Citibank’s E-Business Case Analysis Cheryl Bluthardt...

Running Head: CITIBANK 1

Citibank’s E-Business Case Analysis

Cheryl Bluthardt, Brandy Church, Dawn Townley, and Amanda VanKoevering

LDR660: Strategic Plan & Implementation

Siena Heights University

Lansing, Michigan

April 10, 2012

Citibank Case Analysis 2

Profile of Citibank

Citibank is a multidimensional financial institution that services approximately 200

million corporate and personal consumers around the globe (Hitt, et al, 2011). Before the

financial crisis and subprime mortgage meltdown of 2007, “Citibank was one of the most

profitable banks in the United States” (Hitt, et al, p. 99). The corporation targets large global

enterprises and governments, and differentiates itself from its competition by emphasizing

customer service. As a result, in 2008 Citibank had financial dealings in “49 markets with more

than $12.5 trillion in assets” (Hitt, et al, 2011, p. 101).

Citibank’s vision is to “become the world’s leading e-business enabler” (Hitt, et al, 2011,

p. 105). The bank’s priority is to meet the changing needs of its customers, and therefore

emphasizes technological advancements to provide seamless and efficient banking systems.

Providing anytime, anyplace banking became an essential component of Citibank’s services. An

e-Business strategy was developed to implement this vision by connecting, transforming, and

extending Citibank’s technology offerings (Hitt, et al, 2011).

To fulfill this vision and mission, Citibank employs approximately 325,000 staff (Hitt, et

al, 2011). These employees are led by Sanford Weill, Citigroup’s chief executive, and Jorge

Bermudez, Citigroup’s executive vice-president and head of global Cash Management and Trade

Services (Hitt, et al, 2011). Citibank also partners with several key technology partners that

include Oracle, Commerce One Inc., SAP AG, Wisdom Technologies, and Bolero.net (Hitt, et al,

2011). Together, Citibank and these partners comprise FinancialSettlementMatrix.com, a

company that supplies buyers and sellers with e-solutions to payment processing (Hitt, et al,

2011).


These employees are charged with the task of being as efficient and effective as possible.

Citibank’s main business strategy is to understand client needs by developing relationships with

each customer (Hitt, et al, 2011). Corporate consumers are encouraged to outsource financial

processing to Citibank, further deepening the bank’s understanding of customers’ current needs.

This knowledge can then be used to forecast customer technology needs for future development

and/or delivery.

As a large financial institution, Citibank conducts business around the world in over 100

countries on a daily basis (Hitt, et al, 2011). The bank continues to develop new markets in areas

that are not being serviced in an attempt to sustain its position as a global banking leader. To do

so, Citibank must optimize its e-banking services and anytime, anyplace banking.

This has been the priority of Citibank for the past 15 years. In 2000, “Citibank made a

serious push to deliver integrated solutions that enabled its corporate consumers to conduct

business online” (Hitt, et al, 2011, p. 99). Between 2000 and 2007, several entities within

Citibank were created to focus on the advancement of the institution’s online banking options.

For example, in 2000, Citibank formed the Internet Operation Group, e-Capital, and e-Asset

Management (Hitt, et al, 2011). In 2002, Global Transaction Services was created within

Citibank to integrate technology and global efficiencies. “In 2006, Citibank developed

TreasuryVision” (p. 107) as a means to assist customers with liquidity management (Hitt, et al,

2011). These resources are a few examples of how, by 2007, Citibank offered a variety of web-

enabled business solutions to its customers.


Symptoms of Citibank’s Problems

While Citibank’s mission is to meet its customers’ needs, there are signs that the

institution is struggling to fulfill this mission. First of all, Citibank services corporate customers

of varying sizes around the globe (Hitt, et al, 2011). Citibank’s customers are also expanding

their businesses and becoming e-enabled. Customers want the ability “to collect payments online

and have access to more efficient web-enabled financial processes” (Hitt, et al, 2011, p. 103).

This dynamic clientele base requires Citibank to offer, support, and improve a changing portfolio

of services. Because of the diverse and constantly changing needs, Citibank is struggling to keep

pace.

