Lessons from the strategy of Banco Santander: The three-step process of internationalisation in retail banking

How do local services internationalise? Executives in retail banking face the challenge of internationalising a service which is local in nature. This research proposes a new model that shows some basic similarities with previous conceptual models. However, it incorporates the uniqueness of service industries where entry into new markets usually starts with foreign direct investment. This article analyses in depth the successful internationalisation of a retail bank, Banco Santander, from 1985 to 2005, extending traditional internationalisation models to a service industry. The methodology consists of longitudinal data and qualitative methods. The experience of Banco Santander, the leading bank in Spain, the Euro-zone and Latin America, shows an internationalisation process based on three steps. The first of these is to develop capabilities in the home market. The second step is to create options for leveraging capabilities in new international markets, either through acquisition of a minor player or through strategic alliances with established local companies. The analysis shows that at this step, market selection is based on cultural proximity, geographic focus and deregulation or increased competition. Finally, the third step consists of acquiring a leading local competitor and a quick international roll-out followed by implementation of integrated capabilities.