Alpen Bank: Launching the Credit Card in Romania
In this case Alpen bank’s country manager Carle has to make a crucial decision whether or not they should go for the credit card business in Romania. The bank has to come up with a solid market strategy that can generate at least €5 million in profit within 2 years. Before bringing this business to the market the Bank has to analyze whether an opportunity exists for the launch of the credit card or not. After going to the analysis Carle sees that yes there is the opportunity for credit card business in this market because in 2006 total financial cards has grown by 35% and there was a lot of card circulation in the country. Also 8000 ATMS and 150,000 point of sale terminals have been introduced lately. Other than this the affluent class is looking for luxury and middle class is also the potential customer for credit card. It has to further decide how to position the card in the market, what should be the target audience for the service. The bank has currently established a premium image by targeting the affluent class.
Diagnosis of Issues:
The core problem is whether to launch credit card or not. The Alpen Bank seems hesitant to launch the card due to the following problems: * Low per-capita income levels
* The population seemed inexperience with the usage of credit card. Consumer spending was cash based and merchant acceptance of card payments was low. Core Problem:
The main issue that Alpen bank is facing is whether or not they should launch the credit card business in the Romania market and which group of target audience they should select while applying the launching strategy. Moreover, specifically to Carle, he needs to come up with a program from which, Alpen bank can generate at least €5 million in profit within 2 years. Moreover, clarified positioning strategy and customer segmentation is also needed to secure the success of the program. Opportunity Analysis:
Alpen had the opportunity to act since economic environment in Romania had changed from 2006 after its entering into the EU: the economy there was developing; a growing trends of luxury purchasing emerged; there was also an increasing likeliness of using card instead of cash; other competitors had already taken similar strategies in the market; Alpen’s traditional banking business had a great penetration throughout the country, etc. However, such a growth was not enough compared with other countries of the region. Besides, to launch the credit card business in Romania might be risky and do harm to the customer base. SWOT Analysis:
STRENGTHS: * Affluent class are likely an easier customer to target * They are less price sensitive * They have tendency to use their credit cards more frequently
| WEAKNESSES: * Romania lacked credit card growth potential as compared to other emerging markets * Customers lacked experience in managing credit card * Suffered from tough 3 year recession period * Cardholders used their cards exclusively for case withdrawals rather than purchase * Investment in direct marketing, advertising and support infrastructure
| OPPORTUNITIES: * Macroeconomic trends during the first of the decade were encouraging * One-third of Romania households were likely to purchase branded products * Customers were also increasing in terms of card usage rather than case * Middle class household was a big opportunity for Alpen Bank to grab
| THREATS: * Middle class was growing, but it was a small market which made it riskier * Other banks interested in the same idea * Entry cost would be really expensive * Customer acquisition may be tough
Considering the economic and market conditions as explained in the case, Alpen Bank should launch a credit card. According to the charts 4 & 5 in the appendix, regardless the target audience, launching credit...
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