Additionally, profit margins have been reduced as a result of the subprime mortgage

meltdown in 2007 (Hitt, et al, 2011). The resulting credit crunch has left Citibank facing a tough

business environment filled with intense competition. The changing global economy left

corporate and personal customers with less money, resulting in more requests for efficient and

low cost banking options. Then in 2008, Citibank and other financial institutions came under

regulator scrutiny. According to Hitt, Ireland & Hikisson (2011), Citibank’s “revenue grew 8

percent; however, its operational expenses grew by nearly 15 percent” (p. 102). Citibank has

therefore struggled to balance providing the banking technology desired by both corporate and

personal customers with the costs associated with risk management, compliance, and day-to-day

business operations.


Citibank’s Goals for the Future

Citibank’s leadership has several goals for the organization. Citibank’s focus has been on

the customer – meeting their needs has consistently been touted as the organization’s number one

priority. As a result, the company’s goals focus on achieving this mission.

One of Citibank’s goals is to provide its customers with the technology that would enable

them to conduct business at any time, any place. Citibank’s customers – both corporate and

personal – need the ability to work with their money in the most efficient manner possible.

Therefore, Citibank wants to web-enable its core services. Jorge Burmudez, Citibank’s executive

vice president and head of e-Business, stated that, “a core part of our e-business strategy is Web-

enabling our current services” (Hitt, et al, 2011, p. 107).

Another of Citibank’s goals is to align with partner companies that can provide Citibank

customers with innovative, seamless and efficient services accessible worldwide. Recognizing

that internal resources are limited, and it is resource intensive to internally develop new

technologies that will meet customers’ rapidly changing needs, Citibank has adopted the strategy

of aligning with partners to deliver e-services as a means to achieve their goal. As a matter of

fact, Tom Edgerton, head of the alliance for Citibank e-business, stated that “in the future, it

won’t be what your company can do, but what the network of companies you work with can

provide” (Hitt, et al, 2011, p. 107).

Still yet, another of Citibank’s goals is to provide customers with technology-based

services that would streamline their accounts receivable, accounts payable, and liquidity

management processes. To accomplish this, Citibank emphasizes the development of a single

web-enabled platform where customers could access any of their systems. Caroline Wong, Head

of Citibank Hong Kong’s Cash & Trade stated that Citibank would focus on providing customers


with outsourced accounting solutions to achieve a better total-understanding of their customers

(Hitt, et al, 2011).

An important component to achieving Citibank’s goals is to maintain customer

satisfaction. Therefore, another of Citibank’s goals is to improve their customer service. To do

so, Citibank will need to improve the quality of their telephone hotlines, and to offer customers

relationship managers and product consultants (Hitt, et al, 2011). Another way Citibank would

like to increase customer satisfaction is by using technology to provide customers with better

services at lower costs (Hitt, et al, 2011).

Citibank also wants to increase their profit margins. The poor economy, coupled with the

crash of the subprime mortgage sector, cost Citibank $9.83 billion in the last quarter of 2007

(Hitt, et al, 2011). As a result, it became necessary for Citibank to cut costs to increase its profit

margin. Citibank did not want to reduce its ability to pursue its mission, however, so according

to Charles Prince, the goal became to identify and eliminate “organizational, technology, and

administrative costs that do not contribute to our ability to efficiently deliver products and

services to our clients” (Hitts, et al, 2011, p. 102). Citibank coupled that goal with the desire to

reach new markets in an attempt to increase its revenue stream.


Analysis of Citibank’s Current Situation

General Environment Analysis of Trends

There is a strong trend amongst financial institutions to utilize technology to increase

banking efficiency (Hitt, et al, 2011). This is a result of technology being more readily available

and accessible to both business owners and personal consumers. Technology has also become

more affordable. In relation to businesses, as demand has increased, the cost of the technology

has decreased. Additionally, there has been movement within the industry to encourage the use

of electronic payments (Hitt, et al, 2011).

One example of a recent trend is the use of a portable credit card reader for phones,

iPads, laptops, and computers (Square Up, 2012). This device can be used by businesses of

varying sizes, and allows one to take credit card payments without paying monthly fees or high

per transaction rates, or requiring compliance with Payment Card Industry Data Security

Standard (PCI DSS) as no customer card data are stored with the processor (Square Up, 2012). In

a home-based business article, Culp (2011) states that there are an estimated 18.3 million home-

based businesses in the United States, and that number is forecasted to rise. This means there is a

market for the small, portable, affordable card readers in the United States, and potentially

globally.

