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Citibank: Launching the Credit Card

in Asia Pacific (A)

Case Study, BEP 430 Marketing

20030059 Dong-ock Kim1, 20030071 Min-geuk Kim

2, 20040054 Keehyung Kim

3,

20040535 Yohan Jo4, 20076006 Huang Qiuling

5, 20076035 Dorjsuren Bayarmaa

6

Marketing Team A1 2 3 4 5 6

erst_licht99@hotmail.com1, kmg0702@hanmail.net

2, keehyoung@gmail.com

3,

zukjimote@gmail.com4, sharlin_huangqiuling@hotmail.com

5, gordok_88@yahoo.com

6

Professor: Wonjoon Kim

Date submitted: May 18, 2007

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TO: Rana Talwar, head of Citibanks Asia Pacific Consumer Bank, Citibank

FROM: Dong-ock Kim, Min-geuk Kim, Keehyung Kim, Yohan Jo, Huang Qiuling,

Dorjsuren Bayarmaa

RE: Citibank: Launching the Credit Card in Asia Pacific (A)

DATE: May 18, 2007

As you know, rapid growth of Asia-Pacific economy was incredible in several

years. It could be a good chance for Citibanks growth, so Citibank has started to

branch banking business since 1978. Actually, performance of Asia-Pacific branches is

not bad. In 1988, Citibank earned $69.7 million, but Citibank does not satisfy with its

performance. Citibanks goal is $100 million until 1990. For this goal, Citibank

launched the most innovative service such as telephone banking service. And now,

Citibank is planning to launch a new product credit card.

Acquiring card customers means that Citibank has more opportunities to cross-

sell product line: Auto Loans, Ready Credit, Deposits, and Mortgage Power, Citibanks

core products. But many of Citibank headquarters have doubts about the success of

credit card service in Asia-Pacific. Because there are many regulations that prevent

foreign companies with entering credit card service, and the market is undeveloped

yet. In addition, there are most people with little credit experience. However, through

our research, we are sure that Citibanks credit card can succeed if they have good

strategies like ours.

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We focus on the possibility of some countries that might be success. Based on this, we

are going to recommend some countries good for launching credit card service.

Segmentation

There are many countries in Asia Pacific region. Different people are living in

different countries, and each country has their own market characteristics compared

with other countries. Some countries have strict regulation of government; some

countries are still poor countries; some countries are similar with the western countries.

Therefore, some of them are desirable to start card service but others are not. They are

large enough and different each other. And then, we can assume some countries as a

segment.

Analyze each country (Targeting)

In the case ofAustralia, people want convenient services. And, Citibank has

some unique services that can make their customers manage their finance more

comfortable like telephone banking. It means that Citibanks card service has

competitive power. Furthermore, average customers bank balance of Australian people

is $24,000 which is larger than $10,000. Therefore, a high deposit requirement to use

the services is not a big problem.

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In the case ofMalaysia, Malaysia regulates that only customers whose income

is more than $9,000 can have credit cards. People whose annual income is from $6,000

to $12,500 are 20% of the total population. We guess half of them earn $9,000 ~

$12,500 per year. Hence, 25% of Malaysian people have above $12,500 as an income.

Although competitors such as American Express exist already, Malaysian people have

open mind to credit cards. Furthermore, American Express, the top company which

serves the credit card, has only 15% of market share. Therefore, Citibank is enough

possible to get customers in Malaysia. In addition, the latest Malaysian growth rate is

8% higher than the average value of latest 5 years'. It means that Malaysia has a

wonderful future for the credit card service.

In the case ofThailand, we find out that 20% of Thai whose income is over

$6,000 earn over $23,200 a year. (Expected revenue is $686,977,500) The proportion is

higher than other countries. (Except Indonesia[43%] and Singapore[25%]) And the

proportion of owing cards of that group is just 12.5% of overall population. (India[10%]

and Malaysia[10%] are countries that have lower proportion than Thailand) Also the

literacy rate of Thailand is low 89%. (Australia[99%] and Taiwan[90%] have higher

rate) It means that Citibank can use the bind-ins that have lowest customer acquisition

cost. (Bind-ins[$56.25 per customer], Take-ones[$62.5] and Direct-mail[$112.5]) These

results show that Thailand is a good market for Citibank.

