Santander Bank Corporate Strategy
In this third and final part of the work we will analyze the corporate strategy of Banco Santander following its strategies of vertical integration, internalization and its diversification.
The strategies are elements of vital importance for any company to obtain the achievement of objectives, from the point of view of corporate a company can achieve competitive advantages. The corporate strategy of a company is the one that reflects the company’s achievement with respect to the sector in which it competes, this strategy includes investments in diversification, vertical integration or internalization.
Banco Santander is one of the main Spanish financial entities both nationally and internationally, it has several business units that we have analyzed in regard to its corporate strategy. The concept of responsible banking becomes the main motto of the corporate strategy of this entity since it is clear that its mission goes beyond obtaining liquidity but it must benefit beneficially for the whole society.
Degree of vertical integration of the company and strategic alliances
Vertical integration consists of a growth strategy within the strategic management of companies. This happens when the same company takes care of activities that are usually in charge of a third party, for this the company can create or acquire other companies and through them it can be self-abducted in regard to the supply of materials and supplies, and makecharge of tasks related to the distribution of the goods that it produces.
The Vertical Integration Strategy of Santander revolves around its high negotiation power when it is located in one of the main national and international banking entities and its interest in dominating the supply chain.
In 1948 we can say that an indirect vertical integration occurs, in that year the new mountain company Quijano S.It was one of its main industrial values, it was in the hands of Emilio Botín after a union with that entity this granted several credits for the expansion of capital and about the 40s and 50s obtained spectacular results thanks to the success of the sector at this time. In addition, it benefited from the wide fixed client portfolio when Emilio Botín in the 50s participated in the expansion of the Fasault Fasault de Valladolid factory and in the 60s of Authi of the British-Leyland.
Other vertical integration strategies would be its alliance with the automobile sector, through its subsidiary in Mexico, I sign a union with Suzuki to be the main financial partner in the country, in addition to already having the Peugeot alliance in that country in that country. In the United States it maintains commercial ties through the Fiat company.
In Germany he acquires 51% of Hyundai Kia’s financial entity. Also in Brazil he recently announced the purchase of a 51% participation in Loop. And, in Spain it maintains an agreement with Mapfre for it will distribute exclusively until December 2037, car insurance, multirriesgo commerce, multirriesgo SMEs and civil liability insurance of a new company in which insurer will contribute 82.2 million euros for the50.01% and Santander Seguros will hold the remaining 49.99%.
Another example of strategy is found between the entity and Paybanck for which through a rewards program and the launch of a loyalty card will be allowed to obtain rewards points when making purchases with the participating cards, in addition to accumulating benefits in the mostof 6 thousand establishments of the partners of this program.
Other strategies to highlight are its alliance with the Chinese Bank CC, which Banco Santander will have a 19.9 percent participation in a Joint Venture with said Chinese entity and the agreement with Euro Automatic Cash, a company that owns the ATMs of Banco Popular, which allows all the Santander group customers to use a total network of 7.500 ATMs in Spain, this new union entails that popular recovers the ATMs installed in its offices and that Santander transfer to Euro Automatic Cash the business of its displaced ATMs.
Degree of internationalization
Internalization consists of a series of long -term processes carried out by the company with the aim of entering the international market. Thanks to globalization, this process is much easier due to the use of the Internet, the new dynamics of the world economy and the opening of national economies that make the market within the reach of the whole world.
The processes that were carried out for the internalization of Banco Santander are a great example of progress and aspiration. Since Emilio Botín, currently deceased, achieved the presidency in 1986, the objective of internationalizing the Santander Bank became one of the main ones for the company, 30 years later we can affirm that it was a successful project.
The first phase for the entrance to internalization was the idea of opening representation entities, as well as a series of unions and acquisitions with banks around the world. And that’s how it began, in the twentieth century it opened representation offices in Havana, Buenos Aires and Mexico.
Tran having strengthened with small entities in the international market, in the 60s the purchase of Banco del Hogar de Argentino (Argentina) occurs, which meant extending internalization to Latin America. In the 70s continue with the purchase of the First National Bank in Puerto Rico and the opening of representation offices in Ecuador, El Salvador, Chile, Guatemala, Uruguay and Costa Rica. In 1954 he opened his first office in Europe.
As of 1986, at which time Emilio Botín arrives at the presidency when the most important events for the bank’s trajectory occur:
- Expansion for the German market with the acquisition of CCBANck in 1987.
- New Strategic Alliance, under the Joint-Venture model with Royal Bank of Scotland that provides access to the international market in 1988.
- Purchase of banks in Venezuela, in 1996, Argentina and Mexico, in 1997, and Brazil, in 1998
From 1999 to 2007 there is a second internalization phase, in this period the Latin American powers go through stages of crisis. In this phase Banco Santander decides to strengthen positions in Spain with the purchase of the Hispanic Central Bank in 1999, accentuating its American acquisitions especially in the market of Brazil, Portugal and the United Kingdom.
We can say that Banco Santander’s internalization strategy is very important since it happened in the 157th position of global financial entities to be located in one of the first 10, highlighting that its strategy is based mainly on acquisitions and mergers in Latin America andEurope, consolidating its international market.
Degree of diversification
Diversification consists of the need by managers to grow business;That is, go beyond its original sector, in addition to the course of time and hand of the economic crisis, the banking sector has seen its benefits reduced, it is normal to see it invest in other types of businesses, which promote a good levelentrance to the entity’s coffers.
In a period of 5 years, 6 companies dedicated to the exploitation of aircraft were created, which are dedicated to the rental of airplanes, this consists of the rental of airplanes assuming the risks caused by low of the second -hand assets of which they obtained more24 million euros. In addition to the rental of airplanes they also invested in the sea, through the rental of ships obtaining benefits of more than 4.6 million euros.
In addition, the Santander group participates 174 companies in the energy sector, such as Endesa, Repsol, Natural Gas .. . It also has about 20 companies in the real estate sector, getting to merge with Socimi Merlin Properties. Santander obtains more than 4 million euros derived from Fuensanta waters, since they have 36% of the company in their possession.
It is noteworthy the Santander Global Sport Society, dedicated to the maintenance and management of golf cours.
Once all these businesses are exposed, we conclude that we are faced with an unrelated diversification, since the activity of the company at first that was the banking sector, has little relationship with the new businesses invested. The main objective of diversification is growth, risk reduction since investing in several companies does not depend on one, so it reduces the risk.
Conclusions
The strategies are fundamental components for the growth of companies, since they are the guide of these to achieve their objectives both close and future. In the case of Banco Santander, its corporate strategy is focused on a responsible bank and committed to the environment and society.
Within the corporate strategies regarding diversification we can see how Banco Santander opts for the inverting in renting of all types of vehicles both of cars and of aircraft and ships. In addition to betting on the energy sector with alliances between Repsol, Natural or Endesa gas among many others, which makes us conclude that it is an unrelated diversification.
Regarding internalization, it is based on exemplary processes for other businesses, based on two phases that takes a lot of importance with the role of Emilio Botín in the Presidency in 1986 who focuses on the internalization objective of the bank and great stability is achieved in theinternational market. Among the elements that favored this internalization was the market in Latin America and Europe, and the Spanish position strength with the purchase of the Spanish Central Bank in 1999.
And finally, regarding vertical integration strategies, it was very important for development, we highlight alliances with the New Mountain Siderurgic company Quijano S.A, as well as their alliances in the automobile sector with the well -known renting and the opening of new markets in Mexico, Brazil, Europe and Portugal. Another important point in the union with the Chinese Bank CC and the acquisition of the ATMs of Banco Popular in which Santander Bank customers can operate totally free
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