Citibank's E-Business Strategy for Global Corporate Banking - Case Study Example

? Citibank's E-Business Strategy for Global Corporate Banking case study By First A Paper Presented in Partial Fulfillment Of the Requirements of [Course Number and Name] Month, Year Address: (Not Required) City, State, Country, Zip: Phone: E-mail: Instructor: Abstract The study talks about the E-business strategy of the Citibank, a globally recognized bank. The study discusses about how the Citibank transformed its traditional banking procedures into the digital procedures through the use of the latest technology. The study focuses on the importance of internet in the banking sector. It emphasizes on the e-business practices of Citibank and discusses the point of differentiation of Citibank and how the bank can gain its competitive advantage. Furthermore, the focus is laid on the MNC’s and SME’s as the potential clients of the Citibank. How Citibank serves these two important segments of it clientele. Another emphasis is that how the firms like Citibank could develop an e-business plan to make use of latest technology. Introduction Technology has brought enormous changes to the business practices. Talking about businesses, technology is not restricted to any one kind of business. With the changing technology it has become an essential part of the business practices to adapt accordingly. Changes in technology have been followed globally and by every business sector. One of the most important technologies that have caused the most powerful impact on the businesses is “Internet”. It has revolutionized the ways of doing business. The most enticing change that it has brought by the “Internet” is “E-Commerce”. Firms and industries have shifted towards E-commerce. Many firms have used this technology to set their competitive advantage. Use of internet for conducting business has helped in globalization. It has changed the dimensions of competition throughout the world. Use of internet has transformed the firms’ relationships with the customers, employees, suppliers and other logistic partners. E-commerce is basically the use of internet technology to buy and sell goods. E-commerce has led to the emergence of new markets. It has led to the reduction in costs. Many firms that were unable to adapt the concept of using E-commerce have suffered. As mentioned before, E-commerce is not restricted to any one business sector. Banking is one sector that has faced a huge impact of E-commerce on its business practices; to such an extent that E-commerce has now become directly linked with the profitability (BECKER, S. A. 2008; MEHTA, V., SUDAN, A. S., & DAWRA, S. 2003; MALHOTRA.P &SINGH.B. 2009) Use of internet has changed the customer needs and expectations. It has also influenced the strategic decision-making of the firms. Banking sector had to come up ways in order to successfully adapt to this new technology. They needed a way to translate their traditional strengths into an internet-based business model so it could add more value for the customers. Use of internet has changed the infrastructure for the delivering of goods. Is has increased the time-span for the customers. Now they can connect with the bank at anytime and anywhere. This means that there has been an increase in the banking hours and customers can avail the banking facilities at anytime; especially the transaction facilities. Use of internet to facilitate the routine business practices has led to an immense increase in competition between the firms. Even the use of internet has to be done in a differentiated way. This is exactly how the Citibank incorporated this revolutionary technology into its business model. It not only proved to be successful but set an example for all the other firms that are present within the banking sector (BECKER, S. A. 2008; ENGLER, H., & ESSINGER, J. 2000; UNITED NATIONS. 1998) Point of Differentiation At the end of 1990, Citibank made a change to its corporate bank activities. It changed its corporate business strategy form decentralized to centralized strategy. The bank aimed to build a single web-enabled platform for all its customers with the similar needs. The basic mission of the Citibank’s e-business mission was to “connect, transform and extend”. The e-business strategy of Citibank was to deliver its core service through the web, develop new integrated solutions and to explore new markets. It’s true that initially the bank had to face many serious challenges to follow the e-business plan and it was at several times that it failed. Citibank faced consistently faced challenges in implementing its e-business plan because of its corporate customers with varying needs. The only reason that Citibank’s e-business plan survived was due to its differentiating position. Citibank was not the only bank which moved towards the web-based technology. There were other banks as well that started with the similar plan. Another reason for the implementation of the expensive e-business plan was that Citibank was under an immense pressure of cutting costs and to improve its efficiency. It made a huge investment in the technology in order to cut down its costs and to improve its efficiency. Similar were the problems that other banks were facing. The e-business model of Citibank was differentiated on the basis of its customer service. The bank made continuous heavy investments in technology in order to incorporate electronic technology into its front-end and back-end activities. The reason that Citibank differentiated on the base of its customer service was that most other banks were also getting involved with the e-business and customer service was one aspect that was used by Citibank to add value for its customers. It set up telephone hotlines for its customers. Citibank also appointed relationship managers who could understand the clients’ needs and also product consultants who provided with their expertise about the customer service products. Citibank used the advanced technology to support its operations and achieved a shorter response time; efficiency was increased. These customer oriented services gave the customers of Citibank full confidence in using the bank services. The bank designed its services in such a way that it took over many back-end functions of its customers which helped the customers to get away from excessive paper work and the hectic payment and collection procedures. Citibank created value for its corporate customers by offering outsourcing services. This helped the bank to gain deeper relationship with its corporate customers and also secured the business from those customers. Outsourcing services were that the business customers outsourced all of their