A Study of Global Personal Internet Banking and How ING Direct Remains Competitive

Sheri Stroop University of Maryland University College

IMAN601 Original Writing: 11/15/2012

Updated 7/19/2014

Source: http://www.index2day.com

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Table of Contents

Table of Contents ................................................................................................................... 2

Executive Summary .............................................................................................................. 4

Section I: Commercial Banking Industry Structure ................................................ 5

Porter’s Five Forces Analysis: Commercial Internet Banking .................... 6

Intensity of Rivalry in Personal Internet Banking ............................................................ 6

Potential for Entry into the Personal Internet Banking Industry .............................. 7

Substitute Products and Services to the Personal Internet Banking Industry ..... 8

Strength of Suppliers in the Personal Internet Banking Industry ............................. 9

Strength of Buyers in the Personal Internet Banking Industry ............................... 10

Overall Attractiveness ................................................................................................................ 10

Strategic Group Mapping ......................................................................................... 11

Section II: Evolution of Commercial Internet Banking ...................................... 13

Industry Trends and Outlook ................................................................................ 13

PESTL Analysis-Expansion into Chile ................................................................ 14

Section III: Strategy Formulation ................................................................................ 16

IV. Recommendations and Conclusions ................................................................... 17

Update 2014 ......................................................................................................................... 18

References ............................................................................................................................. 19

Appendix A ............................................................................................................................ 22

Strategic Group Map .................................................................................................. 23

Appendix B ............................................................................................................................ 24

SWOT Analysis ............................................................................................................. 24

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Appendix C............................................................................................................................. 25

PESTL Analysis: Chile ................................................................................................ 25

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Executive Summary

This research paper discusses how ING Direct differentiates itself from other key

players in the global commercial banking industry. Specific attention will be paid to ING

Direct’s online banking framework as compared to other banks in the industry and how this

impacts ING Direct’s competitiveness. In addition, the structure of the online commercial

banking industry is explored, including how each of Porter’s five forces impacts the

attractiveness of profitability in this industry.

The structure of the online commercial banking industry can be described as ten

distinct strategic groups, with three of those groups making up almost 70% of the market

share within the industry. ING Direct makes up a very small piece of the pie at less than 1%

of the global market share. However, this fact alone doesn’t preclude ING Direct from being a

player in the global commercial banking industry, as it is unique in its strategy and reach as

compared to other online banks.

Porter’s five forces analysis is applied to the online commercial banking industry,

with the overall results pointing to an unattractive environment for profits in the industry.

In response to the unattractive business environment, ING Direct must take steps to

strategically insulate itself from the forces in the industry in order to be profitable.

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Section I: Commercial Banking Industry Structure

The commercial banking industry is defined by the United States Census Bureau as

“establishments primarily engaged in accepting demand and other deposits and making

commercial, industrial, and consumer loans. Commercial banks and branches of foreign

banks are included in this industry” (NAICS 5211, 2007). The commercial banking industry,

specifically internet banks focused on individual consumer accounts, is a growing industry in

today’s instant gratification society. As the internet continues to grow and become a

mainstay in business and social life, the internet banking industry is becoming more popular

with consumers. Further, the internet has dissolved borders in this industry, opening up

market threats from global competitors.

The global commercial internet banking industry is made up of long established,

traditional brick and mortar banks that have expanded online and online only firms that offer

a variety of personal banking products such as high interest checking and savings accounts,

money market accounts, online certificates of deposit, low cost investment options, and

more. In addition, hybrid banks are also included in this industry, which have a traditional

brick and mortar banking relationship and also have what is called a ‘Direct’ division that

operates strictly online for more technology savvy customers. Competition in the online

commercial banking industry is intense, as consumers have come to expect high interest

rates, low or no fees and a variety of products to choose from, and the firms are delivering.

One cannot pick up a magazine, watch television or surf the internet without coming across

an ad for one of these online banks. The impact from all of these business forces and more is

analyzed in the next section using Porter’s Five Forces.

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Porter’s Five Forces Analysis: Commercial Internet Banking

Porter’s model compares five common forces that affect the outcome of most

businesses in the market place: rivalry among competitors, barriers to entry in the industry,

potential substitutes offered in the market, strength of suppliers to the industry, and strength

of buyers of the industry’s products or services (Bartlett & Beamish, 2011). Rivalry among

competitors is a force that considers how fierce the competition is within an industry to

maintain or gain market position. An industry’s barriers to entry are obstacles to entering

into a particular industry. Potential substitutes are products or services that could replace

what is being offered by different firms. The strength of suppliers is concerned with how

many suppliers an industry has to choose from and how much influence suppliers have in the

industry. The strength of buyers looks at the bargaining power of purchasers of an industry’s

products or services and how much input buyers have into the direction of an industry.

