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