Citibank's online initiatives and strategies must focus on their ability to meet consumer demands and package their core business functions to offer a feature rich product.
By analyzing the marketplace, creating a value-delivery network or supply chain, and creating a competitive advantage in the market segment, a company can maximize its profits. Citibank represents both a Business-to-Consumer (B2C) and Business-to-Business (B2B) organizational model. It creates value by limiting the intermediaries involved with the distribution of its product, streamlining its business, and reducing costs. This value creation ultimately increases profits. The B2B business model creates value by networking and partnering with other businesses to offer a broad range of products and services. By limiting intermediaries' involvement with the distribution of its product the company can streamline its business, reduce costs, and ultimately add to the bottom line.
Businesses to Consumer online business models have the ability to create direct relationships with the consumer without involving intermediaries, such as distributors, wholesalers, or dealers. ("e-Business Principles and Practices," 2002, page 337). Just like the traditional brick and mortar business model, the purpose of a firm is to create value for its customers and create loyal return business.
To support the firm's activities and produce its products, an organization must perform tasks geared towards design, production, marketing, and delivery. Michael Porter of Harvard University proposed the value chain as a tool for identifying ways to create more customer value. (Kotler, P 2000, page 44). An example of Mr. Porter's Value Chain is depicted in the diagram below.
Materials are brought into the company and then converted in products with are then shipped to customers. The marketing and sales department markets these products and the service department, services them.
In the case of Citibank, checking accounts, investment accounts, savings accounts, and many other financial products are offered to consumers. The firm's infrastructure covers the costs of management, planning, finance, accounting, legal, and government affairs that are required to produce the primary and support activities.
The better a firm manages its value chain the more efficient it can operate thus creating shareholder value. The bottom line, value created equates to increased profits for the firm. Benchmarking best practices and looking for competitive advantages by streamlining operations for suppliers, distributors, and customers, creates an efficient supply chain that can maximize profits.(Kotler, P., 2000, page 45).
According to marketingteacher.com, the (value) chain consists of a series of activities that create and build value. These activities culminate in the total value delivered by an organization. The 'margin' depicted in the diagram is the same as added value. The organization is split into 'primary activities' and 'support activities. An example of a primary activity would be customer databases management and storage. Likewise, support activities might include financial tools accessible through the Citibank website.
As a member of Citigroup, Citibank's senior management strives for a common focus and consistent principles in an effort to grow the bank and generate more opportunity for its customers, shareholders, and communities.
Citibank's strategic intent is to convert its traditional money management business into an e-business framework. The company has historically emphasized advanced technology, as a testament to its leadership it was ahead of its competition in ATM deployment throughout the 1970's and 1980's (Gallivan, 2001)
Citibank continues to emphasize technological advancements in it strategic processes today. As noted on the bank's web site, the goal of Citibank's strategic processes is to "be the payment/settlement site of choice in the business to business (B2B) and business to customer (B2C) flows, as well as a provider of value-added solutions for net businesses" (Internet Citibank e-Business):
CitiDirect is a major initiative in this arena.
Industry e-Solutions provide industry specific solutions to enable clients to provide unique value to their customers. Citibank's new initiative in industry exchanges and tailored solutions for industry leaders helps them differentiate themselves in these markets and gain competitive advantage by e-enabling themselves for the new e-world.
e-Solutions provide clients and communities, in general, with new ways to operate and redefine market practices or open new market spaces in the e-business frontier. Along with management's common focus and consistent principles, Citibank's strategic process in e-business builds upon the company's core competencies. Management and its strategic process guidelines provide a foundation for differentiating the bank from its competitors.
Although online banking has brought traditional financial functionality into Cyberspace, Citibank faces numerous challenges both economically, politically, socially, and internally. As a large multi-national corporation (MNC), its dominance as the number 3 player within the global financial services environment provides resilient competitive strength.
Any discussion of internal and external analysis in today's business environment must consider the effects of technological innovation. A comprehensive framework is necessary to understand the many ways in which technology affects both strategy and the day-to-day functioning of all but the smallest companies.
