International Business
Description of the event
The article featured in CNBC’s financial times section details the impending decision by Barclays bank to exit the African markets. The Barclays Bank group has several branches through its Barclays Bank Africa Group, and has been in the continent for several decades. It has branches in several countries including Kenya, South Africa, Ghana, Mozambique, Uganda and Tanzania (Arnold & Jenkins, 2016). The Barclays Bank Group has appointed a committee to oversee and advice on its exit from the African market.
Even though Africa is one of Barclays Bank’s major growth areas, the bank has, in the recent times experienced considerable challenges in the market place. Analysts believe that the sale will increase Barclays’ capital to a little shy of their target. Among the reasons given for the planned exit are the fluctuations in currency against the British Pound, which has been the case in many African countries, especially in South Africa where the South African rand has been falling steadily. Fluctuations in currency lead losses. The other reason is the corruption that exists in these developing countries which makes it hard to do business since one is not entirely in control of how the business runs. Barclays would wish for a wholesale sellout which is however hard due to present circumstance for industry players in this region.
This story connects to International Business Environment in Developing Countries, and is also tied to currency in the international markets. Developing countries have their unique challenges which impact multi-national business. To begin with, as noted in the article, the ever changing political landscape of these countries does promote stability for businesses. They also lack clear structure in leadership while at the same time; many do give businesses a supportive environment to operate. An example as sighted in this article is South Africa’s appointment of an inexperienced finance minister, which greatly affected the currency. Developing countries also struggle with ethical issues like corruption which promote unfair business practices and lack of a level playing field for businesses. Understanding the business environment in developing countries can help a multi-national when venturing into establishing branches internationally.
The other issue featured is the currency fluctuations. The host country’s currency is normally the currency for doing business. It may be costly in the long run when the currency is too unstable and when its value does not compare. Political changes and unstable markets lead to this. Multinational businesses have to contend with the impact that these changes can have on their businesses. This article shows this situation alongside other issues in international business like ethics.
How can others benefit and/or learn from the situation
There are several lessons that other business can learn from this, as well as benefits from Barclays’ exit. To begin with, the business was not entirely making losses in its African venture; this means that other operators or new entries can benefit from their exit by buying it out and continuing to run their business. Other banks operating in the region can also benefit by the market gap left by Barclays by taking their customers. During a sellout, many clients often lose confidence and exit to other providers who can take advantage of this.
The situation with Barclays offers invaluable lessons on the African marketplace. Existing businesses can use this to restructure their operations to avoid the same position and pitfalls as experienced by Barclays. New entrants into the African marketplace or any other developing nation can also use this information to make them aware of the issues in doing business in developing countries so as to make better informed decisions and strategies to mitigate the challenges anticipated.
References
Arnold, M., & Jenkins, P. (2016). Barclays set to exit African business. Retrieved February 29, 2016, from http://www.cnbc.com/2016/02/28/barclays-set-to-exit-african-business.html
