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Citibank group7

  1. 1. Citibank: Launching the Credit Card in Asia Pacific Erica Baumann Paul Davis Nathan Hahn Rebecca Leeds Lauren Lettieri
  2. 2. Overview: Geography of Asia Pacific The Nature Conservancy:
  3. 3. Overview: The Pacific Ocean’s Eleven <ul><li>Hong Kong (1902) </li></ul><ul><li>Taiwan (1964) </li></ul><ul><li>Australia (1965) </li></ul><ul><li>The Philippines (1902) </li></ul><ul><li>Guam (1969) </li></ul><ul><li>Singapore (1902) </li></ul><ul><li>India (1902) </li></ul><ul><li>Malaysia (1904) </li></ul><ul><li>Indonesia (1918) </li></ul><ul><li>Thailand (1967) </li></ul><ul><li>Korea (1967) </li></ul>
  4. 4. Overview: Citibank’s Mission Statement <ul><li>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. </li></ul>
  5. 5. 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
  6. 6. Overview: Keys Questions in Asia Pacific <ul><li>Should Citibank launch a credit card in the Asia Pacific region, and in which countries? </li></ul><ul><li>How should the particular card launches be tailored to each specific country? </li></ul>
  7. 7. Business Problems <ul><li>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 </li></ul><ul><li>Pricing the card too low would conflict with Citibank’s stated positioning however pricing it too high might mean low customer acceptance </li></ul><ul><li>Citibank’s management were concerned that consumers’ attitudes and credit card usage patterns differed by country </li></ul>
  8. 8. SWOT Analysis: Strengths <ul><li>Undisputed leader of the marketplace </li></ul><ul><li>Australia: customers see the credit card as an “important shopping tool” </li></ul><ul><li>Hong Kong: people are used to credit cards- relatively affluent population </li></ul><ul><li>India: strong economic development in late 80’s </li></ul><ul><li>Malaysia: large successful business population </li></ul><ul><li>Singapore: “one of the world’s largest center of traditional trade and services” </li></ul><ul><li>Thailand: rapidly growing nation (foreign investment) </li></ul>
  9. 9. SWOT Analysis: Weaknesses <ul><li>India: consumers do not like to use revolving credit </li></ul><ul><li>Indonesia: relatively poor country with small upper class; not many qualified for membership </li></ul><ul><li>Australia/Singapore: saturated market </li></ul><ul><li>Taiwan: before 1989, laws restricted credit card business </li></ul><ul><li>Taiwan: culturally not acceptable to owe people money </li></ul><ul><li>Korea: financial problems in credit card business coupled with stringent local restrictions </li></ul>
  10. 10. SWOT Analysis: Opportunities <ul><li>Australia: credit card in conjunction with their banking services </li></ul><ul><li>Hong Kong: want to target customers outside branch business </li></ul><ul><li>India: credit card penetration is low </li></ul><ul><li>Indonesia: upper class growing fast </li></ul><ul><li>Malaysia: culturally acceptable to revolve credit </li></ul><ul><li>Philippines: credit card penetration very low </li></ul><ul><li>Singapore: society prides on innovation and technology and see credit card as convenient </li></ul><ul><li>Taiwan: most wealthy and best educated country in region </li></ul><ul><li>Thailand: strong economy = consumer spending </li></ul>
  11. 11. SWOT Analysis: Threats <ul><li>Australia: AMEX and Diner’s Club seen as symbol of status </li></ul><ul><li>Malaysia: many other options to choose from in 1989 (MasterCard and Visa) </li></ul><ul><li>Singapore: “high-tech mecca” has attracted many multinational corporations </li></ul><ul><li>Taiwan: restrictive laws prohibited thus industry is in early stages </li></ul><ul><li>Taiwan: AMEX and Diner’s Club worldwide respected reputation </li></ul><ul><li>Citibank’s undifferentiated view of one marketplace </li></ul>
  12. 12. Most Likely Case Scenario <ul><li>Citibank will enter the market </li></ul><ul><ul><li>''Sometimes, when an economy is under the most stress, you get presented with the biggest opportunities,'' says Citigroup Vice-Chairman William R. Rhodes </li></ul></ul><ul><li>Cross selling products </li></ul><ul><li>Market will accept new credit card penetration (except for few countries) </li></ul><ul><li>Targeting growing upper class market </li></ul>
  13. 13. Most Likely Case Scenario <ul><li>Citibank’s credit cards as symbols of status </li></ul><ul><li>Citibank’s customer base in Asia Pacific region will increase and expand </li></ul><ul><li>Customers will use their cards for a wide variety of purchases </li></ul>
