International Business Management

BSP 361

University of Wales Institute

1st Coursework

25 October 2007

MOVEMENT OF COMPANIES

Deutsche Bank has threatened to move from

Germany to the UK.

Why?

by

Christian Berger

Nowadays the movement of a company abroad has become a very complex question.

A business organization has to understand that the international environment has changed

in the past twenty years. Today the global economy operates all around the world. There

opened new, interesting markets e.g. China or Russia. The figure of international companies

has risen faster as originally expected. Kotler et al (2001) argue many other industries as well

as the global financial system have become more difficult to understand. According to

Valdez (2000), in 1999 Deutsche Bank was ranked number one of the world′s largest banks

by assets with $865bn. Today its ranked number 6, but only number 23 according to

profitability. It can be said that Deutsche is an investment Bank which deals with the needs

of high net worth individuals e.g. deposits, loans and investment advice. Furthermore it is

one of Europe′s most powerful and successful banks. However, in 2003 Deutsche Bank has

threatened to move from Germany to the United Kingdom (UK).

In 2003 The Sunday Times reported that plans exist to move from Germany either to

Switzerland, USA or UK because of Germany′s antibusiness culture and the complicated

impractical laws. (online) Some of the international experienced managers would support

the concept. An added reason given by a manager from Frankfurt (Main) headquarter is the

poor performance of German companies which sounds like an excuse to move abroad. Rapid

decisions are very difficult just as to be flexible. It seems that Deutsche′s manager wanted to

benefit through a relocation to New York or a huge merger with a Swiss bank e.g. Credit

Suisse. The BBC (online, 2003) observed one day later that Deutsche Bank has indicated the

movement. (online) Although the bank has become globally it is a historically grown

company with its origin in Germany.

Which factors influence a company decision to move abroad? Deutsche Bank has been well

positioned to compete in global affaires. How did they achieved that status? The aim of this

essay is to reply to the complex question whether to go into the international arena or not.

It is useful to study the assets and drawbacks of moving in a foreign country.

Kotler et al (2001) state that international competitors offence the domestic market by

making better products or lower prices available and achieving higher brand awareness.

Foreign markets often present higher profit opportunities than the national market.

Sometimes clients move abroad and require international services. Those points might

influence a company decision to operate globally. However, there are many who said it is

easier and safer to work in a local marketplace because it is not necessary to learn another

country′s language and laws, to accept political, legal and cultural difficulties or to change

products to suit other customer expectations. (Kotler et al, 2001) Those facts on the other

hand speak against moving internationally.

The history of Deutsche Bank has to be taken into consideration. Deutsche Bank has to deal

with risks to be more copetitive. What about the demanded international experience of the

Deutsche Bank managers? Do they have sufficient knowledge of regulations and political

environments in the UK? Can they understand the customer behaviour in other countries?

Can Deutsche offer similar effective organisational structures and services as they do in

Germany? There exists certainly commonness but what are the economic differences

between Germany and the UK?

The following paragraph suggests the history of the bank to understand its development.

(online a) Deutsche Bank was founded 1870 in Berlin to encourage the internationalisation

of trade. It opened a branch office in London in 1873 which became Deutsche′s most

important foreign agency until 1914. Within the company there always was a strong

relationship between Germany and the UK. In 1957 the Norddeutsche Bank AG, the

RheinischWestfälische Bank AG and Süddeutsche Bank AG formed the Deutsche Bank AG, a

joint stock corporation. In 1989 Deutsche Bank AG aquired Morgan Grenfell Group to

expand its presence on the London capital market. It is obvious that the bank has been

become more and more accepted in the global financial market. Since 1994 Deutsche Bank′s

management has been developed its investment activities. (online b) The next paragraph

announces more in detail how Deutsche acts on the global financial market. Today, with

around 7000 employees in London, Deutsche Bank AG is a "leading global investment bank,

with a strong and profitable private clients franchise." (Ackermann, 2007a) The employer

Deutsche Bank AG engages 75,000 people in 75 countries, that represents over 50 % outside

of Germany.

In October 2007 the Deutsche Bank AG strategy orientates to give attention to the Central

and Eastern European business because it is an important market which can be developed in

the future. Furthermore with the acquisition of New Europe Capital Partners (NECP) the

company wants to grow its business relationships. (online c) In the press release from 10

October 2007 Deutsche Bank gave information about the engagement of the former

president of JP Morgan′s Russian operations, Miklos Kormos. This is a classic example of how

Deutsche recruits new international experienced managers who provide the company with

their knowledge to expand the bank′s capital market share. Moreover the Headquarter in

Frankfurt (Main) focusses other branches e.g. the insurance industry. In the recent past its

Global Market division has gained Abbey Life Assurance Company Ltd from Lloyds TSB

Group, a strong competitor in the UK. (online d) According to Michele Faissola (2007), Head

of Global Rates and Member of Global Markets Executive Committee, it means a further step

as a leading supplier of capital markets solutions to the insurance business. It might lead to

the conclusion that Deutsche Bank has the required expertise for a global player. However

the economies of Germany and the UK seem not to be the same.

There is a comparison necessary between both countries, Germany and the UK, to get a

much more detailed look into the conditions of the economic systems. Tayeb (2000) points

out the powerful relevance of the states on business. It is important to know that the

workforce in Germany and in the UK as well is able to compete in international businesses,

means that their qualification skills with modern communications are ideal to do commercial

operations. Another interesting fact is the variety of language in Western Europe which

makes it economically more competitve than in the USA or Japan.