CITIBANK

TEAM 4 CITIBANK… … CREDIT CARD LAUNCH IN ASIA SITUATION O U T L I N E CITIBANK’S PROFILE CITIBANK IN ASIA PACIFIC CITIBANK IN ASIA PACIFIC 1978 -1989 OVERVIEW CITIBANK IN ASIA PACIFIC SWOT ANALYSIS PROBLEM RECOMMENDATION STRATEGY & MARKETING PLAN ALTERNATIVES SPECIFIED ALTERNATIVE COURSES OF ACTION DECISION CRITERIA AND WEIGHTS ANALYSIS STEP 1 : WHICH COUNTRIES ARE FAVORABLE? STEP 2 : WHICH COURSE OF ACTION TO TAKE? FINANCIAL ANALYSIS IMPLEMENTATION FINAL CONSIDERATIONS FOR FUTURE DEVELOPMENT SITUATION PROBLEM IMPLEMENTATION RECOMMENDATION ALTERNATIVES ANALYSIS CITIBANK PROFILE Customers -Target market in the middle class segments of the country’s population -Upscale service Quality -Premium product position -Loyal employees Employees -Disbelief of regional managers in the new expansion strategy -Global: the marketplace is treated as one Brand -Premium product with status Growth strategy To be the most profitable provider in Asia Pacific of an array of financial services to emerging middle-income households in this region. SITUATION PROBLEM IMPLEMENTATION RECOMMENDATION ALTERNATIVES ANALYSIS CITIBANK IN ASIA PACIFIC SITUATION PROBLEM IMPLEMENTATION RECOMMENDATION ALTERNATIVES ANALYSIS CITIBANK IN ASIA PACIFIC 1978-1989 1978: 1981: 1982: Citibank’s Asia Pacific Consumer Bank had established its consumer business in Asia First foreign bank to enter the local trade finance market in Taiwan Acquired Diners Club in Thailand 1983: Citibank enters the credit card market in Hong Kong 1986: Begins a period of growth in Thailand and the Philippines 1989: Talwan reintroduces the idea of a credit card launch in AsiaPacific SITUATION PROBLEM IMPLEMENTATION RECOMMENDATION ALTERNATIVES ANALYSIS PACIFIC ASIA - SWOT ANALYSIS S = Undisputed leader of the marketplace AUSTRALIA Customers see the credit card as an “important shopping tool” HONG KONG Strong adoption of credit cards INDIA Strong economic development in late 80’s W AUSTRALIA HONG KONG Lots of competition INDIA Weak infrastructure INDONESIA Low per capita income MALAYSIA unacceptable to revolve credit INDONESIA Large untapped population MALAYSIA Large successful business population PHILIPPINES Underdeveloped, political corruption SINGAPORE Saturated market PHILIPPINES Large population and booming economy SINGAPORE “One of the world’s largest centers of traditional trade and services” TAIWAN Wealthy and educated population THAILAND Rapidly growing nation (foreign investment) TAIWAN Before 1989, law restricted credit card THAILAND Political corruption SITUATION PROBLEM IMPLEMENTATION RECOMMENDATION ALTERNATIVES ANALYSIS PACIFIC ASIA - SWOT ANALYSIS O AUSTRALIA Credit card in conjunction with their banking services HONG KONG target outside branch business INDIA credit card penetration is low INDONESIA Fast growing upper class MALAYSIA unacceptable to revolve credit PHILIPPINES credit card penetration very low T= undifferentiated view of 1 marketplace AUSTRALIA Saturated Market HONG KONG INDIA INDONESIA MALAYSIA Many other options ( visa / mastercard ) PHILIPPINES SINGAPORE society prides on innovation TAIWAN most wealthy and best educated THAILAND strong economy with lots of consumer spending SINGAPORE High-tech mecca; has attracted lot of multinational corporations TAIWAN Industry is in starting up phase AMEX & Diner’s club seen as status symbol THAILAND strong economy with lots of consumer spending SITUATION PROBLEM IMPLEMENTATION RECOMMENDATION ALTERNATIVES ANALYSIS DEFINED PROBLEM STATEMENT 1. SHOULD CITIBANK PROCEED WITH THE LAUNCH OF A NEW CREDIT CARD PRODUCT IN THE ASIA PACIFIC MARKET? + 2. IF A CREDIT CARD PRODUCT IS LAUNCHED, HOW WILL CITIBANK DEVELOP A STRATEGY FOR THE CARD’S POSITIONING, PRICE, AND COUNTRY SELECTION? + 3. HOW SHOULD EACH CARD LAUNCH BE TAILORED TO EACH INDIVIDUAL COUNTRY? SITUATION PROBLEM IMPLEMENTATION RECOMMENDATION ALTERNATIVES ANALYSIS FUTURE RECOMMENDATION Launch Citibank credit card via sequential regional roll-out ° START IN HONG KONG ° TARGET THE MIDDLE CLASS SEGMENT ° USE HONG KONG AS A TEST MARKET - Use Hong Kong as a centrally located up to later expand to: Taiwan Australia Singapore and then emerging markets ① THE WESTERNIZED COUNTRIES - Australia, Singapore, Taiwan ② THE EMERGING MARKETS - Malaysia, Thailand, Indonesia, India, Philippines SITUATION PROBLEM IMPLEMENTATION RECOMMENDATION ALTERNATIVES ANALYSIS FUTURE RECOMMENDATION Launch Citibank credit card via sequential regional roll-out MARKETING PLAN: ° ° ° ° ° ° SITUATION PROBLEM IMPLEMENTATION RECOMMENDATION ALTERNATIVES ANALYSIS ALTERNATIVE COURSES OF ACTION ① Launch Citibank credit card via sequential regional roll-out starting from the best country outcome of the analysis. ① Launch card via mass expansion across the Asia-Pacific ② Enter market by acquiring an existing card company’s portfolio ③ Initiate greenfield market development to build customer base ① Do not launch a credit card SITUATION PROBLEM IMPLEMENTATION RECOMMENDATION ALTERNATIVES ANALYSIS FORMULATION OF DECISION CRITERIA P olitics E conomy Corruption Economic/Political risk profile GDP/capita Average economic growth rate Market saturation Credit card penetration Cards/pp % middle class % upper middle class % upper class Cultural view Language barrier Literacy rate Required technology available? Competition? % of population @ citibank Restrictions? 