Citibank: Launching the Credit Card in Asia Pacific
Klaus Dissertori
Petr Maxmilian Hajkr
Management of Multinationals
Citibank’s position in Asia-Pacific
- The most profitable and preeminent provider of financial services
- Target segment: upper- and middle-income segment
- Active in 15 countries
PROs
₊ Rapid economic development
₊ Cross selling opportunities
₊ New customers, higher revenue
₊ Higher reputation
₊ Expansion
CONs − Regulations limiting the expansion of
foreign banks
− Weak local infrastructure
− Limited distribution capabilities
− Loss-making proprietary credit card businesses
− Inadequate legal infrastructure
SWOT Strengths
• Prestigious, consumer-oriented international bank
• Leader in most marketplaces
• Fast and high quality bank services
• existing customer base
• good image, wide acceptance
• High reputation
SWOT Weaknesses
• No acceptance of credit card business
• Law restrictions
• High competition
SWOT Opportunities
• Australia: developed service sector, western life
style, good banking infrastructure, desire for c. cards • Hong Kong: economic growth, rapid industrialization,
knowledge of credit cards • India: low credit card penetration, status symbol,
economic growth • Indonesia: small but rapidly growing wealthy class,
no restrictions on card ownership, high status • Malaysia: growing industrial nation
SWOT Opportunities
• Philippines: boom in economy, low credit card penetration
• Singapore: large center for international trade and services, familiarity with c. cards
• Taiwan: large trading power, high education level, less restrictions on c. card ownership
• Thailand: rapid economic growth, low competition
• Korea: n/a
SWOT Threats
• Australia: saturated market, high competition, image doesn’t matter so much
• Hong Kong: saturated market, number of credit card options
• India: cultural differences, population living in rural areas, low income level segment, regulations on foreign exchange transactions
• Indonesia: poor country, low income level, low customer base
• Malaysia: high competition, rural country, law restrictions
SWOT Threats
• Philippines: lack of banking infrastructure
• Singapore: saturated market, government regulations
• Taiwan: government control of database, regulations, high competition, no cultural acceptance
• Thailand: n/a
• Korea: heavy government regulations, strict foreign exchange measures
Where to enter first?
• Countries with high economic growth • Thailand
• Malaysia
• Indonesia
• India
• Philippines
• Taiwan
- Product positioning: • Middle class
• Upper class
• Credit card status – high image
Not immediately
Where to enter first?
• Developed, industrialized countries • Hong Kong
• Singapore
• Australia
- Product positioning • Shopping tool
• Variety of uses – multiple card approach
Which country to avoid?
• Country with strict control measures and regulations
•Korea
Alternatives to the credit card launch
Product/Market
Grid by Ansoff
Alternatives to the credit card launch
Products: • Citi-One
• Mortgage Power
• Auto loans
• Ready credit
• Citigold
• CitiPhone
• IPB
- Improve customers and partners relationships
- Acquiring new customers and partners
Alternatives to the credit card launch
Products: • Citi-One
• Mortgage Power
• Auto loans
• Ready credit
• CitiGold
• IPB
- Offering these products in new markets
Alternatives to the credit card launch
Products: - Development of new products
and services
- Cross-selling
Alternatives to the credit card launch
Products: - New products in new markets
- Technology development
- Internet and Mobile banking
