The Challenge of International Expansion for the Hana Financial Group with Implications for SME Banking

Abstract

Due to the intense competition in the Korean financial market and the increasing importance of Asian market after 2008 financial crisis, it is inevitable for financial institutions to expand the operation into the global market including Asian market. Hana Financial Group (HFG), a Korean banking leader, considers how best to expand overseas in order to wrest itself from a competitive stalemate in its domestic market. HFG expanded by a “choose-and-focus” strategy in China and localization strategy in Indonesia, while establishing a foothold by an acquisition of a local bank into the US. This paper evaluates the expansion strategies of globally-integrated players, regionally-focused players, and evolving challengers especially since the 2008 global financial crisis. And we point out relevant lessons HFG can learn in building its own expansion strategy in the dimensions of market entry, management, and corporate governance. Drawing on these lessons and HFG’s own strengths and opportunities, this paper suggest HFG pursue a ‘Global-Local’ strategy, with further discussion revealing a critical opportunity in the area of small and medium enterprise (SME) banking. Since there are many challenges to overcome barriers such as the incumbent first mover banks from advanced countries, Korean banks’ intense competition in specific regions and local regulation on banking industry, HFG needs to develop a set of refined specialized strategies in promoting SME banking services, while minimizing risks associated with the international expansion.