In the case of Citibank, technology has given the company advantages in the marketplace and streamlined its operations. For example, traditional media, such as books, magazines, and video presentations, and traditional learning environments, such as classrooms and lecture halls, used to be the only vehicles for educating the workforce. Providing information to stakeholders via the Internet and the whole PC infrastructure has allowed communications to be both immediate and able to reach a broader segment of the company in a customized fashion.
The customer's ability to interact with the bank has changed from the need for a physical meeting between the customer and the bank to a 24/7/365 ability to transact business from multiple channels, including ATM's, and the Internet. Citibank has created "digital capital" by automating financial reporting and improving its business-to-business fund flow.
Internal and External Analysis focuses on Citibank's e-Business Integration Map, competitive and customer enhancements, and disaggregation/reaggregation via leveraged technology.
Technology is the expertise we apply to basic science or to previously developed products, tools, and processes to fashion a solution to a new need. The management of a technology task becomes more mundane and all pervasive. It simply will not do to view the task as adding more "bells and whistles" to a product or service. Rather, it is necessary to have a comprehensive framework for understanding the myriad ways in which technology affects both strategy and the day-to-day functioning of the business (Price, Robert M; 1996). Citibank has diversified to such a great extent that its e-Business modality encompasses most of the tasks and functions once conducted solely from their brick and mortar operations, and now more efficiently and effectively than ever before. Because of these technology changes, Citibank purports to have the most diverse array of products and the greatest distribution capacity of any financial firm in the world (Citibank, 2003, Internet).
Prior to online banking, consumers had to depend on a monthly statement to reconcile their account balance, verify if checks had been cleared, and ensure their deposits were accurately posted. Along with the monthly bank statement, consumers sometimes received the cancelled checks they had written for that month. If the bank held the canceled checks and the client required a copy of a check that was written more than sixty days from the transaction date, they might wait up to 3 weeks before receiving a copy in the mail.
All that has changed with the advent of the Internet and the creation of online banking. Now consumers are able to view account balances, access account history, transfer funds between accounts, and pay bills electronically. With the projection of 300 million or more households depending on online banking by the turn of the century, banks must seize on the tremendous opportunity this market presents. Online banking may be the critical service that enables banks to maintain their role as the dominant provider of financial services.
Citibank should expand globally by utilizing its knowledge and experience of international markets, tailoring its customer centric model to service non English speaking nationalities, transfer best practices to newly developed markets, and take advantage of the technology and scalability of its network infrastructure. Many of Citicorp's strategies of providing consumers with flexible investment management and integration of core products will be facilitated by use of their online banking services. Accomplishing this goal will allow Citigroup to consolidate reporting across all services, provide a total view of client's portfolios, and facilitate cross selling of new products to existing clients. Account aggregation takes the integration strategy one notch further, enabling users to access financial accounts held at other institutions: deposit accounts, securities, credit cards, rewards programs, and individual retirement accounts. Any personal account information that can be viewed or managed through the Web can be aggregated into your online bank site.
Breaking down business processes into its various elements and then reassembling the pieces in ways that simplify, eliminate steps, and fine tune processes is known as desegregation and exaggeration. Desegregation helps build new kinds of value for Citibank.
Focusing on concerns like customer service to system availability are important concerns when reviewing, developing, and implementing online banking strategies Citibank differentiates itself from its competitors in its quests to remain a leader in the Global Banking arena.
Citibank should continue with an aggressive strategy thereby positioning its internal strengths to take advantage of external opportunities, overcome internal weaknesses, and avoid external threats. Second, Citibank should focus expanding its insurance vehicles to foreign markets such as those in Mexico and Japan.
Citigroup has established a truly unique presence in Japan, conducting business and building strong ties with retail outlets, institutional, and government clients for more than 100 years.
Also it will be critical for Citigroup to capture market share in order to strengthen their presence in Mexico to facilitate the financial transactions between the U.S., Mexico, and Canada.
Mexico is one of the United States' largest trading partners. The Mexican people are loyal in nature and would likely support Citigroup on a long-term basis if they perceived them as helping develop the network infrastructure and technology to make online transactions possible.
Citibank should pursue an aggressive strategy to expand its insurance business via branch and on-line vehicles to foreign markets, particularly in Mexico and Japan.
References: www-mmd.eng.cam.ac.uk/; www.ask.com ; www.citibank.com ; www.citifinancial.com