Breakeven analysis
• Assumptions - Direct costs apply to both new and existing
customers - Acquisition costs only apply to new customers we add them back - Use of linear interpolation (cost, fixed costs) - We assume:
- 200working days - 10 calls/day 15 sales persons 18.000/SalesPerson/year
Breakeven analysis
- Given the high costs of Direct Mail, only the last 3 marketing methods were taken into consideration
Unit Cost Prospects RR Qualify Cards Card
Customers
Acq
Cost/Card
Direct Mail $ 1.50 300,000.0 0.0 0.7 0.8 3,216 139.9
Direct Sales $ 270,000.00 30,000.0 0.5 0.7 0.8 8,040 33.6
Take-Ones $ 0.25 2,000,000.0 0.0 0.3 0.8 8,016 62.4
Bind-Ins $ 0.15 3,000,000.0 0.0 0.3 0.8 8,016 56.1
Average 50.7
Breakeven analysis Number of customers 250,000.0 500,000.0 750,000.0 1,000,000.0 1,250,000.0 1,500,000.0
Average Revenue per Customer 162.7 162.7 162.7 162.7 162.7 162.7
COSTS
Average Direct costs per customer 25.0 19.0 13.0 7.0 7.0 7.0
Average Acquisition costs per customer 50.7 50.7 50.7 50.7 50.7 50.7
Total direct costs 75.7 69.7 63.7 57.7 57.7 57.7
Contribution of New Customers 87.0 93.0 99.0 105.0 105.0 105.0
Contribution of Existing customers - 143.7 149.7 155.7 155.7 155.7
Number of new customers 250,000.0 250,000.0 250,000.0 250,000.0 250,000.0 250,000.0
Number of existing customers - 250,000.0 500,000.0 750,000.0 1,000,000.0 1,250,000.0
New Contribution 21,737,500.0 23,237,500.0 24,737,500.0 26,237,500.0 26,237,500.0 26,237,500.0
Existing contribution - 35,912,500.0 74,825,000.0 116,737,500.0 155,650,000.0 194,562,500.0
Total contribution 21,737,500.0 59,150,000.0 99,562,500.0 142,975,000.0 181,887,500.0 220,800,000.0
Fixed costs 35,000,000.0 50,000,000.0 75,000,000.0 100,000,000.0 125,000,000.0 150,000,000.0
Profit or Loss before Advertising - 13,262,500.0 9,150,000.0 24,562,500.0 42,975,000.0 56,887,500.0 70,800,000.0
Advertising 1,600,000.0 1,600,000.0 1,600,000.0 1,600,000.0 1,600,000.0 1,600,000.0
Cumulative profit or loss - 14,862,500.0 7,550,000.0 22,962,500.0 41,375,000.0 55,287,500.0 69,200,000.0
Breakeven analysis Number of customers 250,000.00 375,000.00 425,642.50 500,000.00
Average Revenue per Customer 162.65 162.65 162.65 162.65
COSTS
Average Direct costs per customer 25.00 22.00 20.50 19.00
Average Acquisition costs per customer 50.70 50.70 50.70 50.70
Total direct costs 75.70 72.70 71.20 69.70
Contribution of New Customers 86.95 89.95 91.45 92.95
Contribution of Existing customers - 140.65 142.15 143.65
Number of new customers 250,000.00 125,000.00 175,642.50 250,000.00
Number of existing customers - 250,000.00 250,000.00 250,000.00
New Contribution 21,737,500.00 11,243,750.00 16,062,506.63 23,237,500.00
Existing contribution - 35,162,500.00 35,537,500.00 35,912,500.00
Total contribution 21,737,500.00 46,406,250.00 51,600,006.63 59,150,000.00
Fixed costs 35,000,000.00 50,000,000.00 50,000,000.00 50,000,000.00
Profit or Loss before Advertising - 13,262,500.00 - 3,593,750.00 1,600,006.63 9,150,000.00
Advertising 1,600,000.00 1,600,000.00 1,600,000.00 1,600,000.00
Cumulative profit or loss - 14,862,500.00 - 5,193,750.00 6.63 7,550,000.00
Breakeven analysis
• Given some estimates and assumptions
Breakeven = 425,642 customers
In order to reach the breakeven point, Citibank has to acquire 425,642 customers in two years.
Conclusion
• Consideration of the results of different analyses (SWOT, Ansoff, Breakeven analysis, NPV calculation, other financial analyses)
• Differentiation of strategies for each country
• Exploit opportunities and avoid threats
Thank you for your attention!
Top Related