Threat of Substitutes: Except Australia where debit card is used, there is seldom substitute in Asia Pacific. As infrastructures are well developed and the economies of these countries become better, the recognition of credit cards in the society will be increased and the people will use more credit cards. In this sense, I do not see any critical substitutes for credit cards.
Influences of Suppliers: In the future, if Citibank outsources some of administration works of credit card business to local agents, a kind of threat from suppliers (outsourced companies) may happen. But in this case, I don’t foresee any critical threat from suppliers.
Influences of Customers: In general, customers tend to be more knowledgeable about credit cards. For example, some customers of upper call will study how conveniently they can use their cards outside their countries or executives will seek more benefits related to their business trips such as providing members lounge at major airports. Another example is very rich customers will need more information about other financial services through credit card companies. At the same time, more price sensitive customers will also try to apply credit cards, especially emerging markets such as India. Considering these situations, I would like to say that switching cost is very low and customer’s power is very strong.
Through these analyses, I understand that there are some negative factors and some positive factors in this industry. Therefore, I can not clearly define this industry is attractive or not attractive simply by this industry analysis. In order to establish most effective strategy for Citibank, I have to further study resource-based view of Citibank.
Resource Based Analysis
Brand of Citibank: Citibank has already been in banking operation in Asia Pacific and mainly has good relationships with large business houses. Also, for private customers, Citibank offers the Citi-one accounts with minimum deposit $10,000. In addition, in Hong Kong there are 7,600 Citigold customers who are required to deposit more than $100,000 in their accounts. Consequently, Citibank has been regarded as a prestigious, consumer-oriented international bank.
Clear Positioning: As mentioned above, clear positioning as a high-end bank for upper class and large business firms, Citibank could successfully create brand image in Asia Pacific.
Core Competencies: Citibank has managed properly these intangible resources with tangible resources such as banking by phone, overdraft protection and a designated customer service officer to manage their accounts. These resources have combined to create capabilities and become core competencies.
Competitive Advantages: As a result, Citibank has competitive advantages in the banking industry. By adding new financial products, continuing to improve technologies for providing better services and products, Citibank will strengthen its competitive advantages; they will become sustainable competitive advantages.
I would like to recommend launching credit card business by leveraging Citibank’s competitive advantages. In order to successfully launch credit card business, I would recommend to implement the following strategies for Citibank.
Organizational Change: As mentioned in the case, the root cause of country managers’ resistance to issue credit cards is in organizational structure. Because they don’t want to take risks which may cause future losses of their business. Therefore, Citibank has to change the organization: first credit card team of Asia Pacific should be in place and it should be responsible for building strategies for entire markets. And this team should work closely with regional offices. So-called matrix organization should be implemented. Specifically, the team will use current customer base of each country and establish most suitable marketing mix for each country under the cooperation with regional offices.
Marketing: In order to keep brand equity of Citibank, Citibank cannot conduct mass-marketing but more pinpointed marketing for target customers. Therefore, Citibank should not use Bind-Ins method. Also, to achieve effective marketing, Citibank should not use Direct Mail in this case (See Exhibit 2). Consequently, Take-Ones and Direct Sales should be used to acquire new customers. However, location of Take-Ones is very important to access upper and upper-middle class people and high quality of Direct Sales are also mandatory for its success, because Citibank targets not only customers outside its branch business but also cross-selling other Citibank products and services to these customers.
Strategic shift from developed countries to emerging countries: Citibank should start from strengthen its business in Hong Kong then launch credit card business in Australia and Singapore. Because Citibank can use stable infrastructure for the operation of credit card business in these countries and access large number of upper and upper-middle class people.
New team can attract more current upper class customers for the credit cards then expand new customers from upper-middle class by offering Gold Card and middle class by offering Classic Card without deterioration of brand equity through right marketing mix mentioned above. In addition, Citibank should introduce Platinum Card for super upper class people, which may add more brand image for Citibank and also prevent from the cannibalization of current Dinner Card holders (See Exhibit 3).
Expansion for Emerging Markets (See Exhibit 4): Considering the long-term growth prospects, Citibank should start credit card business in emerging markets like India. Poor infrastructure for the operation might be some troubles in the process of the operation, but future profit as the first mover in these countries will overcome these problems. In order to capture increasing number of upper-middle class people in emerging markets, similar strategy should be applied in these countries. They are hungry for a better quality of life and are ready to spend (The End of Corporate Imperialism, page 71). Another important factor to be successful in these countries, Citibank should rethink the cost structure and redesign the products to fit their requirements.
Product Differentiation: In addition to offer Platinum Card for super rich people, Citibank has offer more advanced services and products. First, Citibank can consider to issue Cathey-Pacific Citibank Card in Hong Kong and Philippine, Singapore Airline Citibank Card in Singapore, etc. in order to obtain business executives who currently use Amex for their business trips. Second, Citibank can offer the credit card with card holder’s face picture for the identification. Third, Citibank can issue cooperate cards through strategic alliances with prestigious companies such as Hutchson in Hong Kong, Singapore Telecom in Singapore and Tata-group even in India. As a result, Citibank can obtain more business executives as their new customers.
Through these marketing mix and strategies, Citibank can successfully launch credit card business in Asia Pacific, keeping the brand image prestigious and bringing incremental earning.