The electronic payment trend continues as an analysis of Citibank’s clientele illustrates

that more consumers are acquiring credit cards and using them on a more frequent basis

(Citibank, 2006). According to Citibank’s 2005 financial statements, approximately 36% of

Citibank’s global revenue is a result of customer-driven credit card transactions (Citibank, 2006).

Twenty-four percent is based on Citibank’s US customers, while the remaining 12% is the result


of international credit card transactions (Citibank, 2006). This is the largest percentage of any of

Citibank’s revenue types.

Another industry trend indicates that while consumers are interested in electronic

payments, they still prefer brand recognition and banking with institutions that can demonstrate a

proven history of financial security (Hitt, et al, 2011). Customers want to have peace of mind

when it comes to utilizing e-banking services.


Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis

According to Hitt, Ireland & Hoskisson (2011), Cititbank was the most global of all U.S.

banks and in 1997 was among the most profitable as well. The changing global environment and

customer needs, however, presented Citibank with unique opportunities and threats. An analysis

of Citibank’s strengths, weaknesses, opportunities, and threats provide the following

information:

Strengths:

• Strong Brand Recognition • Continuous Investments in Technology • Global Presence • Diversification of Products and Services

Weaknesses:

• Declining Capital • Debt Obligations Due to

Subprime Market • High Customer Demands • Complicated Products

Opportunities:

• Expand Good Reputation • Improve Existing Web Features &

Expand Global Banking • Increase Customer Service • Offer Fresh Approach to Banking

Threats:

• Competition • Heavy Investments in Technology • Regulatory Scrutiny • Weakening Financial Markets

Strengths

Citibank/Citigroup benefits from strong brand recognition in the financial service

industry (Hitt, et al, 2011). As a result, Citigroup enjoys a strong competitive edge over its

competitors. Not only does Citibank have strong brand recognition within the United State, but

their brand name is known globally as well. According to Hitt, Ireland & Hoskisson (2011),

Citigroup provides a larger amount of credit cards than any other bank. Based on feedback from

this customer pool, in 2003 Forbes.com presented Citibank with a financial sector award, making

Citibank’s superior customer service another of its strengths (Hitt, et al, 2011).


Citibank is also one of the most global of the existing financial service providers (Hitt, et

al, 2011). As a result, Citibank has a history of continually investing in its banking technology.

This reputation of superior technological offerings sets Citibank apart from its competitors.

Citibank’s global presence is vital in continuous profits, and is therefore recognized as

another corporate strength (Hitt, et al, 2011). Their expanded portfolio enables Citibank to

deliver good results, regardless of the ongoing changes within the economy and banking

industry. Citibank’s global presence also provides their customers with a better integration of

products and services.

Citigroup is also known for its diversified products and services (Hitt, et al, 2011). This is

essential in capturing new markets, as well as new consumers. Risk within Citibank is reduced as

a result of diversification. Diversity, in general, helps in positioning Citigroup with consistently

delivering superior products and services.

Weaknesses

The declining economy took a toll on the banking industry. Higher credit card costs and

the global economic slowdown accounted for declining capital within Citibank (Hitt, et al, 2011).

With credit card costs increasing, and financial losses due to the economy, Citibank had to take a

hard look at ways to improve technologies that would embrace and enhance performance.

Citibank also experienced a sharp decline in income levels subject to debt obligations

related to the sub-prime markets (Hitt, et al, 2011). These sub-prime markets strongly impacted

the bottom line profits of Citibank. Investors lost confidence in the financial industry as these

high risk loans escalated out of control.

As customer demands increased, Citibank found it difficult to keep pace with these

requests with less revenue at their disposal (Hitt, et al, 2011). Their lower scale of operations


restricted Citibank’s ability to compete within the banking industry, thus limiting opportunities

within the banking environment.

Citibank experienced a weak competitive position that was primarily attributed to

underperformance (Hitt, et al, 2011). Citibank offered inferior products and services, and lacked

the innovation of new products and services that their customers desired. As a result, market

shares continued to decline over a four year period.

Opportunities

Citibank’s positive reputation is well known within the global banking industry (Hitt, et

al, 2011). Citibank is focused on enhancing and expanding its good reputation. As a result,

Citibank has the opportunity to leverage its reputation to gain new customers, which will

increase profits.

