Group 8
Citibank: Launching the Credit Card
in
Asia Pacific
Group Members:
Joanna Crane
Kelly Lee
Scott McMillan
Lisa Pearson
Ed Petrone
• $228 billion in assets in 1989
• Largest banking company in the United
States
• 11th in the world in banking
• Leader in foreign exchange market
• International presence growing rapidly
• Offered 2 cards: Citi-One and CitiGold
Business Problem/Opportunity
• Whether to launch Citibank credit cards in
various Asian countries (10) – all, none, or
some
• Factors to consider:
– Existing competition from other credit cards
(American Express, Visa, Diners Club,
MasterCard, local banks, international banks)
– Local managers’ opinions in each country;
evaluation of risk
Business Problem/Opportunity
• Factors to consider (cont.):
– Government regulations – who can have a
card, whether one has to go through a central
bank, etc.
– Staffing, infrastructure, distribution capabilities
– Technology
– Past experiences
– Populations, average annual income, growth
rate of countries, GNP
– Which countries to go into
Business Problem/Opportunity
• If entering market, decisions to be made:
– Start from scratch or develop cards with a
card portfolio that already exists
– Manage by individual countries, in groups, or
through one central system
– Marketing tactics: direct mail (consider postal
service), direct sales reps, bind-ins, take-ones
– Fees to customers: joining & annual
– Consumer attitudes: needs & wants from
credit card
Business Problem/Opportunity
• Decisions to be made (cont.):
– Target market
– Financial benefits to offer with the card
– Pricing, branding, positioning, customer
acquisition strategies
– Premium pricing
Estimated Distribution of
Population & Cards by Income
Above
$25,000
$12,500 to
$25,000
$6,000 to
$12,500
$2,000 to
$6,000
Below
$2,000
Total
(in
millions)
Hong Kong
% of pop
% of cards
10
15
25
25
50
50
10
10
5
0
5.6
2.0
Indonesia
% of pop
% of cards
3
40
2
10
2
10
3
40
90
0
168
.120
Malaysia
% of pop
% of cards
5
10
10
45
20
45
45
0
20
0
17
.380
Philippines
% of pop
% of cards
3
50
5
45
22
5
30
0
40
0
62
.240
Thailand
% of pop
% of cards
5
12.5
10
12.5
10
50
20
25
55
0
55
.210
Country
Map of Asia
Most Likely Scenario/Our
Recommendations
• We believe that it would have been wise
for Citibank, in 1989, to launch credit cards
in Hong Kong, Indonesia, Malaysia,
Philippines, and Thailand.
• NOGO in Australia, India, Singapore,
Taiwan, Korea.
Australia
• Already saturated market
– Average Australian carries 2 cards
• Prestige and image of bank issuing card,
no longer important
• 10.5 million cards already exist
• Visa & MasterCard hold 35% of the market
• ½ the cards are issued by local banks
India
• Largely rural population (80%)
• Heavily regulated foreign-exchange
transactions
• Local transactions only for credit cards
• Low merchant acceptance
• Wealth is concentrated among small portion
• Pay on time society
• Local currency only
Singapore
• Political instability
• Already saturated market
– 500,000 cards in force
– 2 credit cards per person
• No support from country manager
• Government regulations
– Cardholders at least 21 years old
– $14,400 minimum annual income
Taiwan
• American Express holds 50% of market
• Cash-oriented society; owing $ is
unacceptable
• Refrain from using revolving credit
• Heavy government protection
– Barrier to growth
– National Credit Card Center (NCCC)
Korea
• Local regulations don’t allow revolving
credit
• Local currency only
• Management problems
• Financial Losses
• Labor problems
Hong
Kong
• Location: Eastern
Asia, bordering the
South China Sea and
China
• Nationality:
Chinese/Hong Kong
• Language: Chinese
(Cantonese), English;
both are official
Hong
Kong




Citibank has been established since 1983
With the country’s economic growth and rapid
industrializations, 5.6 million people with
average annual income of $8,158, cardholders
owning an average of 1.7 cards each
By 1989, Citibank's 140,000 classic and Gold
Visas held an 8.7% share of the credit card
market
Charge card competed directly with American
Express, which had issued 175,000 cards in
Hong Kong.
Hong
Kong
• Rate: Lower joining fee + Higher annual fee
• Target Market: Mass Marketing strategy
• Market Entry: Combination of widespread TakeOne displays in more than 4,000 merchant
locations and direct mailing as well as crossselling to existing branch customers
• Hong Kong had its own system capabilities
Indonesia
 Location: Southeastern Asia,
archipelago between the
Indian Ocean and the Pacific
Ocean
 Nationality: Indonesian
Language: Bahasa Indonesia
(official, modified form of
Malay), English, Dutch
Indonesia
• Indonesia is a poor country with about 80% of the
population living in rural areas and earning less than $500
per year
• Because of low income levels, many did not qualify for
membership
• Three local banks, American Express, and Diners Club
shared the market equally
• Whereas all charged a joining fee a well as an annual
membership fee, the local banks priced their offerings
significantly lower
Indonesia
• Rate: Keep Joining fee and Annual membership fee
the same as Diners club and Master Card
• Target Market: Wealthy population only, those
earning $25,000+ per year
• Market Entry: Direct sales force
Malaysia
•
•
•
Location: Southeastern Asia,
peninsula bordering Thailand
and northern one-third of the
island of Borneo, bordering
Indonesia, Brunei, and the
South China Sea
Nationality: Malaysian
Languages: Bahasa Melayu
(official), English, Chinese
dialects (Cantonese, Mandarin,
Hokkien, Hakka, Hainan,
Foochow), Tamil, Telugu,
Malayalam, Panjabi, Thai
Malaysia
• Malaysia is a growing industrial nation, and is
world’s third-largest producer of semiconductors.
