January 23, 2003
We recommend in the first phase to expand the credit card business into India, the Philippines, Taiwan and Thailand. These are fairly stable untapped markets. Our strategy is to focus generally on the high status groups in these markets. The cards should be issued in the local currency but include an option for Taiwan customers to use US dollars. In the next phase enter into Malaysia, Australia and Singapore. Again focus on the high status groups in these markets. We don’t recommend expanding into Indonesia due to the unfavorable economic conditions. Marketing should focus on direct sales and bind-ins for markets high status cards and expand these channels with direct mail and take-ones where a more diversified population is targeted.
Citibank believes expanding their credit card business into Asia Pacific would be a way to increase their revenue, as they are currently restricted on the number of foreign bank branches they can open. Citibank must decide in which countries of the Asia Pacific it should invest, and which countries to target first.
Current Performance in Asia Pacific
Citibank, with operations in 15 Asia pacific and the Middle East countries, earned $69.7 million in 1998 and was an undisputed leader in most marketplaces. The table below shows that the profit margins in Asia Pacific are a phenomenal 22% on average.
Looking at the performance of individual countries in Asia Pacific (See table below). We can see that Thailand, Australia, Indonesia, Taiwan and Singapore perform over average while Hong Kong, Philippines, Malaysia and India perform below average. |Ranked by performance* |Thailan|Austral|Indones|Taiwan |Singapo|Hong |Philipp|Malaysi|India | | |d |ia |ia | |re |Kong |ines |a | | |# Of Bank Customers(000) |12 |85 |21 |16 |18 |130 |46 |29 |61 | |# Of Bank Accounts(000) |16 |150 |25 |30 |67 |250 |85 |58 |165 | |Net Revenue From Fund |8 |59 |12 |11 |16 |67 |19 |11 |6 | |Net Revenue/Customer |0.67 |0.69 |0.57 |0.69 |0.89 |0.52 |0.41 |0.38 |0.10 | |Net Revenue/Accounts |0.50 |0.39 |0.48 |0.37 |0.24 |0.27 |0.22 |0.19 |0.04 | |*Ranked on Net Revenue/Customer and Net Revenue/Accounts and averaged ranking |
Arguments for and against launching the credit card in Asia Pacific
This is a risky investment and a difficult decision to make. Here are some factors that makes this plan risky: |Opportunities |Threats | |Can acquire customers through new innovative channels. No need for |Low per capita income | |bricks-and-mortar branches |Little credit experience and lack of credit bureaus | |Overcome limitations imposed on the number of branches allowed |Hardly any infrastructure (telecom and postal service) | |Capitalize on the rapidly growing middle-income households |Weak legal system, high level of fraud | |Expanding to the affluent upper-income group that offers high margins on |Unstable political environment | |return |Economic instability | |Opportunity for...