Intensity of Rivalry in Personal Internet Banking

There is fierce rivalry amongst competitors within the personal internet banking

industry, both in the United States and abroad. Some of the key players include ING Direct,

Ally Bank, Charles Schwab, Sallie Mae, FNBO Direct and HSBC Direct. All of these firms offer a

variety of products through their online banking services, with a focus on high interest

returns and low or no associated banking fees (http://www.bankrate.com). The intensity of

the rivalry can be seen in various offers that the firms use to woo away customers from other

banks, such as ING Direct’s $50 credit for opening and using its checking accounts

(http://www.INGDirect.com) and Sallie Mae’s exceptionally high rate of return for savings

accounts of more than .10% over its competitors (http://www.bankrate.com). There is also

a high level of advertising in this industry, which also contributes to strong rivalry.

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Furthermore, it costs buyers nothing to switch firms in this industry, as a simple few mouse

clicks can get them a new account, adding to the intensity of the competition. Online banking

in countries outside the United States poses limited rivalry, as it is “mostly limited to online

brokerage firms and internet divisions of traditional financial institutions”

(http://www.fincen.gov).

Overall, the intensity of the rivalry in the banking industry makes it unattractive from

a profit earning standpoint. The closeness of the pricing in this industry leaves little margin

for profits, as in order to attract customers, banks must be competitive in both their interest

rates and fees. In addition, the ease with which consumers can switch banks can cause

uncertainty in the longevity of a consumer’s accounts.

Potential for Entry into the Personal Internet Banking Industry

Due to the sheer number of existing brick and mortar commercial banks, there is a

sizable pool of entry candidates into the personal internet banking industry. Many brick and

mortar establishments have already taken advantage of the internet boom by offering online

banking options. There are some limitations to brick and mortar banks that attempt to

compete in the online personal banking scene, as overhead costs for a bank that maintains

both an online and physical presence are much higher than they are for an online only bank.

Brick and mortar banks that have an online presence generally cannot compete with online

only banks, as interest rates for savings and checking accounts with a brick and mortar bank

are generally much lower than they are for an online only bank, while fees tend to be higher

(http://www.bankrate.com).

Other potential entrants into the industry would be existing online credit and loan

firms, mortgage companies, and insurance companies, who have typically dual branded their

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products with those of the banking industry. There are some players in this industry, such as

Sallie Mae and American Express that have managed to break into the online banking

industry and compete with their banking counterparts. However, other multinational firms,

such as Wells Fargo and Citibank have an online presence, but have not set themselves apart

in two out of three main competitive influences in this industry – interest yield and fees

assessed for use (Devlin & Gerrard, 2004). The potential for new entrepreneurs to enter into

this industry is much lower, as there are many federal regulations surrounding this industry,

such as the more than 400 new regulations introduced by the Dodd-Frank Act of 2010

(Public Law 111-203). Therefore, with high barriers to entry, the profit potential from this

force is attractive.

Substitute Products and Services to the Personal Internet Banking Industry

The only real alternatives to online bank accounts are traditional checking and

savings accounts at a brick and mortar establishment, or not using a bank at all. Though

traditional brick and mortar relationship banks have been the personal banking method of

choice to consumers in the past, the improvement of internet security in recent years and the

growing popularity of the internet and mobile apps have improved the attractiveness of

online personal banking. The threat of substitution from brick and mortar establishments is

high, as online only banks have to gain and keep the trust and security of consumers that

have banked at these long established firms. In addition, a 2011 Pew survey found that

“adults aged 65 and older are significantly less likely than other age groups” to do any

banking online (Smith & Zickuhr, p.12).

On the other hand, younger consumers that have grown up in the information age are

highly mobile and more open to internet banking technology. A survey conducted by the

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Knowledge Networks on behalf of the Board of the Federal Reserve in January of 2012 found

that 68% of participants had used internet banking in the last 12 months, with 50% of those

respondents being under the age of 30 (Gross, Hogarth & Schmeiser, survey, March 2012).

However, with only 43% of internet users banking online, there is still a lot of room for

growth in this industry (Beier & Fox, 2006). It is this potential for growth in the younger

consumers that diminishes the force of substitutes in this industry, which is attractive for

profits.