• Convenience and extra credit were important
reasons for owing credit cards
• American Express held a 15% share of market
and extensive branch and ATM network, Malayan
Banking Berhad with 10% share
• Local banks usually did not charge a joining fee
for the classic card but they all charged an
annual fee
• According to Malaysian law, only consumers
with an annual income of $9,000 or more could
own a credit card
Malaysia
• Target Market: Mass marketing strategy ($6,000+);
Prestige
• Market Entry: Take-ones, Direct Sales
• Rate: Lower joining fee than American Express;
comparable annual fees
Philippines
• Location: Southeastern Asia, archipelago
between the Philippine Sea and the South
China Sea, east of Vietnam
• Nationality: Filipino
• Languages: 2 official languages –
Filipino and English
Philippines
• Booming recovery in late 1980’s leads to more
jobs = more money in the country
• Penetration of credit cards very low
• Wide acceptance of bank, revolving credit facility,
interest rate, repayment rate, and credit limit are
very important
• Don’t like to carry cash
• Only local transactions in the local currency
Philippines
• Target Market: annual income earners of $12,500+
• Market Entry: Direct sales and bind-ins because
marketing to 8% of the total population and need a
good response rate
• Rate: Joining fee and annual fees as high as the 4
major companies to show we are a prestigious
company because we are marketing to the richer
part of the economy
Thailand
• Location: Southeastern Asia, bordering
the Andaman Sea and the Gulf of
Thailand, southeast of Burma
• Nationality: Thai
• Languages: Thai, English, ethnic and
Regional dialects
Thailand
• Economy growing at average of 11.6%
from 1986-1989
• Foreign investment growing more
there than any other country in SE Asia
• Tourism biggest form of exchange
• Not many credit card players
• AMEX and Diners Club very popular
because of prestige
Thailand
• Target market: population earning $2,000-$12,500
• Make move to the upper income group once
prestige is gained by Citibank
• Rate: Position between AMEX and Diners Club vs.
Visa and MasterCard because of
current status of all cards
and to gain prestige
• Market Entry: Direct mail
and take-ones because we
are marketing to 20% of the
population and this will
reach more prospects
Planned Costs
• $3.9 million: Customer acquisition costs (2
Direct Mailings, 3 Take Ones, 1 Bind-ins
and a 58 person sales force)
• $8 million: Advertising costs for all 5
countries
• $35 million: Overhead costs for 250,000
cardholders (with an increase of $10-$15
million for each additional 250,000)
Targeted Pricing
Country
Desired # of
Customers
Citi-One
Joining Fee
Citi-One
Annual Fee
Citi-Gold
Joining Fee
Citi-Gold
Annual Fee
Hong Kong
36,000
$25
$55
$40
$87
Indonesia
255,000
$60
$50
$60
$60
Malaysia
390,000
$28
$54
$34
$75
Philippines
285,000
$35
$50
$50
$60
Thailand
36,000
None
$65
None
$120
With an estimated distribution of 75% choosing Citi-One and 25%
choosing Citi-Gold
Break Even Analysis
• Based on projected costs and pricing,
revenues and costs should be equal at
approximately 690,000 customers.
• Estimated revenues and costs are both ≈ $67
million.
• Costs include all acquisition and advertising
costs ($12 million) plus $55 million in
overhead.
• Revenues based on targeted customer
numbers and pricing for markets in Hong
Kong, Indonesia and Malaysia.
Best Case Scenario
• Citibank successfully enters credit card market
for each targeted country.
• Builds solid infrastructure and sales force to
support product launch
• Launch gains support of each respective
Country Manager.
• Acquires significant portion of the market share
by offering quality service, pricing competitively
and providing a high prestige product.
Best Case Scenario
• Reaches 1 million card holders, lowering
overhead from $25/card to between $6
and $8/card.
• Further increases revenues through cross
marketing other Citibank products and
services to new cardholders.
Worst Case Scenario
• Citibank’s attempt to enter the credit card
market in Asia fails in each nation.
• Country managers resist decision to
launch credit cards, and provide little
support or assistance.
• Lack of infrastructure and a poorly trained
staff lead to service problems and a
decrease in total customers.
Worst Case Scenario
• Citibank cards are perceived as low quality
and prestige by the Asian market.
• An insufficient number of cardholders
results in high overhead costs, and an
overall loss.
• Losses hurt other core services offered by
Citibank in the region.
Sources
• http://www.cia.gov/cia/publications/factboo
k/
• http://www.google.com/images
• http://travel.yahoo.com
• http://www.citibank.com
• Citibank: Launching the Credit Card in
Asia Pacific (A)
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