Economy, Business And Markets

Financiers Need to Form Strategic Alliances

Business & Markets Desk
Financiers Need to Form Strategic Alliances
Financiers Need to Form Strategic Alliances

Competition in the Iranian financial industry is rising. Financial institutions are battling over existing territory and opening new frontiers. Anyone who falls behind will be left in the dirt and the future has more of the same.

Foreign companies are eying Iran. Their entry will raise the bar. Thankfully, Iranian financiers have at least a year before foreigners land on our shores. They must prepare.

Thus, strategic alliances are a must as the industry ups its game and grows to cater the needs of its clients. To fill the gap between a company’s resources and its requirements, it can enter into a strategic union with a similar company. Synergy is what companies look for when opting for an alliance. We all know consolidation is one of the keys to cutting costs, sharing knowhow and adapting to new market conditions.

In short, strategic unions, if done right, can raise companies’ profitability in local and foreign markets. Simultaneously, they will ensure the parties’ independence.

Partners may provide the strategic alliance with resources such as products, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise, or intellectual property.

For Iran’s many financial companies with their varied scale of operations, these alliances are key to survival and expansion.

As an example, the top 10 brokers—mostly subsidiaries of large banks—handled half the transactions in the stock market and took home handsome profits during the 2014-15 fiscal year ending March 21. Conversely, the 10 worst brokers barely handled 1% of all trade. The same circumstances apply for other branches of financial services.

So, if the small fish want to play in the pond, they have to consolidate. Be it via mergers and acquisitions, or through striking strategic alliances with other companies.

Whether financial institutions will start integration vertically—entering into deals with companies in other sectors of the financial industry and forming big conglomerates—or horizontally, increasing their market share depends on each firm’s conditions and strategies.

Furthermore, these alliances can be struck with foreign companies as well. One gains a foothold in Iran while the other gets top financial expertise. The recent cooperation between Iran’s Turquoise Partners and British Charlemagne Capital to sell Iranian securities to foreign investors is a good example.