Strength of Suppliers in the Personal Internet Banking Industry

There are many suppliers to the commercial banking industry, some required in

order for a bank to open. In the United States, banks rely on the investment of shareholders

to supply the money used to finance bank activities, but the Office of the Comptroller of

Currency (OCC) has to approve national bank charters. Banks “must obtain approval for

deposit insurance from the Federal Deposit Insurance Corporation (FDIC), [with] additional

approvals…required from the Federal Reserve” (http://www.federalreserve.gov). Since

national banks in the United States are required to obtain these approvals, the suppliers to

U.S. banks have strong influence in the industry, with no alternatives. Banks operating in

other countries, such as Europe have similar government agencies to contend with, such as

the European Banking Authority in Europe (http://www.eba.europa.eu).

Another important internet banking supplier is the IT firms that supply the networks

and provide the hardware and software for online banks. These firms have the potential to

make or break a bank’s business and reputation, as the level of security they provide and the

reliability of the hardware and software that runs the online banking platforms are

important to keeping online banking customers. Therefore, with the Comptroller, the FDIC

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and Federal Reserve having total control of the banking industry, and IT firms having control

over the security and reputation of the banks, the strength of suppliers in this industry makes

the potential for profits unattractive.

Strength of Buyers in the Personal Internet Banking Industry

Online banks face strong buyer bargaining power. Consumers incur no costs when

switching online banks and may have multiple accounts with multiple online banks,

increasing their knowledge of trends and changes in the industry. This makes it more likely

that a customer will switch banks if a more attractive offer arises. In addition, patrons who

deposit large sums of money in banks have great influence over the terms and conditions of

those deposits, as there is always the threat of taking their business (and their money)

elsewhere. It is the exclusive power of the buyer which makes this force unattractive to

profits.

Overall Attractiveness

There are many factors that influence the personal internet banking industry. Based

on the results of Porter’s Five Forces Analysis, one can conclude that the competitive

environment for the personal internet banking industry is unattractive in terms of earning

good profits. Rivalry in the banking industry is fierce, while competition from tradition brick

and mortar bank institutions is a definite threat in the realm of substitution, as traditional

banks have a relationship aspect to them that online only banks can’t compete with, even

though there is potential for growth with younger bankers. Both suppliers and buyers in the

online bank industry have strong bargaining power, leaving online banks struggling to keep

up with regulations and demands from consumers. In order to cope with the five forces

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impacting the online banking industry, companies like ING Direct need to develop a strategy

to insulate themselves against these forces and remain profitable.

Strategic Group Mapping

In the commercial internet banking industry, focus must be put on how different

companies in this industry relate to one another and how ING can compete with and/or

cooperate with the other companies. According to a study conducted by Devlin and Gerrard

in 2004, consumers choose retail banks based on the fees they charge and the number of

products that the banks provide (Devlin & Gerrard, 2004). In other words, consumers want

to know what a bank has to offer for the least cost to the consumer.

An analysis of the commercial internet banking industry based on the study by Devlin

and Gerrard turned up ten distinct strategic groups, with three of those groups making up

almost 70% of the market share in the global industry. The other 30% of the groups are

more specialized in the products that are offered. As evidenced by the strategic group map

(see Appendix A), ING Direct is in a strategic group on its own. It offers more products than

other low fee banks, and charges zero fees for all of its personal banking products. Mobility

barriers from group to group in the banking industry can only be overcome through mergers

and acquisitions by larger banking firms. ING Direct has some distinct advantages over other

firms in the online banking industry. For example, ING has established online banking

throughout the world providing the same types of products across borders. This is

significant because, although other banks have an online presence, ING is the only online

bank where an online checking or savings account can be opened in every country in which it

does business. Other ‘multinational’ banks offer only limited services in countries other than

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their home country, which puts ING far ahead of the competition in terms of its company’s

reach.

SWOT Analysis

A SWOT (strengths, weaknesses, opportunities and threats) analysis (see Appendix B) of ING

Direct shows that ING is heavy on strengths and opportunities and low on weaknesses and

threats, which is a great place for a company to be. One of ING’s most important strengths is

its ability to appeal to the average consumer. Most banks go after customers that have a lot

of money to invest, but ING’s marketing strategies show that it cares about the average saver

(Swibel). For example, ING opened up a series of ING Direct Cafes to bring a relationship

banking aspect to the online banking business. For the cost of a $2 cup of coffee, customers

have access to the free internet the café provides, while it inundates the customers with

suggestions to open up a savings account and provides the tools to do so right there in the

café (Neier, Tarter, & Zahay-Blatz, 2011). Another tactic the company uses is to entice

consumers to open accounts with various rewards. Perhaps ING’s greatest appeal to the

average customer is that customers of ING Direct incur zero fees for all of the online personal

banking services it provides. There are no overdraft fees, no minimum balance fees, no

maintenance fees, and no hidden fees.

