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Citibank: Launching the Citibank: Launching the Credit Card in Asia Credit Card in Asia
PacificPacific
Erica Baumann Erica Baumann Paul Davis Paul Davis
Nathan HahnNathan Hahn Rebecca LeedsRebecca Leeds Lauren LettieriLauren Lettieri
Overview:Overview:Geography of Asia PacificGeography of Asia Pacific
The Nature Conservancy: http://nature.org/wherewework/asiapacific/
Overview:Overview:The Pacific Ocean’s ElevenThe Pacific Ocean’s Eleven
Hong Kong (1902)Hong Kong (1902) Taiwan (1964)Taiwan (1964) Australia (1965)Australia (1965) The Philippines The Philippines
(1902)(1902) Guam (1969)Guam (1969) Singapore (1902)Singapore (1902)
India (1902)India (1902) Malaysia (1904)Malaysia (1904) Indonesia (1918)Indonesia (1918) Thailand (1967)Thailand (1967) Korea (1967)Korea (1967)
Overview:Overview:Citibank’s Mission Citibank’s Mission
StatementStatement Citibank’s mission in the Asia Citibank’s mission in the Asia
Pacific region was to be the most Pacific region was to be the most profitable provider of a wide array profitable provider of a wide array of financial services to an of financial services to an increasingly affluent and middle-increasingly affluent and middle-income market, and to reach the income market, and to reach the rapidly growing middle-income rapidly growing middle-income households in this region.households in this region.
Overview:Overview:Citibank in Asia PacificCitibank in Asia Pacific
1978-19891978-1989
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
Overview:Overview:Keys Questions in Asia Keys Questions in Asia
PacificPacific
Should Citibank launch a credit Should Citibank launch a credit card in the Asia Pacific region, card in the Asia Pacific region, and in which countries?and in which countries?
How should the particular card How should the particular card launches be tailored to each launches be tailored to each specific country?specific country?
Business ProblemsBusiness Problems Citibank wondered whether they could adopt Citibank wondered whether they could adopt
a mass-market positioning to acquire enough a mass-market positioning to acquire enough credit card customers and still maintain its credit card customers and still maintain its up-market positioning with the current up-market positioning with the current upscale branch banking customersupscale branch banking customers
Pricing the card too low would conflict with Pricing the card too low would conflict with Citibank’s stated positioning however pricing Citibank’s stated positioning however pricing it too high might mean low customer it too high might mean low customer acceptanceacceptance
Citibank’s management were concerned that Citibank’s management were concerned that consumers’ attitudes and credit card usage consumers’ attitudes and credit card usage patterns differed by countrypatterns differed by country
SWOT Analysis: SWOT Analysis: StrengthsStrengths
Undisputed leader of the marketplaceUndisputed leader of the marketplace Australia: customers see the credit card as an Australia: customers see the credit card as an
“important shopping tool”“important shopping tool” Hong Kong: people are used to credit cards- Hong Kong: people are used to credit cards-
relatively affluent populationrelatively affluent population India: strong economic development in late 80’sIndia: strong economic development in late 80’s Malaysia: large successful business populationMalaysia: large successful business population Singapore: “one of the world’s largest center of Singapore: “one of the world’s largest center of
traditional trade and services”traditional trade and services” Thailand: rapidly growing nation (foreign Thailand: rapidly growing nation (foreign
investment)investment)
SWOT Analysis: SWOT Analysis: WeaknessesWeaknesses
India: consumers do not like to use revolving India: consumers do not like to use revolving creditcredit
Indonesia: relatively poor country with small Indonesia: relatively poor country with small upper class; not many qualified for membershipupper class; not many qualified for membership
Australia/Singapore: saturated marketAustralia/Singapore: saturated market Taiwan: before 1989, laws restricted credit card Taiwan: before 1989, laws restricted credit card
businessbusiness Taiwan: culturally not acceptable to owe people Taiwan: culturally not acceptable to owe people
moneymoney Korea: financial problems in credit card business Korea: financial problems in credit card business
coupled with stringent local restrictionscoupled with stringent local restrictions
SWOT Analysis: SWOT Analysis: OpportunitiesOpportunities
Australia: credit card in conjunction with their banking Australia: credit card in conjunction with their banking servicesservices
Hong Kong: want to target customers outside branch Hong Kong: want to target customers outside branch businessbusiness