Expanding global banking is essential in any banking organization. Citibank’s product

portfolio could be enhanced by adding new products and services, as well as improving and

enhancing current offerings. Innovative products and services could potentially bring new

customers to Citibank.

Customer service is of utmost importance to Citibank (Hitt, et al, 2011). They want their

customers, new and old, to know they can rely on Citibank to focus on each person’s individual

account as they would their own. This is the reason Citibank has made increasing customer

service of utmost importance.

Citibank is offering a fresh approach to banking. New technologies can provide

Citibank’s customers with innovative and efficient accounts receivable, accounts payable, and

liquidity management services to be accessible anywhere, anytime, at the lowest cost (Hitt, et al,

2011). This will be a crucial tool in the success of Citibank.


Threats

As with any industry, competition is always a threat. Citibank’s main competitors include

Bank of America, Chase Bank, as well as new entrants into the banking industry (Hitt, et al,

2011). Citibank must be innovative in developing new techniques in which to serve their

customers to remain strong and eliminate competition. Retaining current customers, as well as

attracting new ones, will prove crucial to the financial stability of the organization.

Even though investing in technology is one of Citibank’s strengths, it also has the

potential to threaten the profitability of the organization. Developing and providing new

technologies is resource intensive (Hitt, et al, 2011). Whether Citibank simply enhances its

current technology, or purchases new technologies, the budget will be impacted.

Regulatory scrutiny is another threat to Citibank’s growth (Hitt, et al, 2011). Banking

regulations change continuously. Staying abreast of these updates and implementing means to

stay in compliance is a resource burden on the industry. Being non-compliant, however, is an

even larger burden.

Weakening global financial markets also pose a threat to Citibank’s growth (Hitt, et al,

2011). The declining economy provides an unstable condition that creates stress and fear for all

involved. This includes the banking industry, the customer, and the investors. As long as the

financial markets remain weak, threats to survival will remain.


Financial Analysis

The financial analysis provides the organization and stakeholders with the financial

condition of the organization. This is obtained from taking the financial statement, calculating

and analyzing ratios using simple averages, and calculating percentages based upon the data.

Business decisions are then based upon what these ratios reveal. Accounting ratios are one of the

most important tools used in analyzing and interpreting financial statements, as well as

determining the financial stability of the organization.

Financial ratios are pertinent when engaging in decision making. Managers need financial

information to better equip them with the tools needed to make current and future decisions for

organizational success. Financial strengths and weaknesses are revealed within the financial

ratios. Therefore, these ratios provide an essential tool in providing the organization what they

need to make educated decisions as to prior performance, current conditions, and future

predictions of the organization in relation to their overall goals.

Citibank’s 2005 financial ratios are follows:

• Profitability Rations

1. Return on total assets = 17.5% * Acceptable

2. Return on stockholder’s equity = 22.1% * Acceptable

3. Return on common equity = 22.3% * Acceptable

4. Operating profit margin = 1.6:1 * Acceptable

5. Net profit margin = 16.5% * Acceptable

• Liquidity Ratios

1. Current Ratio = 1.2% *Acceptable

2. Quick ratio = 2.4% *Acceptable


• Leverage Ratios

1. Debt-to-assets = 7.5% * Acceptable

2. Debt-to-equity = 12.2% * Acceptable

3. Long-term debt-to-equity = 1.9% * Acceptable

4. Times-interest-earned = 36.1% * Acceptable

5. Fixed charge coverage = .8% * Acceptable

• Activity Ratios

1. Total assets turnover = 8.1% * Acceptable

2. Average collection period = 1.3 times * Acceptable

• Shareholders’ Return Ratios

1. Dividend yield on common stock = 9.1 * Acceptable

2. Price-earnings ratio = 3.6 * Acceptable

3. Dividend payout ratio = .03 * Acceptable

4. Cash flow per share = .09 * Acceptable

Ratios are primarily used to uncover underling strengths and weaknesses within the

financial stability of an organization. They are not to be deemed as the ultimate factor in making

financial decisions. They are simply a piece of the puzzle to use in conjunction with additional

analyses to better understand whether it is a good move to go forward with something, or not.