The SWOT analysis also shows opportunities for ING Direct. With online banking

trending toward an increase in mobile banking, ING has opportunities to expand in this area

and is already leading the pack with its CheckMateSM mobile app. This app allows bankers to

simply take a picture of a check to deposit it, allowing fast and easy access to their money

(http://www.ingdirect.com/deposits/mobile.html). The additional opportunity in mobile

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banking is expansion into other mobile markets, as this app is currently only available on

Android and iPhone operating systems.

The only real weakness for ING Direct is the tiny market share that its strategic group

has compared to other strategic groups in the industry. However, compared to other banks

that offer similar services with similar very low or no fee models, this isn’t troubling for the

online pioneer, as it has double the market share of strategic groups that offer the most

similar ranges of products. In addition, this weakness has actually been absorbed by

CapitalOne in the U.S. market, which bought ING Direct’s US banking company in 2011

(Barth, 2011). With CapitalOne’s purchase of ING Direct, ING now has the backing of big

money behind its ingenuity, insulating it somewhat from the threat of other giants in the U.S.

market potentially taking on its business model.

Section II: Evolution of Commercial Internet Banking

Industry Trends and Outlook

The online banking industry has quite a few trends that ING Direct should watch for

in the coming decade to maintain its profitability, though some of those trends are being set

by ING itself. One of the biggest trends in the online banking industry that is sure to

continue for many years to come is the increase in mobile internet banking (Tripathi, 2012).

For the next generation, for whom cell phones have always been the norm, this will be an

expected feature for any global banks that want to remain in the industry. Another growing

trend, especially for U.S. consumers is the demand for “expedited online bill payments”

(Munger, 2009). Globally, as developing countries continue to adopt the concept of online

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banking, and infrastructure to support online systems increases, more and more developing

countries will see their banks go online.

PESTL Analysis-Expansion into Chile

One of the few countries in the world where ING Direct does not currently have

personal internet banking is in the country of Chile. A PESTL (political, economic, socio-

cultural, technological, legal) analysis (see Appendix C) of the country of Chile shows the

potential for expansion of ING’s business into this country. Chile has been explored by many

companies in recent years as a destination for expansion due to its business-friendly political

environment and expanding economy. The country has had a stable political environment

for more than two decades, with an open economy and little bureaucracy to get in the way of

businesses that wish to move to Chile. Gross domestic product in Chile is expected to grow at

a rate of 6.2% over the next year, with an average of 4.2% for the following 3 years. This is

higher than the global average of around 3%, making Chile a prime candidate for new

business. In addition, Chileans value higher education, with 1/3 of its population attending

post-primary universities (Reininger, 2010).

Trends for Chile show rapid adoption of technology by younger generations, making it

a prime location for a technology based internet banking firm such as ING. Institutions of

higher learning are implementing e-learning environments and technology in the classroom

which has a real potential to translate into further technology adoption in other areas of

student life. There is already network infrastructure in place in Chile and younger

generations are more likely than not to use the internet on a regular basis (Alshare &

Alkhateeb, 2008). Furthermore, Chile has the largest adoption rate of internet banking in

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Latin America, with over 34% of their people having used internet banking

(http://www.thepaypers.com, 2011).

As a result of the analysis of global trends in banking, particularly in the country of

Chile, where ING could look next for potential expansion, the prospects look good for the

continued growth of the internet and mobile banking industry on a global scale. This is

particularly true for a pioneer such as ING Direct, who when expanding into emerging

markets could have the edge over its competitors because it appeals to the average citizen.

Trends toward increases in mobile banking in particular could mean growth for companies

like ING that have jumped ahead of their competitors with innovative technology for check

cashing and other mobile banking apps.

Current trends in internet banking will have significant impacts to industry forces and

structure. More power will be given to buyers, as buyer demand for better product

technology and innovation is increasing. This increase grants more power to the banking

industry’s IT suppliers as well, as banks will have to rely on the IT industry to provide the

technology demanded quickly, efficiently and securely. Though this will cause a decrease in

attractiveness for profits from buyer and supplier forces, it also paves the way to widen the

gap between internet banks and their brick and mortar counterparts, decreasing the impact

of this substitution threat and increasing the attractiveness of this force for profitability. The

structure of the banking industry is likely to shift over the next 10 years to be more

dominated by internet bankers and less so by brick and mortar banks. The additional

reliance on technology will also increase barriers to entry into the industry, making this force

more attractive, while intensity of rivalry isn’t predicted to change much.

