Citibanks E-Business Strategy - Case Study Example

Case Study: Citibank’s E-Business Strategy for Global Corporate Banking Case Study: Citibank’s E-Business Strategy for Global Corporate Banking 1. What are the impacts of the internet on the competitive landscape of corporate banking? (Hint: use Porters 5 forces) Threat of new entrants: The world over, the banking industry is one of the hardest industries to enter owing to the capital requirements and heavy regulation of the industry by governments. However, through the device of mergers, smaller banks are able to join thereby posing real competition to the major banks. Threat of substitutes: Whereas the products offered by commercial banks are essentially the same, every bank strives to differentiate its products to stand out of the crowd. Industry rivalry: Citibank notes that the banking industry has always been competitive. Competition has become especially fierce in the last few decades, forcing banks to find new ways of increasing cost efficiencies in order to grow profits. Bargaining power of suppliers: Apart from customer deposits, banks resort to the capital markets to raise money to finance their growth. Increased competition for capital continues to force banks to innovate (Citibank, 2008). Bargaining power of consumers: Citibank notes that its corporate customers have become ‘smarter and tougher’, forcing the bank to migrate to the e-space. 2. What has Citibank done to differentiate its e-business products from those of its Competitors? In order to differentiate its e-business products from those of its competitors, Citibank took several measures(Citibank, 2008). First, the bank developed a strategy for its corporate banking division where its target corporate clients included multinational corporations (MNCs), financial institutions, government agencies, local enterprises and SMEs. The bank understood that each of these corporate client categories had unique needs. The bank realized to need to go the extra mile to package its products to meet the unique needs of every customer (Citibank, 2008). Citibank also differentiated itself and its products from those of its competitors through an improved, comprehensive customer service. The customer service includes telephone hotlines, relationship managers who take their time to comprehend the individual customer’s needs and product advisors whose role is to advise customers on the product or products that most suits its needs. Finally, the bank continues to invest heavily in technology in order to promote both the front- and back-end electronic banking systems. Besides, the bank seeks to make itself more accessible to its customers through what is calls its unified platform. The platform uses a teamwork approach that allows the bank to work with every function in the organization of the client (Citibank, 2008). 3. What can Citibank do to create competitive advantages? There are several things Citibank can do to enhance its competitive advantage: Grow its global reach: As at the time of developing this strategy in 2008, Citibank had operations in 100 countries of the world and employed over 268,000 people. This global presence, the bank believes, puts it in a strong position to meet the global needs of its customers. This being the case, the bank should continue its global expansion drive. Strengthen its brand: The bank believes that it has built a strong brand recognition. It claims that its customers regard it as an innovative bank with a global presence, providing exemplary customer service. If this is the case, the bank should keep strengthening its brand. Continue to invest in technology: Citibank says that it is going to maintain its privileged position as a provider of money management and transaction-oriented banking services. To this end, the bank has invested heavily in technology to enhance its services. The goal is to provide its corporate clients with the most affordable, unique, reliable and safe solutions (Citibank, 2008). 4. How has Citibank successfully converted its traditional money management business into an e-business? During the process of transforming traditional assets to digital assets, what issues should a company like Citibank take into account to ensure successfulimplementation? The primary goal of cash management is finding ways for money to circulate efficiently and securely in a manner that satisfies the needs of the customer. Two important aspects of a corporate client’s needs are accounts payable and accounts receivable. In 2000, the developed solutions to address three process areas, namely the management of accounts receivable, accounts payable and liquidity. In 2007, after several innovations, the bank’s money management products included web-based payment and receipt solutions, vendor financing and commercial cards (Citibank, 2008). There are several factors that a company must consider when it contemplates migrating from physical/traditional assets to digital assets. Two of these considerations stand out: efficiency and security. With regard to efficiency, the digital assets must be able to meet the purpose they are designed for it the most cost-effective way. With respect to security, a new digital system must be strong enough to keep off fraudsters. This aspect is especially important in an age where cases of bank fraud are on the rise in spite of banks spending a lot of money to secure their services and products (Citibank, 2008). 5. What actions has Citibank taken to serve the needs of two very different market segments, MNCs and SMEs? Many MNCs could not wait for banks to launch wen-enabled financial services and products. As a result, they embarked on building their systems and exploring ways to act as intermediaries to the banks. Some corporations approached the banks and expressed their interest in partnering with them to develop web-based financial solutions that were responsive to their needs. The new technologies that the MNCs sought, however, needed massive investment in personnel and equipment. Most banks were not ready to make those investments. Citibank and Deutsche Bank were some of the main banks that had put a lot of money into building the infrastructure necessary to move and watch over cash online (Citibank, 2008). Thus, Citibank was one of the first commercial banks to enable its customers to transact online anytime from anywhere around the world. Its product was called CitiDirect. Citibank’s priority was to migrate all its corporate clients onto CitiDirect. Then in 1997, the bank introduced CitiBusiness, an online banking product targeting SMEs. However, the challenge was that most SMEs, unlike the MNCs, did not know what they wanted in terms of e-banking. Besides, most SMEs were still manual in their operations (Citibank, 2008). 