India: credit card penetration is lowIndia: credit card penetration is low Indonesia: upper class growing fastIndonesia: upper class growing fast Malaysia: culturally acceptable to revolve creditMalaysia: culturally acceptable to revolve credit Philippines: credit card penetration very lowPhilippines: credit card penetration very low Singapore: society prides on innovation and Singapore: society prides on innovation and
technology and see credit card as convenienttechnology and see credit card as convenient Taiwan: most wealthy and best educated country in Taiwan: most wealthy and best educated country in
regionregion Thailand: strong economy = consumer spendingThailand: strong economy = consumer spending
SWOT Analysis: SWOT Analysis: ThreatsThreats
Australia: AMEX and Diner’s Club seen as symbol of Australia: AMEX and Diner’s Club seen as symbol of statusstatus
Malaysia: many other options to choose from in Malaysia: many other options to choose from in 1989 (MasterCard and Visa)1989 (MasterCard and Visa)
Singapore: “high-tech mecca” has attracted many Singapore: “high-tech mecca” has attracted many multinational corporationsmultinational corporations
Taiwan: restrictive laws prohibited thus industry is Taiwan: restrictive laws prohibited thus industry is in early stagesin early stages
Taiwan: AMEX and Diner’s Club worldwide Taiwan: AMEX and Diner’s Club worldwide respected reputationrespected reputation
Citibank’s undifferentiated view of one marketplaceCitibank’s undifferentiated view of one marketplace
Most Likely Case Most Likely Case ScenarioScenario
Citibank will enter the marketCitibank 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
Cross selling productsCross selling products Market will accept new credit card Market will accept new credit card
penetration (except for few countries)penetration (except for few countries) Targeting growing upper class marketTargeting growing upper class market
Most Likely Case Most Likely Case ScenarioScenario
Citibank’s credit cards as symbols Citibank’s credit cards as symbols of statusof status
Citibank’s customer base in Asia Citibank’s customer base in Asia Pacific region will increase and Pacific region will increase and expandexpand
Customers will use their cards for Customers will use their cards for a wide variety of purchases a wide variety of purchases
Most Likely Case Most Likely Case ScenarioScenario
Australia: More services will be offered Australia: More services will be offered to maximize financial managementto maximize financial management
Hong Kong: Reach customers outside Hong Kong: Reach customers outside business segment by cross sellingbusiness segment by cross selling
India: Increase merchant acceptanceIndia: Increase merchant acceptance Indonesia: Incentives and higher credit Indonesia: Incentives and higher credit
limits opportunitieslimits opportunities Malaysia: Build up credit for future uses Malaysia: Build up credit for future uses
Most Likely Case Most Likely Case ScenarioScenario
The Philippines: Market program The Philippines: Market program geared towards gaining acceptancegeared towards gaining acceptance
Singapore: Highlight convenience’s of Singapore: Highlight convenience’s of CitibankCitibank
Taiwan: Promote awareness of the Taiwan: Promote awareness of the emerging credit card industryemerging credit card industry
Thailand: Two card approach to attract Thailand: Two card approach to attract all customer basesall customer bases
Korea: Will not enter due to Korea: Will not enter due to government regulationsgovernment regulations
Worst Case ScenarioWorst Case Scenario
Established competition beats CitibankEstablished competition beats Citibank Population too poor to qualify (Indonesia)Population too poor to qualify (Indonesia) Government regulation and culture limits Government regulation and culture limits
acceptanceacceptance Failure of customers to fulfill payments- large Failure of customers to fulfill payments- large
debtdebt Different countries not accepting of consistent Different countries not accepting of consistent
multinational strategymultinational strategy Rejection due to national pride and culture Rejection due to national pride and culture
(Taiwan)(Taiwan) Saturated markets not accepting of another Saturated markets not accepting of another
credit card (Singapore)credit card (Singapore)
Best Case ScenarioBest Case Scenario
Citibank adjusts strategy for specific countries’ Citibank adjusts strategy for specific countries’ needs (including options)needs (including options)
OR All countries accept Citibank’s multinational OR All countries accept Citibank’s multinational planplan
Become a penetration leader (Philippines)Become a penetration leader (Philippines) Utilize Singapore for latest technologyUtilize Singapore for latest technology Government law changes opens doors (Taiwan)Government law changes opens doors (Taiwan) Take advantage of some countries’ growing Take advantage of some countries’ growing