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Section III: Strategy Formulation

ING’s mission statement and current strategy are all about its customers: “…to

deliver financial products and services in the way that our customers want them delivered:

with exemplary service, convenience and at competitive prices” (http://www.ing.com,

2012). ING intends to strengthen existing ING Direct offices by evolving them into “more

mature full-service banking models” (http://www.ing.com, 2012). This strategy shows that

ING is not only aware of the force of substitution by its brick and mortar competitors, but

that the company is taking actions to insulate itself from this competitive force by taking on

the substitute product as well.

As a company, ING needs to continue to take steps to offset the fierce rivalry in the

online banking industry. One of the ways that ING intends to do this is to separate its

banking and insurance businesses so that each can better focus on its customers. This will

help ING further cultivate its core business strengths, especially in the banking industry,

without having to divide its attentions with the insurance industry.

There are further steps that the company can take to strengthen its competitive

position over the next 3-5 years. With mobile banking trends showing an increase in

customer demand for mobile banking products, ING needs to continue to focus and develop

this area of its business to stay competitive. ING has been seen as a leader in the online

banking industry, and to maintain that image, the company will need to continue to stay at

the forefront of technology in the business. One of the ways the company could do this is by

focusing more on the younger generations of bankers and offering more products specifically

aimed at younger people. The company has already started moving in this direction in its

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U.S. markets, offering savings accounts specifically for children. Some other products that

ING should consider are pay cards for allowances, dual purpose products such as

combination work or student ID/debit or credit cards and further innovation to where a card

is no longer even necessary to pay for items. These types of advances and product mixes can

further insure that ING stays ahead of its competitors in the online banking industry.

ING also needs to continue to expand the online banking advantage it has. As

marketing and security are both key success factors in this industry, the company needs to

strengthen its image with older demographics. Although backward integrating existing ING

Direct firms into more “full-service” banks will help to win over this demographic for ING as

a company, it may not be the best way to show its older customers that online banking is the

way of the future because it sends a mixed-message. ING should be focusing its marketing

efforts more on mature demographics, emphasizing the things that older populations care

about – reputation, security and relationships.

IV. Recommendations and Conclusions

ING continues to expand its bank business throughout the world, but more

importantly, it is shaping the framework of the online banking industry as it goes. The

company is keenly aware of the forces that shape the online banking industry and also how

to insulate it from these forces to remain profitable and stay ahead of its competition. As ING

is heavy on strengths and opportunities, it needs to focus its energy on continuing to appeal

to younger generations with mobile technology while also appealing to more mature

customers through increased relationship banking and better marketing of the security of

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should consider expansion into countries like Chile to continue to be the pioneer in the

online banking industry in countries where this is a fairly new concept.

Update 2014

While ING was purchased by Capital One in February 2013, becoming Capital One

360, the model that started the company, as well as its success has not changed

(www.capitalone360.com). Capital One continues to honor the traditions that made ING

Direct a successful company, including free checking, free savings, and incentives for opening

new accounts, including market accounts.

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References

Alkhateeb, F. B. & Alshare, K. A. (2008). Predicting student’s internet usage in two emerging

economies using an extended technology model (TAM). Academy of Educational

Leadership Journal, 12(2), 109-128.

Barth, C. (2011). Capital One to buy ING Direct USA for $9 billion. Forbes.com, 10. Retrieved

from EBSCOHOST.

Bartlett, C.A., and Beamish, P.W. (2011). Transnational management: Texts, cases and

readings in cross- border management. New York, NY: McGraw Hill.

Beier, J. and Fox, S. (June 14, 2006). Online banking 2006: Surfing to the bank. Retrieved

from http://www.pewinternet.org.

Capital One 360. (2014). Retrieved from http://www.capitalone360.com

Chile. (2011). Country Report. Chile, (5), 1-24. Retrieved from Business Source

Complete.

Chile. Retrieved from http://www.everyculture.com/Bo-Co/Chile.html#b

Company Information. (2011). Hoovers. Retrieved from http://www.hoovers.com.

Devlin, J. F., & Gerrard, P. (2004). Choice criteria in retail banking: an analysis of trends.

