American Express BA 7050 Marketing Strategy Section 200
Raj Sharma Dz7186 03/09/2010
Challenges and opportunities
American express company is a global financial services company which is best known for its credit card, charge card and traveler’s cheque businesses. American express earns majority of its revenue from the fees charged to merchants for processing purchases made using an American Express card. American Express’ target market mainly comprise of affluent , high spending consumers who typically like to travel, like to be different and like to access exclusive experiences. Affluent consumers constituted roughly 10% of the card users in 2007 but accounted for 50 % of U.S. credit/charge card consumer spending. Therefore American express’ success mainly depends on consumer spending using American Express card. Through the company statistics for 2006-2007 it is found that average basic card member spending increased by 8.07% from $11,201 to $12,106 per card along with the increase in total number of cards in force from 48.1 million to 52.3 million. However there was dramatic slowdown in card member spending in the second half of 2007 due to the US housing downturn and economic downturn. Thus the main challenge for the company is to continue its growth while maintaining the company’s premium positioning in slow economy. Another challenge that American express already faced by 2005 and will continue to face is increase in number of competitors. Primary competitors of American Express are Visa Inc., MasterCard and Discover Financial services having 42.2%, 28.7%and 5.3% share of Credit Card purchases in 2007 respectively. Despite these challenges, an economic downturn also provided an opportunity to transform business and improve performance. With close examination on cost reduction, management can drive transformational changes that can result in both immediate savings as well as sustainable long–term value. By taking steps... [continues]
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