  14. 14. Most Likely Case Scenario <ul><li>Australia: More services will be offered to maximize financial management </li></ul><ul><li>Hong Kong: Reach customers outside business segment by cross selling </li></ul><ul><li>India: Increase merchant acceptance </li></ul><ul><li>Indonesia: Incentives and higher credit limits opportunities </li></ul><ul><li>Malaysia: Build up credit for future uses </li></ul>
  15. 15. Most Likely Case Scenario <ul><li>The Philippines: Market program geared towards gaining acceptance </li></ul><ul><li>Singapore: Highlight convenience’s of Citibank </li></ul><ul><li>Taiwan: Promote awareness of the emerging credit card industry </li></ul><ul><li>Thailand: Two card approach to attract all customer bases </li></ul><ul><li>Korea: Will not enter due to government regulations </li></ul>
  16. 16. Worst Case Scenario <ul><li>Established competition beats Citibank </li></ul><ul><li>Population too poor to qualify (Indonesia) </li></ul><ul><li>Government regulation and culture limits acceptance </li></ul><ul><li>Failure of customers to fulfill payments- large debt </li></ul><ul><li>Different countries not accepting of consistent multinational strategy </li></ul><ul><li>Rejection due to national pride and culture (Taiwan) </li></ul><ul><li>Saturated markets not accepting of another credit card (Singapore) </li></ul>
  17. 17. Best Case Scenario <ul><li>Citibank adjusts strategy for specific countries’ needs (including options) </li></ul><ul><li>OR All countries accept Citibank’s multinational plan </li></ul><ul><li>Become a penetration leader (Philippines) </li></ul><ul><li>Utilize Singapore for latest technology </li></ul><ul><li>Government law changes opens doors (Taiwan) </li></ul><ul><li>Take advantage of some countries’ growing economy and affluence </li></ul><ul><li>Make money off of late payments and interest </li></ul>
  18. 18. Strategy: Market Entry <ul><li>Greenfield Market Development </li></ul><ul><li>Direct marketing program </li></ul><ul><ul><li>Direct mail </li></ul></ul><ul><ul><li>Take-ones </li></ul></ul><ul><ul><li>Direct sales force </li></ul></ul><ul><ul><li>Bind-ins </li></ul></ul>
  19. 19. Strategy: Pricing <ul><li>Low joining fee to induce more customers </li></ul><ul><li>Higher annual fee to provide a steady recurring revenue </li></ul><ul><li>Premium pricing for the Citigold card to attract affluent cardholders </li></ul>
  20. 20. Strategy: Options <ul><li>$USD as standard currency for all cards </li></ul><ul><li>Regional Card Center </li></ul><ul><ul><li>Lower costs because of economies of scale </li></ul></ul><ul><ul><li>Capability to do quick work product launches in Asia Pacific </li></ul></ul>
  21. 21. Strategy: Business Segments <ul><li>Non-Resident Indian Business (NRI) </li></ul><ul><ul><li>Special offering for Indian customers who did not reside in India </li></ul></ul><ul><li>International Personal Banking (IPB) </li></ul><ul><ul><li>To service the growing group of affluent Asian clients with global financial needs </li></ul></ul>
  22. 22. Strategy: Core Products <ul><li>Citi-One </li></ul><ul><li>Mortgage Power </li></ul><ul><li>Auto loans </li></ul><ul><li>Ready Credit </li></ul><ul><li>Citigold </li></ul><ul><li>CitiPhone </li></ul><ul><li>ATMs </li></ul>
  23. 23. Go Decisions: Taiwan, India, Indonesia, Malaysia, the Philippines, Singapore and Thailand <ul><li>Reasons </li></ul><ul><ul><li>Countries growing along with infrastructure </li></ul></ul><ul><ul><li>Rapidly growing upper and middle class </li></ul></ul><ul><li>Recommendations: </li></ul><ul><ul><li>Two card approach- middle class and upscale customers targeted individually </li></ul></ul><ul><ul><li>Create status for credit card </li></ul></ul>
  24. 24. Go Decisions: Australia and Hong Kong <ul><li>Reasons: </li></ul><ul><ul><li>Most developed Westernized nations </li></ul></ul><ul><ul><li>Strong credit card and financial infrastructure </li></ul></ul><ul><ul><li>On average, 2 cards per person </li></ul></ul><ul><ul><li>Wide variety of usages – shopping  travel </li></ul></ul><ul><li>Recommendations: </li></ul><ul><ul><li>Two card approach </li></ul></ul>
  25. 25. No Go Decision: Korea <ul><li>Reasons: </li></ul><ul><ul><li>Regulations do not allow banks to issue cards with revolving credit </li></ul></ul><ul><ul><li>Only local currency credit cards allowed </li></ul></ul><ul><ul><li>Poor diplomatic relations </li></ul></ul><ul><ul><li>Infrastructure and legislation are not conducive to credit card usage </li></ul></ul><ul><li>Recommendations: </li></ul><ul><ul><li>To risky to enter the market </li></ul></ul>
  26. 26. Population Breakdown by Income: Asia Pacific
  27. 27. Break Even: Asia Pacific
  28. 28. Population Breakdown by Income: Malaysia
  29. 29. Break Even: Malaysia
  30. 30. ANY QUESTIONS?