Journal Of Strategic Marketing, 12(1), 13-27.

Farcas, D., & Reininger, M. (2010). Distance education in the form of e-learning in Chile:

Training human capital for the 21st century. International Journal of Advanced

Corporate Learning, 3(3), 14-18. doi:10.3991/ijac.v3i3.1372.

Gross, M.B., Hogarth, J.M, and Schmeiser, M.D. (2012, March). Consumers and Mobile

Financial Services. Retrieved from http://www.federalreserve.gov.

How can I start a bank? Retrieved from http://www.federalreserve.gov.

Industry statistics sampler. United States Census Bureau. (2007). Retrieved from

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http://www.census.gov/econ/industry/def/d52211.htm.

J. M., G. (2008). Regionally bridging finance and business. Financial Executive, 24(9), 46-47.

Jain, R., Laboissière, M. A., & Larraguibel, G. (2007). How Chile can win offshoring. Mckinsey

Quarterly, 10-12.

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Journal of Payments Strategy & Systems, 3(1), 83-91.

Neier, S., Tarter, B., & Zahay-Blatz, D. (2011). ING Direct cafés. International Journal of

Integrated Marketing Communication , 3(2), 91-95. Retrieved from EBSCOHOST.

Parker, C. (2008). Science and technology in undergraduate students' worldview, shaped by

globalization: The Chilean case. Perspectives on global development & technology,

7(1), 69-90. doi:10.1163/156914907X253215.

The Paypers. (July 25, 2011). Retrieved from http://www.thepaypers.com/news/online-

banking/chile-online-banking-usage-on-the-rise/744895-12

Products. (2012). Ally. Retrieved from http://www.ally.com.

Products. (2012). Ascencia. Retrieved from http://www.ascencia.com.

Products. (2012). Bank of America. Retrieved from http://www.bankofamerica.com.

Products. (2012). Bank of China. Retrieved from http://www.bocusa.com.

Products. (2012). Bank of internet. Retrieved from http://bankofinternet.com.

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Products. (2012). Barclays. Retrieved from http://barclays.com.uk.

Products. (2012). Charles Schwab bank. Retrieved from http://www.schwabbank.com.

Products. (2012). Chase. Retrieved from http://www.chase.com.

Products. (2012). Citibank. Retrieved from http://www.citibank.com.

21

Products. (2012). Discover. Retrieved from http://www.discover.com.

Products. (2012). E-trade. Retrieved from http://us.etrade.com.

Products. (2012). FNBO Direct. Retrieved from http://www.firstnational.com.

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Products.(2012). IBC Asia. Retrieved from http://www.icbcasia.com.

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Appendix A

Table 1-1: Data courtesy of http://www.hoovers .com and each individual bank’s website (see references for full list).

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Strategic Group Map

Table 1-2

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Appendix B

SWOT Analysis

• Appeals to the average consumer

• Offers lowest fees in the business • Reaches more countries with

online banking products than any other firm

• Only company it its strategic group

• Possesses less than 1 % of the global market share

Strengths Weaknesses

Opportunities Threats

• Increase market share through mergers

• Mobile banking technology • Staying ahead of other online

banks • Appeal to younger customers

and cultivating relationships through ING Cafes (Neier, Tarter & Zahay-Blatz, 2011)

• Larger companies capitalizing on ING’s business model

• Potential to isolate richer customers while catering to the average consumer

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Appendix C

PESTL Analysis: Chile

(Sources Chile Country Report, 2011; Reininger, 2010; http://www.everyculture.com; Jain, Laboissiere, & Larraguibel, 2007; Parker,2008)

• Presidential democracy • Open, free-market economy • Political environment unlikely to

change in the near term • Pro-market and business friendly • Policies promote entrepreneurship

and cut bureaucracy • Transparent regulatory framework • Stable legal environment

• GDP growth between 4.8%-6.2% expected from 2011-2015

• Government has cash surplus • High inflation • Strong currency, price stability • BCC raising interest rates, fiscal

tightening • Still recovering from a 2010

earthquake • Private consumption growth • Privatized pension system (higher than

avg savings • High foreign investment and cash

flows • 7% Unemployment

Political/Legal Economic

Socio-Cultural Technological

• Reorientation of education system likely in the near term

• Population of 17.4million • Higher education valued • High urban population distribution • Class system • Unequal labor distribution between

men and women • Strong family loyalty

• Mobile technology and e-learning increasing availability of higher education

• Ranked #1 in Latin America on the networked readiness index

• Positive views on technology

CHILE