Diagnosis of Citibank’s Problems

The analysis of Citibank’s current information provided an interesting perspective on the

state of the institution. Based upon Citibank’s financial ratios, it has been determined that

Citibank has steady growth and consistent profits (Citibank, 2006). However, trend data would

suggest that customers are requiring more innovative banking technologies, and that Citibank

will need to invest in this area to maintain that steady growth and consistent profits – particularly

in light of Citibank’s mission to meet customer needs. With limited overhead, however, Citibank

does not have the revenue needed to develop its own technologies to keep pace with the

changing and diverse needs of its customers. This appears to be Citibank’s root problem.

There are institutional strengths and industry opportunities that can address this problem,

though. Trend data suggest that customers desire banking establishments with proven records of

financial security. Considering that the SWOT analysis identified brand recognition as one of

Citibank’s strengths, it would seem advantageous for Citibank to leverage this to increase its

market power. Citibank also aspires to partner with complementary companies that can offer e-

banking solutions that Citibank does not have resources to address on its own. Given the trends

and the evidence collected in the analysis of Citibank’s current situation, the Strategic Goal

Matrix indicates that Citibank should focus on providing a new e-banking technology through a

partnership with a complimentary organization.

Based on the trend analysis, the form of technology that will benefit a majority of

Citibank's customers is the Square credit card reader and processor (Square.com, 2012). This

device is very small, portable, cost effective and efficient. As long as an individual that wants to

process a credit card has internet access, either by cell phone (smart phone), iPad, tablet, laptop,

or desktop he/she can accept Mastercard, Visa, Discover or American Express.


It is therefore proposed that Citibank and Square collaborate and partner to offer this

technology to Citibank’s current customers. The benefits to both parties will be exponential

because Square will have access to the Citibank trusted, globally recognized brand, and Citibank

will be able expand on its largest percentage of revenue by making it easier to use and process

electronic credit card payments.

Strategic Goal Matrix

Rate each alternative from 1 to 3 to evaluate ideas, strategies or solution possibilities.

GOAL OPTIONS IMPROVES

QUALITY High = 3 Low = 1

COST TO

IMPLEMENT High = 1 Low = 3

TIME

REQUIRED A lot = 1

Not much = 3

EASE OF

STAFFING Easy = 3

Difficult = 1

FINANCIAL

RETURN High return = 3 Low return = 1

TOTAL

POINTS

Grass Lake Regional Chamber of Commerce – Determination of Goals for Implementation


Action Planning for a Better Citibank

To enable Citibank to partner with the complementary company and provide the credit

card processing services to its current customer base, thereby enabling Citibank to also increase

customer service satisfaction and profits, Citibank needs to:

• Obtain funding source for start-up fees

• Draft a partnership negotiation contract between Citibank and Square

• Legalize negotiations between Citibank and Square

• Satisfy any legality issues or insurance requirements

• Establish Citibank’s partnership with Square’s business presence

• Establish the web presence for this joint venture and identify staff who will be

responsible for maintaining the site

• Determine accounting procedures of uploading and downloading files including

financial transactions

• Identify help services for customers within Citibank and within Square

• Schedule the date the new service will begin operations

• Consider any additional filings that may be required ( Federal or State)

• Develop and implement a marketing plan

• Develop an operations plan for the sales department to handle customer inquiries

and order processing

• Establish an evaluation metric to annually assess and document Citibank’s

Strengths Weaknesses Opportunities and Threats (SWOT Analysis)

To work through this list, Citibank’s leadership and departments will need to work

collaboratively to design and implement a synergistic strategic action plan. The individual


department action plans that follow illustrate how Citibank’s leadership and marketing, IT, and

sales departments will develop and implement a marketing plan to promote this new technology.