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Recommendation (Positioning)

There are 4 countries have high possibility to launch credit card service amon

g the 9 countries, which are Australia, Hong Kong, Malaysia, and Thailand. Each

country has different position, regulation and using of credit card, so it needs different

recommendation for each country.

In the case of Australia, the card market is already saturated. Naturally, if

Citibank starts Greenfield market development, there will be very intensive competition.

Therefore, acquiring other card service bank will be better. Furthermore, Australian

people have negative attitudes toward joining and annual membership fee. Therefore,

lower joining and annual fee than AMEX and Diners Club will be needed.

In the case of Hong Kong, there already have Citibanks Classic and Gold

Visas that hold an 8.7% share of the credit card market, but it shows very small amount

of 462,840 customers from total customer 5,320,000. Credit Card customers use their

cards for a variety occasions from daily trips to the grocery store to business travel to

family vacations, so Citibank needs to concern more about these kinds of services cards.

Half of the population use telephone, so telephone banking service can be successful in

Hong Kong. Moreover, Citibank need to choose Greenfield market development,

because if Citibank enter the market by acquiring an already existing card portfolio, the

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bank could consider leveraging off an already developed operations infrastructure and

trained human resources in the acquired company to consolidate the market share.

In the case ofMalaysia, most people live in rural areas and the most important

reasons for owning credit cards are convenience and extra credit (Exhibit 10). Because

there is 60% of the population living in rural areas, so Citibank needs to operate 3

branches and many ATMs continuously. Consumers usually use their credit card for

personal and family retail purchases, and with small group of corporate customers who

used the cards for business travel and entertainment. Therefore, the service needs to

focus on family and traveler mainly. In addition, advertising should be focused only in

rural areas. By competing with American Express, providing high limit for using card

is important.

In the case ofThailand, Citibank need to be concentrated on the structure of

Thailand industry. Most profit of Thailand comes from tourists, and Thais savings are

relatively and absolutely low. It might be a problem to launch credit card service. I think

that Citibank should focus on foreigners (tourists) and high-income customers (over

$23,000). In addition, US dollar should be the standard currency for these credit cards.

If they spend over a basis, for example $10,000 a year by using this card, Citibank can

provide them more convenient services like low loan interest rate and so forth. Moreove

r, it would be better to move their branches to somewhere near the international airport.

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Exhibit 1 SWOT analysis for Citibank

Favorable UnfavorableInternal Strength

- Citibank pioneered telephonebanking in much of Asia, and it isan attractive service forcustomers.

- Citibank provides customerssome services that none of itscompetitors could reproduce.

Weakness

- Citibank imposed relatively highdeposit requirements of itschecking/saving customers.

External Opportunities

- The growth rate in Asia-pacificcountries is increasing higher andhigher recently.

- There are very large populationpotential customers in somecountries.

Threats

- Economics in Asia-pacific countriesare not as developed as United Statesand Europe.

- Governments regulations of somecountries make barriers for Citibank.

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Appendix 1 PEST analysis for Citibank

Political

Some countries regulate using credit card.

Some countries have risk of political corruption.

Economical

Some countries are so poor that card is not profitable at all.

There are competitors that started card service faster than City bank

Social/Cultural

In some countries, card is used commonly but in some other countries, card is only for

high status people.

Each country has different standards for choosing credit cards.

Technological

Citibank has quite high technology that can make customers more comfortable.

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In the case ofIndonesia, 90% of people earn less than $2,000 annually, but 80% of

Indonesian live in rural areas. Because of low income levels, many people are not

qualified for membership, and it limits the size of the customer severely. Thus,Indonesians perceive card ownership as a measure of high social standing. These all

make hard for Citibank to launch the credit card in Indonesia.