Citibank - Entering credit card business in asia pacific, consumer business area, market entry strategy

1. CITIBANK: LAUNCHING
THE CREDIT CARD IN
ASIA PACIFIC

2. OVERVIEW:
THE PACIFIC OCEAN’S ELEVEN
Hong Kong (1902)
Taiwan (1964)
Australia (1965)
The Philippines (1902)
Guam (1969)
Singapore (1902)
India (1902)
Malaysia (1904)
Indonesia (1918)
Thailand (1967)
Korea (1967)

3. OVERVIEW:
CITIBANK’S MISSION
STATEMENT
Citibank’s mission in the Asia Pacific region was to be the most
profitable provider of a wide array of financial services to an
increasingly affluent and middle-income market, and to reach
the rapidly growing middle-income households in this region.

4. OVERVIEW:
CITIBANK IN ASIA PACIFIC
1978-1989
1986: Begins a
period of growth
in Thailand and
the Philippines
1982: Acquired
Diners Club in
Thailand
1978: Citibank’s
Asia Pacific
Consumer Bank
had established
its consumer
business in Asia
1981: First foreign bank to
enter the local trade finance
market in Taiwan
1983: Citibank enters
the credit card market
in Hong Kong
1989: Malaysia
and Australia
have saturated
credit card market
1989: Talwar
reintroduces the idea of
a credit card launch in
Asia-Pacific

5. OVERVIEW:
KEYS QUESTIONS IN ASIA
PACIFIC
1. Should Citibank launch the
card product in Asia Pacific?

6. BUSINESS PROBLEMS
Citibank wondered whether they could adopt a mass-
market positioning to acquire enough credit card
customers and still maintain its up-market positioning
with the current upscale branch banking customers
Pricing the card too low would conflict with Citibank’s
stated positioning however pricing it too high might
mean low customer acceptance
Citibank’s management were concerned that
consumers’ attitudes and credit card usage patterns
differed by country

7. SWOT ANALYSIS:
STRENGTHS
Undisputed leader of the marketplace
Australia: customers see the credit card as an “important
shopping tool”
Hong Kong: people are used to credit cards- relatively
affluent population
India: strong economic development in late 80’s
Malaysia: large successful business population
Singapore: “one of the world’s largest center of traditional
trade and services”
Thailand: rapidly growing nation (foreign investment)

8. SWOT ANALYSIS:
WEAKNESSES
 India: consumers do not like to use revolving creditIndia: consumers do not like to use revolving credit
 Indonesia: relatively poor country with small upper class;Indonesia: relatively poor country with small upper class;
not many qualified for membershipnot many qualified for membership
 Australia/Singapore: saturated marketAustralia/Singapore: saturated market
 Taiwan: before 1989, laws restricted credit card businessTaiwan: before 1989, laws restricted credit card business
 Taiwan: culturally not acceptable to owe people moneyTaiwan: culturally not acceptable to owe people money
 Korea: financial problems in credit card business coupledKorea: financial problems in credit card business coupled
with stringent local restrictionswith stringent local restrictions

9. SWOT ANALYSIS:
OPPORTUNITIES
Australia: credit card in conjunction with their banking services
Hong Kong: want to target customers outside branch business
India: credit card penetration is low
Indonesia: upper class growing fast
Malaysia: culturally acceptable to revolve credit
Philippines: credit card penetration very low
Singapore: society prides on innovation and technology and see
credit card as convenient
Taiwan: most wealthy and best educated country in region
Thailand: strong economy = consumer spending

10. SWOT ANALYSIS:
THREATS
Australia: AMEX and Diner’s Club seen as symbol of status
Malaysia: many other options to choose from in 1989
(MasterCard and Visa)
Singapore: “high-technology” has attracted many
multinational corporations
Taiwan: restrictive laws prohibited thus industry is in early
stages
Taiwan: AMEX and Diner’s Club worldwide respected
reputation
Citibank’s undifferentiated view of one marketplace

11. ANALYSIS OF BUSINESS
1. Citibank’s Asia Pacific Consumer bank expects to increase
its earnings by $30 million over two years. Assuming the
bank retains its current profitability ratio, it is expected to
increase its revenue by 90.8 million over next 2 years.
2. Given the distribution limitations imposed on foreign banks
in Asia Pacific region, it is unlikely that Citibank would be
able to increase the revenue by $90 million through their
current consumer banking operations. Hence Citibank must
launch new products to generate additional revenue
stream.
3. Looking at the low penetration of Credit cards (Exhibit 8 of
the case) and high growth rates (Exhibit 4 of the case) of
Asia Pacific countries, Citibank has a great opportunity to
launch Credit card business to generate the additional
revenue and profits.