back-end processes to the bank. Another point of differentiation was that Citibank segmented its clients into corporate and other categories so the handling of the needs of each group was made easier. For each category, Citibank devised its web-based products accordingly. Another aim of the e-business strategy of Citibank was that it wanted to empower its customers. Citibank achieved economies of scale because it was now managing large number of customers. The bank used the advanced technology to provide customers with value-adding services at lower costs. Citibank focused on alliances as part of its strategy. It made use of the partner’s strengths because these were mainly the technological alliances. The main reason for the bank to shift to e-banking was that its clients’ businesses were expanded globally and most of them were e-enabled, so it became a necessity for the bank to shift to e-commerce. Then there was also a growing demand for the internet banking facilities in the middle markets. More focus on the customer service and a wide array of successful web-enabled products differentiated Citibank from its customers. Competitive Advantage of Citibank If Citibank stops making continuous investments in technology, the bank will lose its competitive advantage. The bank differentiated itself from its competitors by positioning itself as a leading supplier of cash-management and transactional banking facilities. The bank made continuous investment in the technology in order to improve its services. The main aim of the bank was to provide the corporate customers with the cost-effective banking solutions and facilities. This goal of Citibank led to the gain of a competitive advantage. The bank acquired it through heavy investments in technology. There were two other things that contributed to the competitive advantage of Citibank; global reach and strong brand image. Citibank has uniquely positioned itself because it serves the global customers’ needs. It has a large customer base, a diverse product line and is always ready to get involved with the community wherever it has its branches. People worldwide recognize Citibank as a global bank with excellent service offerings, especially the customer service. Therefore the bank has developed a strong brand image in the minds of the customers. Together the strong brand image, the global reach and the continuous investment in technology have helped the bank achieve the competitive advantage. All these three things give the bank a competitive edge over the competitors. If any of these three facets are lost by the bank or might be ignored, the bank will lose its competitive advantage because these three collaboratively lead to a strong competitive advantage of Citibank. What Citibank can do to maintain this competitive advantage is that it should hold its strong brand image. It should keep focusing on the customer service and loom for other means of adding value for its customers. Another thing it should do is that it should keep on investing in technological advancements as soon as they hit the market. This could be a little riskier but Citibank is a pioneer in e-banking among the banking sector, so it can make use of the first mover’s advantage. If Citibank keeps its business strategy centralized, it will be more successful because it will develop a centralized focus and will also help achieve a consistent service all over the globe. Conversion of traditional money-management business into E-business With the changing market trends and the consumer needs, Citibank decided to move towards e-business. Internet was the main technology that was incorporated into the banking procedures. Citibank used its traditional business units to derive the strategies for its e-business. When traditional money-management business was converted into e-business, it was basically done to eliminate duplication of the procedures in order to cut costs. The conversion required heavy investment but it was time for a change. Market needs were changing and customers became more inclined to use internet banking facilities. Citibank took the initiative and converted its traditional money-management activities into e-business procedures. Citibank came up with its own e-business structure which involved the traditional business units to formulate the e-business strategies. This approach was also being used by the other banks at that time which were moving towards e-commerce. An e-business unit was established by the Citibank’s administration which was responsible for the development of internet software for setting up digital commerce exchanges for the corporate and B2B clients. Citibank invested huge amount of capital to specialize in each area of the e-business, including software development, systems development and the front desk services. For transformation of its traditional processes to e-business processes, Citibank focused on alliances. Exclusively it formed alliances with those companies that had access to large markets and had technology infrastructure so that both could be used by the Citibank. The basic transformation that took place also included the transformation of all the back-end activities. Traditionally the transaction procedure required huge paper work and was a function of the bank-customer relationship. This required more time for the whole transactional activity to take place. What Citibank did was that it began with the process of Regionalization. Citibank had 200 data centers all across the globe. All the data centers within each country were united and moved to Singapore. The whole data was this way centralized and the e-business unit of Citibank developed the systems to manage the automatic transactional processes. Regionalization of cash and trade was done by the Citibank for the operational purposes. Regionalization was a way to lower costs and improves efficiency. Regionalization was done to reduce the number of data centers that were established around the world. It also helped in the quality management of the service. Every process was centralized and helped in quality consistency. This way of regionalization reduced the cycle time for the transactions, it also helped in reducing errors and increased the efficiency of the banking procedures. It became less costly for the bank to provide the service and for the customers to acquire the banking facilities. The second step that Citibank took after Regionalization was the “Internalizing the Web”. Internalizing the web was done in order to establish an e-workplace. Everything was digitally regulated. Employees had access to all the relevant data that they required at any point of time. They did not have to make phone calls in order get