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Part 3 Chapter 22 Geographic Expansion Amabelle B. Niez Reporter.

Geographic Expansion is a market strategy where an enterprise grows by expanding from its original location to additional geographic regions. T hey can be either domestic within a state or region or international by participating in a foreign market. Geographic expansion is one of the preferred business growth strategies..

iIBM. sears. Domestic Expansion In the United States, the ability of FIs to expand domestically has historically been constrained by regulation. By comparison, no special regulations have inhibited the ability of commercial firms such as IBM , Sears and General Motors , from establishing new or de novo offices, factories, or branches anywhere in the country. Nor have commercial firms been prohibited from acquiring other firms—as long as they are not banks. While securities firms and insurance companies have faced relatively few restrictions in expanding their business domestically, other FIs, especially banks, have faced a complex and changing network of rules and regulations. As a result, regulation both inhibits and creates incentives to engage in geographic expansions..

T he economic factors that impact commercial firm expansion and acquisition decisions are likely to impact the decisions of FIs as well. Two major groups of factors are cost and revenue synergies and firm-market-specific attractions, such as the specialized skills of an acquired firm’s employees and the markets of the firm to be acquired. Thus, the attractiveness of a geographic expansion, whether through acquisition, branching, or opening a new office, depends on a broad set of factors encompassing: Regulation and the regulatory framework. Cost and revenue synergies. Firm- or market-specific factors..

Regulatory Factors Impacting Geographic Expansion.

Cost and Revenue Synergies Impacting Domestic Geographic Expansion by Merger and Acquisition.

Revenue synergies, like cost synergies, are the result of a merger. With revenue synergies, the newly merged company can generate more sales than the two companies can separately. Key revenue synergies may include access to patents or other intellectual property and having complementary products, customers, or geographical locations that create opportunities for cross-marketing, cross-selling, bundling, and providing a more rounded customer experience ..

Note that these three methods of global activity expansion are not mutually exclusive; an FI could use all three simultaneously to expand the scale and scope of its operations..

DOLLAR EXCHANGE. POLITICAL RISK. Factors Encouraging U.S. Bank Expansions Abroad.

Factors Deterring U.S. Expansions Abroad Capital Constraints Emerging Market Problems Competition.

Advantages and Disadvantages of International Expansion.

Regulation of Foreign Banks in the United States Federal Reserve approval is necessary to establish any foreign banking institution in the United States. In addition, foreign banks must obtain regulatory approval from the OCC or the state banking supervisor when establishing new branches and agencies ..

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