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The National Australia Bank (NAB) has been consistently concentrating on its business links with Europe and America. However, the population in the two markets is consistently contracting at the time when the economic environment continues to toughen. The bank lacks a comprehensive expansion plan into the already flooded European and American markets. Besides, it is already heavily over-geared. However, the case is different with Asian markets, particularly China and India. They are described as seductive global business destinations owing to the high population. Further, the past two decades have been characterized by record increases in the business transactions between China and Australia thereby explaining why the market appears attractive. The National Australia Bank has established a base in Shanghai, China, but despite its attractiveness to investors, the legal and regulatory framework makes it difficult for businesses to thrive. It is so for foreign businesses especially from Europe and America. Records have it that some companies have suffered unprecedented losses in their tenure of operations in China with the wastes being linked to stringent regulatory limitations (Mason, 2007). Viewed from a value network model perspective, the stringent regulatory framework in China stands outs as a major management challenge to the National Australia Bank management. The issue is worthy a further research simply because investors eyeing the Chinese market cannot circumvent the law. Yet it is a major contributor to a business failure and financial losses as experienced with the case of Foster breweries. This report presents a critical analysis of the herein introduced management issue with an aim of providing sound and working recommendations for the NAB. My argument is that its management should approach the authorities in China with a deal of co-opetition as discussed under the value network model.
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Asia and China have been hyped as the most attractive emerging markets. Many investors are eyeing the seductive market in China. However, the history tells that some business organizations have collapsed within a few years, if not months, of opening businesses in China. The business failure and incurrence of financial losses by non-Chinese investors in the country are partly linked to cultural diversity. However, the single major cause of the business failure is the issue of stringent regulatory limitations. The National Australia Bank is focused on nabbing the opportunity presented by increasing Australia-China business ties but it does not want to fall into the fate of other businesses. The latter ones have had to close a shop within a few months or years of starting operations in China (Li, Hsu, & Qin, 2014). What makes the stringent regulatory limitations as a major managerial challenge for the NAB is the following fact. The issue has been linked to past business failures in the country. For instance, a currency licensing process may take up to three years. The issue, therefore, deserves the attention of researchers with an aim of finding a lasting solution for the NAB and other investors as well as prospective investors in the Chinese market. India experienced similar problems a decade ago. The research indicates that the ability to establish and foster cooperation and healthy competition among various stakeholders may help mitigate the associated risks.
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The value network model best explains the case scenario. The model has been proposed by Dam Brandenburger and Barry Nalebuff. They believed that there were four tenets guiding the operations of any firm (Allee, 2002). The four principles include the customers, the competitors, the suppliers, and the complements. The model is based on Porter’s Five Forces model. It emphasizes on the co-existence of competition and cooperation under the single tenet that the theorists named co-opetition. The term co-opetition means the cooperation between business entities to create a bigger industry or a bigger business, while, at the same time, dividing it up through a healthy competition. In the case regarding the National Australia Bank, the theory suggests that the bank establishes strong links with the Chinese big four banks. They are all state-owned and ensure that it cooperates with the authorities, which would ensure its peaceful coexistence in the environment having many regulatory limitations. My argument is that opting for establishing strong links between the National Australia Bank, the big four banks in China, and the regulatory authorities will not only create confidence in the Chinese financial services industry but also provide a soft landing spot for the National Australia Bank. It will reduce the period to currency licensing to less than the current three or more years.
To understand the issue at hand, a critical evaluation of the underlying problem leading to the presence of stringent regulations is necessary. The value network model assumes that any organizational or operational problem affecting an organization must fall under at least one of the four tenets of the creation of the value network. The problem could, therefore, be related to the customers. It means that the organization failure would then be attributed to issues failing to handle and serve the customers appropriately. The underlying problem may be affecting the suppliers thereby straining the supplier-firm relations. However, the customer-related and supplier related tenets of the National Australia Bank appear to have no problems. However, on the other hand, the stringent regulatory environment could be directly linked to the competition and complementary tenets of this theory (Rasmussen & Wangel, 2007). With regard to competition, the Chinese authorities could be afraid of the introduction of substitute financial products affecting the authorities’ grip on the market. On the other hand, the partnering with the incumbent financial services providers such as the NAB may also dilute the control of big four banks operating in the Chinese financial market. In my opinion, the fear of competition and partnerships may be hampering the idea of liberalizing the banking sector in China and instead encouraging the persistence of stringent regulations.