Is “Follow the Customer” an Entry Strategy Aboard?

Abstract: Our paper tries to verify the relation between international banks’ expansion and international automotive corporations’ overseas business in China. Pervasive phenomena indicate that foreign banks take following their clients as the initial strategy when they start overseas business in China’s market. As many previous literatures analyzed, in the beginning stage in a new foreign market, multinational banks adopted this passive strategy and intended to follow some manufacturing enterprises from their home countries. The Chinese automotive sector is a touchstone of opening to foreign investors since the reform in China. It also gradually becomes an important tie for foreign banks’ overseas business. On one hand the multinational banks can afford capital support and financial service for their home country customers. On the other hand they can reduce the risk of expanding into a new market and prepare for grow up at an appropriate time. To achieve our purpose, we study the factors on foreign banks’ entry from host country level. We built the OLS regression on total foreign banks assets and added the total asset of the foreign automobile companies and total trade volume in auto sector as independent variables in order to research this relationship. From our analysis, the multinational banks are proved to follow their customers - foreign automobile companies to some extent.