An example of a strategy that simultaneously emphasizes arbitrage and adaptation is investing heavily in a local presence in a key market to the point where a company can pass itself off as a “local” firm or “insider.” A good example is provided by Citibank in China. The company, part of Citigroup, has had an intermittent presence in China since the beginning of the 20th century. A little more than 100 years later, in 2007, it was one of the first foreign banks to incorporate locally in China. The decision to incorporate locally was motivated by the desire to increase Citibank’s status as an “insider”; with local incorporation, the Chinese government allowed it to extend its reach, expand its product offerings, and become more closely engaged with its local customers in the country.
China’s decision in 2001 to become a member of the World Trade Organization (WTO) was a major factor in Citibank’s decision to make a greater commitment to the Chinese market. Prior to China’ joining the WTO, the banking environment in China was fairly restrictive. Banks such as Citibank could only give loans to foreign multinationals and their joint-venture partners in local currency, and money for domestic Chinese companies could only be raised in offshore markets. These restrictions made it difficult for foreign banks to gain a foothold in the Chinese business community.
An example of a strategy that simultaneously emphasizes arbitrage and adaptation is investing heavily in a local presence in a key market to the point where a company can pass itself off as a “local” firm or “insider.” A good example is provided by Citibank in China. The company, part of Citigroup, has had an intermittent presence in China since the beginning of the 20th century. A little more than 100 years later, in 2007, it was one of the first foreign banks to incorporate locally in China. The decision to incorporate locally was motivated by the desire to increase Citibank’s status as an “insider”; with local incorporation, the Chinese government allowed it to extend its reach, expand its product offerings, and become more closely engaged with its local customers in the country.China’s decision in 2001 to become a member of the World Trade Organization (WTO) was a major factor in Citibank’s decision to make a greater commitment to the Chinese market. Prior to China’ joining the WTO, the banking environment in China was fairly restrictive. Banks such as Citibank could only give loans to foreign multinationals and their joint-venture partners in local currency, and money for domestic Chinese companies could only be raised in offshore markets. These restrictions made it difficult for foreign banks to gain a foothold in the Chinese business community.
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