Citigroup Corporate Strategy Be #1, Global Financial Services ...


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Citigroup Corporate Strategy Be #1, Global Financial Services ...

  1. 1. Citigroup Corporate Strategy <ul><li>Be #1, Global Financial Services One-Stop-Shop </li></ul><ul><li>Contrast Citigroup vs, Financial Specialist Firms. </li></ul><ul><li>Costs vs. Benefits of One-Stop-Shop Strategy </li></ul><ul><li>Coordination Costs for Citigroup to Become the # 1 </li></ul><ul><li>Global Bank, Investment Bank, Brokerage Firm. Asset Manager, Insurance Firm, etc. </li></ul><ul><li>Costs vs. Benefits of Citigroup’s Global Diversification & Financial Diversification. Increased or reduced risk? </li></ul>
  2. 2. Citigroup Uses 4 Corp Strategies <ul><li>Portfolio Strategy = Diversify Business Risks of Each Financial Services Sector: Risk Metrics </li></ul><ul><li>Turnaround Strategy = Sandy Weill’s M&A growth pattern: at Shearson, Commercial Credit, </li></ul><ul><li>Prime America, Travelers, Salomon Brothers, C </li></ul><ul><li>Transfer Skills = Weill’s team, for 20 years; Bob Lipp, J. Diamond (fired) F. Zarb & now R Rubin </li></ul><ul><li>Share Resources = Cross Selling Travelers and Citibank products & services. Very Poor Start. </li></ul>
  3. 3. Citigroup’s Size, Scale and Scope <ul><li>Did Citigroup’s many decades of global banking relationships and transactions experience in over 100 countries, build Trust, Local Networks & Real Power? </li></ul><ul><li>What are Citi’s scale economies from strong balance sheet: $901 Billion Assets & $260 Billion Market cap? </li></ul><ul><li>Did Citi’s Scale reduce risk of govt loans, businesses? </li></ul><ul><li>Do Citigroup’s scope economies in many financial services = Real Touch Points in cross sell relationships for corporate & individual clients? Or is it just claims. </li></ul><ul><li>Did Citi’s wide foreign scope break legal boundaries? </li></ul>
  4. 4. Citigroup Value Migration Strategy <ul><ul><li>Citigroup used its strong balance sheet and bank lending power to muscle itself into bulge bracket investment bank ranks for giant debt and equity issues and M&A Deal Management. These generate higher margins. </li></ul></ul><ul><ul><li>Is Citigroup trying to change the rules of the game in M&A, Underwriting and IPOs of Investment bankers to require high capital, for whole range of deals? </li></ul></ul><ul><ul><li>Result: Merrill, Goldman, Morgan Stanley Credit Ratings were revised to Negative on July 16, 2001 </li></ul></ul>
  5. 5. Financial Services Global Growth Drivers <ul><li>Demographics of Global Baby Boomers Retire. </li></ul><ul><li>Huge Generational Transfer of Wealth. </li></ul><ul><li>Global Financial Services grows faster than OECD nations’ economies. </li></ul><ul><li>Governments Investment Barriers falling </li></ul><ul><li>Consolidation in each Financial Industry </li></ul><ul><li>Convergence among all Financial Services </li></ul>
  6. 6. Citigroup’s Competitive Advantage <ul><li>Why is Citigroup positioned to take advantage of global financial trends? Its Breadth, Depth, Size, or Relations? </li></ul><ul><li>Each Financial Industry is fragmented but consolidating fast in many countries = Citi’s Key Targets </li></ul><ul><li>Citi’s Aggressive Growth Management Team is opportunistic & cherry picks best deals at low prices. </li></ul><ul><li>Citigroup’s Culture of continual cost cuts for efficiency in infrastructure, staff, technology and productivity. </li></ul><ul><li>Citigroup is producer and distributor of its own Financial Services products, plus those of key allies. </li></ul>