6. How has Citibank’s Cash and Trade Group managed to develop different e-businessproducts for varied industries? With the market changing so rapidly, how does Citibankidentify market needs? Citibank operates an interactive platform that makes it possible for the staff of the bank to work closely and directly with every major division or department of the customer organization. The team from the bank is led by a product consultant. Usually, this is an expert in the industry or sector the client he/she advises operates in. Through this arrangement, the bank is able to understand intimately the needs of the client. On a wider scale, the bank is also able to gain deep insights into the needs of the industry of the client (Citibank, 2008). Having identified the specific needs of clients in a given industry, the Cash and trade group embarks on developing products and services targeted at addressing the identified needs. Then, because has close contact with the client marketing the new product is relatively easy. In addition, the bank does not compete on price. Rather, it focuses on providing satisfactory customer service. The bank believes that is a customer is satisfied with an existing service and with the care with which the product is provided; one will buy a new product when introduced to him. The only condition is that the products satisfy the customer’s felt need (Citibank, 2008). 7. One of Citibank’s challenges is in managing vendors and suppliers without allowing them to exploit its clients. How does Citibank protect its clients from its strategic partners? Before 2000, Citibank tried to execute every aspect of e-business by itself – software development, front-office services, systems development, etc. That strategy failed. Then the bank discovered the power of partnerships. Since then, the bank has continued to form strategic alliances with various service providers. For example, in 2000, Citibank teamed up with four companies to form FinancialSettlement Matrix.com. This is a virtual marketplace that links buyers and sellers. The site also has payment processing and credit services by several participating banks and other financial services companies (Citibank, 2008). Two challenges faced the bank following this alliance, first the bank had to devise ways on how to make the partners understand its business model and prevent them of exploiting the bank’s advantaged position – its brand, its expertise in financial services, its worldwide presence, its strong relationships with its customer – for their personal gain. Secondly, the bank had to find ways to protect its customers from exploitation by the bank’s partners in the alliance. The strategy under analysis is silent on how the bank addressed these two challenges. 8. Prepare a SWOT analysis to evaluate Citibank’s e-business strategy. Strengths Some of the bank’s strengths include a global presence, a strong brand and continued investment in technology. With operations in 100 countries of the world, the bank can venture into more markets. Its robust brand recognition should make entry into the new markets relatively easier. The bank’s investment in technology will enable it to serve its clients faster, better and more satisfactorily (Citibank, 2008). Weaknesses Even though the bank has invested heavily, the strategy does not outline the measures the bank intends to take to stay abreast with technology. Information and communication technology is very dynamic. Thus, unless the company is careful, the technology it deploys today at an exorbitant cost might be rendered redundant tomorrow by newer innovations. Such an occurrence would result in losses to the bank. Moreover, banks and their clients are increasingly prone to bank fraud. This risk id further enhanced by the bank’s move to offer its products online. Cybercrime is a major threat to safe computing today. Yet the strategy is silent on how the bank deals with cybercrime and fraud. Opportunities The world over, there is increased access to financial services even in the poorer countries of the world where a few years ago banking and banking services were a preserve for the rich. This increased access to and demand for financial services by individuals and local companies alike presents an opportunity for the bank to venture into new markets. In addition, more and more businesses around the world are going online. This digital migration presents Citibank with opportunities to bring in more SMEs (Citibank, 2008). Threats Ultimately, the biggest threat to Citibank is growing competition from other commercial banks. Yet a look at the bank’s e-business strategy does not provide enough solutions to stay ahead of the completion. Even though the bank specializes in serving corporates and SMEs, most other banks have some level of specialization. Moreover, every bank tries to differentiate its products from the rest in the market. Clearly, Citibank will have to do more if it wants to outdo its rivals and even sneak into their market shares (Citibank, 2008). 9. How does this case demonstrate the alignment of an e-business strategy with the company’s overall business strategy? An e-business strategy ought to be consistent with the overall strategy of the company. To a large degree, Citibank’s e-business strategy is in line with and compliments the overall strategy of the bank. Since, the 1990s the bank has mostly pursued corporate banking. This strategy saw the bank’s corporate banking business evolve from highly decentralized operations to more decentralized ones that concentrated on some 1,400 MNCs and institutional investors. Also, from the mid-1990s, shifted from a location-based bank to a multi-dimensional one (Citibank, 2008). Customer needs, as opposed to physical location and products, became the bank’s priority. This overall strategy is echoed in the bank’s e-business strategy for global corporate banking. First, this strategy is purely concerned with how to serve corporate customers online. Secondly, it places emphasis on customer satisfaction, not pricing of products. Thirdly, it can be said y to be a means of implementing the overall strategy of serving corporates without barriers of geographical location. 10. Beyond the case: Citibank has hit hard times in the last several years. Do you think the strategy described in this case helped in the decline or was this a bright spot? Explain your answer. This strategy is no doubt a significant milestone in the history of the bank. First, the bank’s alliance strategy puts it in a better position to invest its resources in its core business of providing banking services to its customers. Prior to 2000, the bank had tried to do everything by itself. The results were disastrous. Now with strategic alliances, the bank focuses most of its resources on its core business (Citibank, 2008). Secondly, the e-business strategy of the bank is consistent with its overall strategy serve its corporate clients without the limitations of location. With its online business model, the bank can now serve any of its 1,400 target customers wherever they are located. Besides, the online presence of the bank offers it increased visibility hence the potential of acquiring new customers. The acquisition of new customers is important when one considers the growing competition in the banking industry. Thirdly, the strategy enumerates some of the bank’s competitive strengths. These include global presence, a strong brand and significant investment in technology. The bank should leverage on these strengths to enhance its growth and, ultimately, profits. Reference Citibank. (2008). Citibanks E-business Strategy for Global Corporate Banking. New York City: Citibank. Read More