Bank of America

2142 Words Nov 8th, 2012 9 Pages
Internation Business Case Study

Bank of Amerian and
The Chinese Credit Card Market

1. How important is China to Bank of America? Did BOA do the right thing by taking a minority position in CCB?

We considered that Bank of America’s taking minority position in CCB (9 percent, as stated from the case) is an adequate decision. Looking at the situation from the perspective of a firm in search for successful overseas expansion, we considered that CCB - one of the largest commercial banks in China - could serve as a profitable business partner. A big advantage is that CCB has relationships with many of the largest business groups and leading companies in industries strategically important to China's economy. Another is that CCB already
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The biggest problem is the deeply-rooted savings culture, which was the result of tradition, fiscal discipline and personal experience. It is expected to take time for the Chinese to become more comfortable with borrowing money. Another challenging fact was that more than half the Chinese cardholders were unprofitable and financing themselves outside the formal financial systems which hinder the profitability of the credit card business. Other issues include falling transfer fees due to pressure from the merchants and retailers, government corruption, higher propensity to switch banks, and lack of adequate infrastructure.
The current market situation yields both edges of the knife; very promising in the sense that it is an emerging opportunity to seize hold of a beneficial business, but also proves to be dangerous in both cultural and political aspects of the country, especially considering the fact that BCA may not be so familiar with the market situation as it is not a local business. Considering both the potential promising aspects and the challenges that BCA faces in entering further into the Chinese credit card industry, its decision to take minority position in CCB at current status seems to be a reasonable one.

2. What is your assessment of the credit card business in China? Given the unique Chinese saving traits, what is your prognosis on the viability of this business?

In China, a credit card, called The…