access to data. Everything was right there in front of them. As mentioned earlier, this reduced the human error. Secure databases were established. The whole work environment turned into a technological space. Automation was at the core of the e-workplace. The bank continuously pushed the limits of its automotive boundaries. In traditional transactions customers had to deposit cheques or had to open letter of credits and had to go through extensive paper work and get it submitted with the bank. But despite of all this extensive transactional procedure, customers were unaware of the time when the banks will actually perform the task. Citibank went for the straight-through automation. With this automotive straight-through processing, customers’ expectations and the need of knowing the exact time when the task will be performed by the bank were matched. This was possible because all the processes took place online and there was less human chaos involved. Companies like Citibank, which have widespread global operations and want to maintain a centralized control can follow the same e-business model. In order to so, the most important thing that the companies need is the huge amount of capital. To transform the traditional business practices into the e-business practices is an expensive thing to do and not all companies can afford to do so at such a large scale. The successful implementation can only be ensured if in return the e-business has helped in reduction of costs and improved efficiency. Employee training programs are necessary so that they become aware how to handle software and other systems that are a result of the advanced technology. Customer awareness about the e-banking facilities is also an important aspect. During the course of this transformation, Citibank needs to take care of the technological changes taking place and also the changing customer needs. With these changes taking place, it will have to adjust its e-business model accordingly. If it fails to do, it will lose its customers and the heavy investment made in the technology will be useless. So for the successful implementation of the e-business Citibank needs to keep tempo with these two major changes that can affect all business practices (CRONIN, M. J. 1997; 1999; BOL, G., RACHEV, S. T., & WU?RTH, R. 2008) MNC’s and SME’s Citibank serves two very diverse markets; one is MNC’s and the other SME’s. In order to fulfill the needs of both the target markets, Citibank took several actions. Citibank extended its services to the industrial sectors and not only to the individuals. Citibank developed a global infrastructure to serve its large and diverse clientele. MNC’s and SME’s came under the corporate customers of the Citibank and were the priority of the bank. Citibank wanted to move all its customers to the e-business, meaning that it wanted that all its corporate customers should switch to the use of the e-baking facility. But it was difficult to persuade the customers to forego the traditional processes and to switch to the new web-enabled products and services. Initially SME’s were not the focus of Citibank but in 1997 it started considering this group of its clientele as well. The reason for not focusing on SME’s was that they were conservative about the integration of technology into its business processes. The bank started focusing on SME’s when they started wanting an e-business presence. SME’s been unsure of what exactly they wanted in their e-business presence and had no track of how to move forward with the new practice. Whereas on the other hand, MNC’s dealing in e-business was completely aware of its needs and wants. In order to serve the SME’s Citibank came up with CitiBusiness which was a one-stop platform that provided with the financing facilities to the SME’s. But it was really hard for the Citibank to focus all its resources on SME’s because they were still tied up in the use of traditional transactional procedures and were reluctant to open up to the e-business procedures. MNC’s were provided with all the financing and credit facilities trough internet. MNC’s were offered the use of CitiDirect and they availed the facility. Security was a great concern for the customers who had turned to e-banking or were planning to do so. Just because of the security concerns, customers were very reluctant to go for the e-banking. Just because of this huge issue, Citibank had to act slowly and with patience to roll-out its web-based products and applications. To cater to the security threat faced by the customers, Citibank developed complex security procedures using the most advanced encryption techniques. This was necessary because Citibank knew that it will take some time to develop a level of trust with the customers and to educate them about the new trend. In order to encourage the conservative customers, whose best example is SME’s, Citibank planned to build a strategy that focused on the pricing incentive scheme (MALMBORG, C. J. 2000) Despite all the security measures taken and despite being ready to roll-out its web-enabled products and services, Citibank had to act with patience to counter all the client needs. Citibank sets an exemplary model of e-business model. It would be better for Citibank to focus on a wide array of clients rather than MNC’s and SME’s only. It should come up with e-business plans for individuals as with all the financing facilities etc. It can stay on the top position if it tries to hold its global positioning. References (1999). E-Banking, FEDI and E-Commerce by Citibank. ASIAMONEY -LONDON-. 10, 22-25. BECKER, S. A. (2008). Electronic commerce concepts, methodologies, tools and applications. Hershey, Pa, IGI Global (701 E. Chocolate Avenue, Hershey, Pennsylvania, 17033, USA). CRONIN, M. J. (1997). Banking and finance on the Internet. New York, Van Nostrand Reinhold. UNITED NATIONS. (1998). Electronic commerce initiatives of ESCAP: business facilitation needs. New York, United Nations. TURBAN, E. (2008). Electronic commerce 2008: a managerial perspective. Upper Saddle River, N. J., Pearson. ENGLER, H., & ESSINGER, J. (2000). The future of banking. London, Reuters. MEHTA, V., SUDAN, A. S., & DAWRA, S. (2003). Management information system. New Delhi, India, Anmol Publications. MALHOTRA.P &SINGH.B. (2009). The Impact of Internet Banking on Bank Performance and Risk: The Indian Experience. Eurasian Journal of Business and Economics MALMBORG, C. J. (2000). IT-based decision tools for item processing operations management in retail banking. Hershey, PA, Idea Group Pub. BOL, G., RACHEV, S. T., & WU?RTH, R. (2008). Risk assessment decisions in banking and finance. Heidelberg, Physica. http://site.ebrary.com/id/10266235. Read More