12. MOST LIKELY CASE
SCENARIO
1. Citibank will enter the market
''Sometimes, when an economy is under the most
stress, you get presented with the biggest
opportunities,'' says Citigroup Vice-Chairman
William R. Rhodes
1. Cross selling products - Market will
accept new credit card penetration
(except for few countries)
2. Targeting growing upper class market

13. MOST LIKELY CASE
SCENARIO
1. Citibank’s credit cards as symbols of
status
2. Citibank’s customer base in Asia Pacific
region will increase and expand
3. Customers will use their cards for a wide
variety of purchases

14. MOST LIKELY CASE
SCENARIO
Australia: More services will be offered to
maximize financial management
Hong Kong: Reach customers outside
business segment by cross selling
India: Increase merchant acceptance
Indonesia: Incentives and higher credit limits
opportunities
Malaysia: Build up credit for future uses

15. MOST LIKELY CASE
SCENARIO
The Philippines: Market program geared
towards gaining acceptance
Singapore: Highlight convenience’s of
Citibank
Taiwan: Promote awareness of the
emerging credit card industry
Thailand: Two card approach to attract all
customer bases
Korea: Will not enter due to government
regulations

16. WORST CASE SCENARIO
Established competition beats Citibank
Population too poor to qualify (Indonesia)
Government regulation and culture limits acceptance
Failure of customers to fulfill payments- large debt
Different countries not accepting of consistent
multinational strategy
Rejection due to national pride and culture (Taiwan)
Saturated markets not accepting of another credit
card (Singapore)

17. BEST CASE SCENARIO
Citibank adjusts strategy for specific countries’
needs (including options)
OR All countries accept Citibank’s multinational plan
Become a penetration leader (Philippines)
Utilize Singapore for latest technology
Government law changes opens doors (Taiwan)
Take advantage of some countries’ growing
economy and affluence
Make money off of late payments and interest

18. OVERVIEW:
KEYS QUESTIONS IN ASIA
PACIFIC
3. Which countries should
Citibank enter first? Which
countries should it avoid?

19. S-T-P ANALYSIS OF
CREDIT CARD BUSINESS

20. S-T-P ANALYSIS OF
CREDIT CARD BUSINESS

21. S-T-P ANALYSIS OF
CREDIT CARD BUSINESS
Phase I – Roll out of credit card business in countries with low
political and economic risks, high per capita income with fairly
good growth rate. We recommend “Taiwan”, “Australia” and
“Malaysia” to be part of phase I of roll out as they present a
sufficiently diverse market (in terms of maturity).
Phase II – The learning from Phase I roll out can be applied to
other countries. In Phase II, priority should be given on market
size and potential growth rate. In this phase, we recommend
roll out of operations to “India” and “Indonesia”. NOTE – Even
though Philippines have a fairly large untapped market, we
don’t recommend roll out of operations until the political and
economic conditions improve.

22. GO DECISIONS:
TAIWAN, INDIA, INDONESIA, MALAYSIA,
THE PHILIPPINES, SINGAPORE AND
THAILAND
Reasons
Countries growing along with infrastructure
Rapidly growing upper and middle class
Recommendations:
Two card approach- middle class and upscale
customers targeted individually
Create status for credit card

23. STRATEGY: MARKET
ENTRY
Greenfield Market Development
Direct marketing program
Direct mail
Take-ones
Direct sales force
Bind-ins

24. OVERVIEW:
KEYS QUESTIONS IN ASIA
PACIFIC
2. How should Citibank
position its card, if it decides
to launch?

25. POSITIONING OF CREDIT
CARD

26. STRATEGY: PRICING
Low joining fee to induce more customers
Higher annual fee to provide a steady
recurring revenue
Premium pricing for the Citig o ld card to
attract affluent cardholders

27. OVERVIEW:
KEYS QUESTIONS IN ASIA
PACIFIC
4. If you chose not to introduce the
card what would you do to achieve
the $100 million earnings target by
1990? What kind of branch banking
products should the bank offer?

28. STRATEGY: CORE
PRODUCTS
Citi-O ne
Mo rtg ag e Po we r
Auto loans
Re ady Cre dit
Citig o ld
CitiPho ne
ATMs

29. ACHIEVING $100 M
WITHOUT CARD

30. ACHIEVING $100 M
WITHOUT CARD

31. ACHIEVING $100 M
WITHOUT CARD

32. THANK YOU
ASUTOSH
BHARAT
BRAJESH