The Internationalisation of Retail Banking: Banco Santander's Journey towards Globalisation

This article provides a rich description of Banco Santander's transformation from a medium-sized Spanish bank to one of the world's biggest and most profitable banks. This internationalisation has been distinguished not just by its speed and scale, but also by its profitability and creation of shareholder value: a stark contrast to the disappointing outcomes of trans-border ventures at many other banks. We identify a systematic pattern in Banco Santander's international growth that we conceptualize as a three step process: first, building capabilities in the home market; second, creating growth options in foreign markets through small-scale acquisitions or strategic alliances; third, large-scale foreign market entry and rapid integration. We identify three features of Banco Santander's international strategy which can offer useful guidance to other financial service firms. First, the importance of basing international expansion on superior home-based organisational capabilities; second, the merits of an exploratory approach to learn about new markets and assess potential acquisition targets; third, the value of transferring home base capabilities through cross-border integration of new acquisitions into the existing international network. While the pattern of its internationalisation differs from those of manufacturing firms, Santander's strategy is consistent with two key features of the Uppsala model: increasing commitment to foreign markets incrementally, and entering foreign markets sequentially, starting with those with close cultural and/or economic proximity to the home country.