Department

Completed by:Key Result Area:

Goal:

Step # Action Responsibility Outside Experts Needed

Budget Needed

Budget Explaination

1To create a diverse team, who will ensure the development and annual revision of a viable technology vision that aligns with Citibank's goal

Corporate Level N/A N/A N/A

2 To assess the level of progress attained by Citibank for each of the areas that are affected by technology use

Supervisory Level N/A N/A N/A

3 To recommend strategies to achieve desired goal Manager Level N/A N/A N/A

4To prioritize those recommended strategies as strategies that should be completed within, the short term (1-3 years), as well as long term (3-5 years) strategies

Corporate Level N/A N/A N/A

5To re-assess the level of progress attained by Citibank for each of the areas of focus for technology use on an annual basis, and make necessay changes as needed

Corporate level N/A N/A N/A

Corporate

Dawn Townley, CEO

Leadership

Align with partner company to provide new technology to current Citibank customers, thereby Increase profits and customer satisfaction

Department


Goal:

Step # Action ResponsibilityOutside Experts Needed

Budget Needed Budget Explaination

1 Negotiation with Square for technology Internal/External* Yes N/A N/A

2 Use Square's technology External* Yes N/A N/A

3 Set up a helpdesk within Citibank Internal/External* No Yes N/A

4 Train superusers for helpdesk Internal/External * No Yes N/A

5 Mock exercise with helpdesk superusers Internal No N/A N/A

6 Re-assess processes for helpdesk Internal No N/A N/A

* External is to mean Square

Information Technology

Amanda VanKoevering, Director of Information Technology

Information Technology

Implement new technology for customers

Department


Goal:


Budget Needed

Budget Explaination

1 Schedule a brainstroming session with the marketing department and PR from Square Internal Yes N/A N/A

2 to contract with a company to design a survey of the current customers Internal Yes Yes Pay for survey

creation

3 Send out survey mail Internal Yes Yes Pay for postage and duplication

4 Compile Survey Data Internal No N/A N/A

5 Analyse data for customer needs Internal No N/A N/A

6 Request a budget from leadership Internal No N/A N/A

7 Develop multi faceted marketing campaign to include use of mail and tv ads Internal Yes Yes N/A

8 Hire firm to and producers to advertise Internal Yes Yes N/A

9 Re-assess marketing strategy on an annual basis Internal No No N/A

Marketing

Cheryl Bluhardt, Director of Marketing

Marketing

Inform current customers of new credit card reader

Department


Goal:


Budget Needed

Budget Explaination

1Schedule meeting between head of sales and head of marketing to discuss marketing plan - target audience and timeline

Head of Sales Admin Asst NA NA NA

2Schedule meeting between head of sales and head of product development to timeline for getting sales staff aclimated to features of new product


3Compile meeting notes from two meetings to identify needs of sales staff and timeline needed to achieve staff proficiency

Head of Sales NA NA NA

4 Design training program for sales staff Head of Sales NA NA NA

5 Review notes from implementation of other new products Head of Sales NA NA NA

6 Create FAQs for all features of new product Head of Sales NA NA NA

7 Write script for sales staff Head of Sales NA NA NA

8

Schedule meeting between head of sales and head of IT to establish expectations for support when sales staff are asked questions out of their area of expertise and identify support resources


9 Create IT resource contact list for sales staff Head of Sales NA NA NA

10 Reserve training facility for sales staff Head of Sales Admin Asst NA Yes Need money for

large enough facility

Sales Department

Brandy Church, Diector of Sales

Operational Processes

To establish workflow for sales personnel responding to marketing plan of new product

11 Duplicate training manuals, FAQs, scripts, and contact lists

Head of Sales Admin Asst NA Yes Duplication fees

12 Inform sales staff of training sessions Head of Sales Admin Asst NA NA

13 Conduct training sessions Head of Sales NA Yes Will need food and beverages

14Establish work schedules with extra workers to accommodate increased phone volume to accommodate marketing push

Head of Sales NA NA NA

15 Implement extra sales staff work schedules Head of Sales and Sales Dept NA Yes Overtime

16 Re-assess on an annual basis Head of Sales NA NA NA


References

Citigroup. (2006). 2005 Financial Information. Retrieved March 13, 2012 from

http://www.citigroup.com/citi/fin/data/k05c.pdf?ieNocache=353.

Culp, K. J. (2011, November 18). Home-Based Statistics You Should Know. Unknown,

Unknown, Unknown.

Hitt, M.A., Ireland, R.D., & Hoskisson, R.E. (2011). Strategic Management: Competitiveness

and Globalization (9th ed.). Mason, OH: South-Western Cengage Learning.

Square Up. Accessed April 5, 2012 from http://square.com.

http://www.citigroup.com/citi/fin/data/k05c.pdf?ieNocache=353

http://square.com/

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