Introduction
Opening a new office usually involves many risks, especially if the new area is not researched properly. Various aspects need thorough consideration, including the short-term and long-term investments, the profitability, the type of presence, and others. If a new office is to open in a country with no previous attachment, its financial influence should also be appraised. This paper will discuss the viability of opening a bank office in Lithuania.
Main body
Europe may have plenty of large financial centers, but they also involve tough competition. It would be beneficial to start with a smaller but financially influential country. One of them is Lithuania, an Eastern European country with a strategic geographical position. It borders such countries as Poland, Belarus, Latvia, and Russia (Auers, 2015). Most of them are developing countries, so it will be possible to expand business there due to their geographical and cultural closeness with Lithuania. The state is involved in regional integration efforts by being a part of the European Union (EU) in 2004 and the euro area, and its currency is the euro (Organisation for Economic Co-operation and Development [OECD], 2016). Aside from its external influences, Lithuania’s policies also make it a viable country for opening a new business. Its institutional environment is stable and transparent, despite the economy being volatile due to its reliance on export (OECD, 2016). Overall, Lithuania seems to be a promising country to open a new office and potentially expand its influence in the future.
A venture into a previously unexplored market may still lead to risks despite its assumed safety. In the case of Lithuania, the benefits may outnumber the potential losses. The challenges are connected with the country’s demographic decline, caused by low fertility rates, migration, and the informal economy (OECD, 2016). However, Lithuania’s infrastructure has improved, and it has several business centers in such cities as Vilnius and Kaunas (OECD, 2016). One could be used as the basis for a new bank, although the capital would probably be preferable. Whether all the stakeholders will benefit remains to be seen, but even if the bank is not as profitable as expected, it will still open new doors to the area with substantial financial potential. Therefore, the overall assessment of opening a new office in Lithuania is positive.
Considering the area’s novelty and the absence of previous experience with it, the choice of the type of presence is crucial. At first, it would be beneficial for the manager to follow the presence of natural persons to monitor the staff and explore the possibilities for expansion (Daigremont, 2019). Later, it could be subject to change, depending on the development. As for financing, the debt type seems to be relevant despite the country’s potential. However, if the venture is successful, and the stakeholders see the positive results, it could become equity finance (Bischoff & Wühler, 2019). Overall, the presence of natural persons and debt financing should accompany the initial stages of the bank establishment to avoid risks.
Ultimately, the office will be based in Vilnius, Lithuania’s capital. It is an integrated science, studies, and business center with two valleys, so it could attract not only the local customers but also other EU citizens (Santara & Sauletekis). The capital has the biggest population in the country, which is beneficial for promotion efforts and establishing the initial client base (Auers, 2015). The EU investments also seem to have impacted Vilnius the most, while other regions still suffer from higher unemployment rates and other long-term consequences of various financial crises (OECD, 2016). Altogether, Vilnius appears to be the most suitable financial center in Lithuania to open a bank.
Conclusion
In conclusion, this paper described Lithuania’s potential for a new business initiative, opening a bank. The country has much potential, starting from its strategic geographical position and active regional integration participation. Despite some risks involved, establishing a bank in Lithuania also has significant benefits. To decrease the risks, the implementation of the presence of natural persons and debt financing seems reasonable. Out of its three business centers, Vilnius suits the objectives the most, so the bank will likely open there.
References
Auers, D. (2015). Comparative politics and government of the Baltic states: Estonia, Latvia and Lithuania in the 21st century. Palgrave Macmillan UK.
Bischoff, J. A., & and Wühler, M. (2019). The notion of investment. In M. M. Mbengue & S. Schacherer (Eds.), Foreign investment under the Comprehensive Economic and Trade Agreement (CETA) (pp. 19-44). Springer.
Daigremont, C. C. (2019). Most favored nation treatment. In M. M. Mbengue & S. Schacherer (Eds.), Foreign investment under the Comprehensive Economic and Trade Agreement (CETA) (pp. 71-94). Springer.
Organisation for Economic Co-operation and Development (2016). OECD economic surveys: Lithuania 2016. OECD iLibrary. Web.