariffs multiplied the price of the product by five, we solved the problem with the granting of franchises. An ambitious project that the Callaghan brand has successfully experimented with in Morocco and Central America. 2