economy and affluenceeconomy and affluence Make money off of late payments and interestMake money off of late payments and interest
Strategy: Market EntryStrategy: Market Entry
Greenfield Market DevelopmentGreenfield Market Development Direct marketing programDirect marketing program
– Direct mailDirect mail– Take-onesTake-ones– Direct sales forceDirect sales force– Bind-insBind-ins
Strategy: PricingStrategy: Pricing
Low joining fee to induce more Low joining fee to induce more customerscustomers
Higher annual fee to provide a Higher annual fee to provide a steady recurring revenuesteady recurring revenue
Premium pricing for the Premium pricing for the Citigold Citigold card to attract affluent card to attract affluent cardholderscardholders
Strategy: Options Strategy: Options
$USD as standard currency for all $USD as standard currency for all cardscards
Regional Card CenterRegional Card Center– Lower costs because of economies Lower costs because of economies
of scaleof scale– Capability to do quick work product Capability to do quick work product
launches in Asia Pacificlaunches in Asia Pacific
Strategy: Business Strategy: Business SegmentsSegments
Non-Resident Indian Business (NRI)Non-Resident Indian Business (NRI)– Special offering for Indian customers Special offering for Indian customers
who did not reside in Indiawho did not reside in India International Personal Banking International Personal Banking
(IPB)(IPB)– To service the growing group of To service the growing group of
affluent Asian clients with global affluent Asian clients with global financial needs financial needs
Strategy: Core Strategy: Core ProductsProducts
Citi-One Citi-One Mortgage PowerMortgage Power Auto loans Auto loans Ready CreditReady Credit CitigoldCitigold CitiPhoneCitiPhone ATMsATMs
Go Decisions: Go Decisions: Taiwan, India, Indonesia, Malaysia, Taiwan, India, Indonesia, Malaysia,
the Philippines, Singapore and the Philippines, Singapore and ThailandThailand
ReasonsReasons– Countries growing along with Countries growing along with
infrastructureinfrastructure– Rapidly growing upper and middle classRapidly growing upper and middle class
Recommendations:Recommendations:– Two card approach- middle class and Two card approach- middle class and
upscale customers targeted individuallyupscale customers targeted individually– Create status for credit cardCreate status for credit card
Go Decisions: Go Decisions: Australia and Hong Australia and Hong
KongKong Reasons:Reasons:
– Most developed Westernized nationsMost developed Westernized nations– Strong credit card and financial Strong credit card and financial
infrastructure infrastructure – On average, 2 cards per person On average, 2 cards per person – Wide variety of usages – shopping Wide variety of usages – shopping travel travel
Recommendations:Recommendations:– Two card approach Two card approach
No Go Decision: KoreaNo Go Decision: Korea
Reasons:Reasons:– Regulations do not allow banks to issue Regulations do not allow banks to issue
cards with revolving credit cards with revolving credit – Only local currency credit cards allowedOnly local currency credit cards allowed– Poor diplomatic relationsPoor diplomatic relations– Infrastructure and legislation are not Infrastructure and legislation are not
conducive to credit card usageconducive to credit card usage
Recommendations:Recommendations:– To risky to enter the marketTo risky to enter the market
Population Breakdown Population Breakdown by Income: Asia Pacificby Income: Asia Pacific
Countries Above 25000 12500-25000 6000-12500 2000-6000 < 2000
% of Population 2% 4% 5% 8% 81%
% of Cards 27% 35% 31% 7% 0%
# of People 23,757,500 42,145,000 58,157,500 88,000,000 933,240,000
# of Cards 3,929,250 5,011,250 4,498,000 1,021,500 0
Cards Per Capita 0.165 0.119 0.077 0.012 0.000
Population 1,145,300,000# of Cards 14,460,000
Break Even: Asia Break Even: Asia PacificPacific
Advertising Budget 2,500,000.00$
Overhead 61,000,000.00$
Direct Costs 22,500,000.00$
TOTAL COSTS 86,000,000.00$
# of Cards 900,000
Average Annual Fee 56.13$
Average Joining Fee 39.75$
Revenue 86,292,000.00$
Population Breakdown Population Breakdown by Income: Malaysiaby Income: Malaysia
Malaysia Above 25000 12500-25000 6000-12500 2000-6000 < 2000
% of Population 5% 10% 20% 45% 20%
% of Cards 10% 45% 45% 0% 0%
# of People 850,000 1,700,000 3,400,000 7,650,000 3,400,000
# of Cards 38,000 171,000 171,000 0 0
Cards Per Capita 0.045 0.101 0.050 0.000 0.000
Population 17,000,000
# of Credit Cards 380,000
Break Even: MalaysiaBreak Even: Malaysia
# of Cards 900,000
Average Annual Fee 64.00$
Average Joining Fee 34.00$
Revenue 88,200,000.00$
Advertising Budget 2,500,000.00$
Overhead 61,000,000.00$
Direct Costs 22,500,000.00$
TOTAL 86,000,000.00$
ANY QUESTIONS?ANY QUESTIONS?