Northern Portugal is the cradle of the nation's entrepreneurial spirit. Businesspeople in the region consider themselves to be the real wheeler-dealers of the Portuguese economy, running mainly small to medium-size businesses, and having a certain air of contempt for their counterparts in Lisbon and further south. According to the northern Portuguese, Lisbonites are mere employees of multinationals who spend their time on politics and parties while the real deals are done in the north.

Of course, in common with most other capital cities, Lisbon is where the power and money gravitates; like the multinationals, banks have a strong presence there. However, the Portuguese have a saying that banks are born in Oporto and die in Lisbon, where deal-making skills become blunted and attention to detail becomes lax. For this reason, Banco Portugues de Investimento (BPI) keeps its headquarters in Oporto. BPI is an exclusive merchant bank set up in 1981 by Artur Santos Silva; Senhor Silva has, in the meantime, set up or acquired a string of subsidiary banks between Oporto and Lisbon.

Two of these, Banco de Fomento e Exterior and Banco Fonsecas & Burnay, have head offices in Lisbon, while a third, Banco Borges & Irmao, remains in Oporto. Borges & Irmao is focused towards northern Portugal, which is where the bulk of its branches are, and Fonsecas & Burnay focuses in the south. Both subsidiary networks have been briefed to develop consumer lending niches such as credit cards and car purchase loans, segments where BPI claims it has developed key products. The business in the north has the added bonus of using its retail activities to scout for corporate finance - so many of its retail customers are businesspeople running small and medium enterprises.

Typically, the banking groups in Portugal divide their markets into three main segments: small and medium enterprises, universal banking, and large corporations. BPI believes that the delivery of tailor-made services to specific segments is the key to success in domestic banking. Banking executives are painfully aware that there is a lot of work to be done in restructuring the industries of northern Portugal - they talk in terms of identifying products and standardising them, of joint marketing projects, and of pooling companies together for research and testing of projects. Aiding management buyouts and merger and acquisition deals are seen as ways of ensuring continuity in businesses, and are looking towards cross-border transactions with companies in northern Spain as a way of consolidating businesses.

So far, progress has been slow; the northern business culture is not receptive to involving banks in their activities. The family businesses in the north tend to be mistrustful of banks, are suspicious of marketing ideas and usually employ one graduate to look after the banks - there is a widespread belief that the less the company has to do with the bank, the stronger is the business. Successful firms are perceived as those who neither give nor receive credit, who deal in cash only, and who keep their business dealings close to their chests.

There is, fortunately, a growing realisation that these practices might work well for small firms, but will not be effective if the firm is to grow beyond a small family concern. ‘Small family companies tend to have opaque accounts which makes risk evaluation very complex; they are also, by definition, very individualistic,' is how one Oporto banking analyst expressed it. In the near future, the banks are expecting some medium to large firms to emerge in northern Portugal as the merger process accelerates. Better able to compete on a world stage, these firms will probably be engaged in the traditional industries of textiles and leather, but will be better managed and better financed than the present companies.

If this is the case, the banks expect to be sharing in their success, and in the growth of northern Portugal as a player on the world business stage. (Case contributed by Jim Blythe)

Questions
1. What kind of secondary sources might be useful to the banks in identifying business customers?

2. How might banks decide which retail customers are also potential corporate clients?

3. What would be the main difficulties in researching the corporate market in northern Portugal?

4. How might the banks research the market for retail customers?

5. What secondary sources might be useful for the banks in identifying customers within their chosen niche markets of credit cards and car loans?