15% 30% S ociety 10% T echnology E nvironment L egal 15% 25% 5% SITUATION PROBLEM IMPLEMENTATION RECOMMENDATION ALTERNATIVES ANALYSIS ANALYSIS OF DECISION CRITERIA 1 DECISION CRITERIA 100% Hong kong Taiwan Australia P 15% 3 4 4 E 30% 4 4 4 S 10% 3 2 3 T 15% 4 4 4 E 25% 4 4 2 L 5% 4 2 4 94% 90% 85% 69% 60% 49% 44% 35% 25% 4 = very favorable Singapore Malaysia Thailand India Indonesia Philippines 1 = not favorable 3 3 3 2 2 1 3 2 2 2 1 1 3 2 2 1 1 1 3 2 1 1 1 1 2 3 2 2 2 1 3 2 1 2 1 1 2 = less favorable 3 = favorable SITUATION PROBLEM IMPLEMENTATION RECOMMENDATION ALTERNATIVES ANALYSIS ANALYSIS OF DECISION CRITERIA 2 Decision Criteria P E economic/political risk corruption weight Hongkong 15 30 4 Asia Pacific 3 Alternatives Acquistion 2 Greenfield 2 NO launch 0 GDP/Capital Average growth rate middleclass > $6000 uppermiddle> $12500 upperclass > $12500 currency demanded credit card penetration 4 3 2 2 0 S #cards/person language barrier? literacy rate % population @ city bank #city bank customers #population 10 5 2 3 3 0 T telephones/population % 15 5 3 2 2 0 television/population% infrastructure E L competition regulations 25 5 5 5 455 0,91 3 3 290 0,58 4 3 259 0,518 4 3 259 0,518 0 0 0 0 SITUATION PROBLEM IMPLEMENTATION RECOMMENDATION ALTERNATIVES ANALYSIS FINANCIAL ANALYSIS Costs – Given Information Customer Acquisition Costs Direct Mail Take -Ones Direct Sales Bind-Ins Direct Costs (less than 1 million cards) $25 / card Fixed Overhead Customers 250,000 Additional 250,000 Unit Cost in $ 1.5 .25 18,000 per sales rep .15 Direct Costs (1 million cards or more) $6 to $8 / card Fixed Overhead Costs $35,000,000 $10 – 15 million / year Advertising Expense $1.6 to $2.5 million SITUATION PROBLEM IMPLEMENTATION RECOMMENDATION ALTERNATIVES ANALYSIS Revenues Sources All Countries– What the competiors are doing NowGiven Information Revenue Source International (AMEX+Diners) Bank Median $40 $60 Monthly Varies by merchant Differs Local Bank Median $25 $32.5 1.5% to 3% Varies by merchant Differs FINANCIAL ANALYSIS Joining Fee Annual Fee Interest Payment Merchant Discounts Transaction Related fees SITUATION PROBLEM IMPLEMENTATION RECOMMENDATION ALTERNATIVES ANALYSIS FINANCIAL ANALYSIS Break Even Analysis – Australia Market Size -Target those making $6,000 a year or greater 80% X 16.5 Million People = 13.2 Million Customers -Average number of cards = 2 -Segment with highest percentage of cards = $12,500 - $25,000 (35%) SITUATION PROBLEM IMPLEMENTATION RECOMMENDATION ALTERNATIVES ANALYSIS Costs - Australia Channel Direct Mail Take-Ones Direct Sales Bind-Ins Channel Cost = 450,000 = 500,000 = 54,000,000 = 450,000 55,400,000 Total Percentage Qualified Respondents qualified Responses .666 4000 6000 .333 10000 30000 .666 10000 15000 .333 10000 30000 Unit Cost 1.5 X 0.25 X 18000 X 0.15 X Prospects Reached 300000 2000000 30000 3000000 Rsesponse Prospects Rate Reached X 300000 .02 X 2000000 .015 X 30000 .5 X 3000000 .01 Total Qualified 34,000 Total Respondents =6000 =30000 =15000 =30000 Actual Customers Direct Mail Take-Ones Direct Sales Bind-Ins Conversion Rate 80% 27200 TV Advertising 2,500,000 Costs TV Customers 420,000 Overheard Costs 35,000,000 Total Costs 104,080,000 Total Direct Costs Customers 25 447,200 Total Direct Costs 11,180,000 SITUATION PROBLEM IMPLEMENTATION RECOMMENDATION ALTERNATIVES ANALYSIS Revenue - Australia Revenue Types Joining Fees Annual Membership Fee Interest Revenue Merchant Discounts $ Amount 60 30 140 5 Number of Card Holders 447,200 Revenue per Card 235 Total Revenue 105,092,000 Revenue per Card 235 SITUATION PROBLEM IMPLEMENTATION RECOMMENDATION ALTERNATIVES ANALYSIS Summary - Australia Break Even # of Credit Cards 447,200 Break Even Cost $104,080 approximately Break Even Revenue $105,092 approximately -A high number of cards in year 1, but even if revised down, not difficult to break even -Must differentiate with good service in this market -Citibank brand image alone will not sell this card in Australia THANK YOU FOR YOUR ATTENTION