  7. 7. Sandy Weill’s M&A Strategy <ul><li>For 30 years he used M&As of clones to grow. </li></ul><ul><li>Weill Kept Layering each acquisition on top in </li></ul><ul><li>Brokerage, IB, Consumer Finance & Insurance. </li></ul><ul><li>Weill Memo: “We’re Nowhere in International.” </li></ul><ul><li>Global Acquisitions. Mexico, Japan & Europe </li></ul><ul><li>Several M&A Deals = Immediately Accretive </li></ul><ul><li>Great Acquirer = Halo Effect = He Hits Targets </li></ul>
  8. 8. Does Citigroup Exploit Network Economics? <ul><li>Do Network Economics Exist in Financial Services Industries? Yes at Mike Milken’s Drexel Burnham. </li></ul><ul><li>Are they Customer-Centric Relationships for Cross selling via Touch Points? Is it Auction community? </li></ul><ul><li>Are they Technology Standard Setting based like Microsoft’s enter-once securities back-office code? </li></ul><ul><li>Are Segments of Financial Services Industry “Winner Take All Markets”? </li></ul><ul><li>If so: Which? If not: Why Not? </li></ul><ul><li>Can Citigroup exploit “virtuous circle”& “Vicious Cycle?” Dynamics of Network Economics? </li></ul>
  9. 9. How Can Citigroup Exploit Network Alliances? <ul><li>Can Citigroup use its global base in over 100 countries and over 100 million clients as a Network to Leverage positive feedback loops by forming linked Corporate Alliances? </li></ul><ul><li>Which Alliance networks would be most powerful and most sustainable for Citigroup? </li></ul><ul><li>Can Competitors form alliance networks to counter balance Citigroup’s global reach? </li></ul>
  10. 10. Citigroup’s Focussd Competitors <ul><li>Focused Specialists in each Financial Niche Try to Dominate narrow business lines. </li></ul><ul><li>They Target Securities Processing, Custody, Asset Management, Credit Cards, High net Worth, Sub-Prime clients, Innovative finance. </li></ul><ul><li>They gain economies of scale from size. </li></ul><ul><li>Are Cutting-edge Specialists: Faster to Market More Flexible, Less Rigid with Less Layers? </li></ul>
  11. 11. Citigroup’s Risks & Weaknesses <ul><li>No clear successor to Sandy Weill. </li></ul><ul><li>Citigroup has ongoing Criminal Investigations </li></ul><ul><li>Citigroup has low P/E Ratio & may go down. </li></ul><ul><li>Credit Card write-offs and Weakening Retail </li></ul><ul><li>Lower Trading revenue and Invest Bank fees. </li></ul><ul><li>Citigroup may be hit by Global Recession. </li></ul>
  12. 12. Citigroup’s 7S Framework <ul><li>Citigroup Legacy IT Systems often Inefficient </li></ul><ul><li>Citigroup’s Mixed Strategies were Uneven. </li></ul><ul><li>Citigroup’s Aggressive Management Style </li></ul><ul><li>Its two Superordinate goals: Size vs. Stock Price </li></ul><ul><li>Is Citigroup Size/Scope too Big to Fail, Globally </li></ul><ul><li>Governments will step in to bail it out of trouble. </li></ul><ul><li>Has Citigroup excess Staff in US & Abroad? </li></ul>
  13. 13. Citigroup’s Future Strategy <ul><li>Should Citigroup keep growing by Mergers </li></ul><ul><li>Should Citigroup grow via more Allliances </li></ul><ul><li>Has Citigroup Optimized its Use of Internet? </li></ul><ul><li>Has Citigroup preempted #1 Global Role? </li></ul><ul><li>Is Citigroup business model Copy-able? </li></ul><ul><li>Has Citigroup Diversified Major risks away or bundled its many risks? Or Both? </li></ul>
  14. 14. Citigroup: Limits of Firm Growth <ul><li>What are limits to Citigroup’s Corp. Growth? </li></ul><ul><li>Should sections of Citigroup be sold or spun off as separate businesses, like Travelers P&C? </li></ul><ul><li>Is the whole of Citigroup greater than its parts? </li></ul><ul><li>Has Citigroup achieved maximum synergies? </li></ul><ul><li>Is Citigroup’s Global One-Stop-Shop the most efficient Corporate Structure? </li></ul>
  15. 15. Critical Linkages in the Corporate Strategy Triangle © 1999 The McGraw-Hill Companies, Inc., 7-2 Figure 7-1 Irwin/McGraw-Hill VISION GOALS & OBJECTIVES BUSINESSES RESOURCES Role of Corporate Office Structure Systems Processes Corporate Advantage Competitive Advantage Control Coherence