Citibank

The Decision to Globally Expand Citibank

The decision to open Citibank Credit to Asian Pacific is one that requires much investigation into the cultures, economies, and social statuses in each prospective market. While it is mainstream ideology to use credit for daily purchases in the United States where Citibank is located, many countries frown upon indebtedness to others, including creditors. Although there are risks in offering credit cards to many of these countries, it is recommended that Citibank launch two card options; a Standard Card that caters to the lower-middle class consumers with lower incomes, (that meet minimum requirements) and a Gold Card that will provide increased credit ceilings to the upscale markets.

Phased Introduction to Asian Pacific Markets

In order to realize the best business plan for the Asian Pacific countries, it is suggested that Citibank globalize the credit card markets through a phased approach. This approach will introduce the card to the countries that are estimated to have the least amount of risk associated with their economies, political status, and cultural acceptance of credit usage. The successful practices would propagate through to the future expansions and provide a strong foothold into the markets. Citibank should open the Gold marketplace first, providing a low volume, but high scale product that lower-middle class consumers would strive for and eventually have, in the Standard Card product. Rather than adapt to the antiquated set of regulations and standards of an existing local company, Citibank would benefit by opening its own business centers, where it would be free to adapt to both company and cultural desires.

The strengths of entering the Asian marketplace are the reinforcement of Citibank's view of the global market, the opportunities provided by a high economic growth area, the future potential to cross-sell its entire product line, the opportunity to become an early leader in upscale Visa and Mastercard services, and a forcing function to innovate its products and services.

The risks of entering the Asian marketplace are the political corruption, fraud, cultural differences, and government regulations. The potential rewards of being a fast follower to the Asian market outweigh the risk of the political corruption. Cultural differences and government regulations are known risks and each country will have a different plan to optimize its business in these differing environments. The concern between the mismatch of the targeted banking business and the traditional mass market credit card business is mitigated by taking a phased approach, where the credit cards are initially launched in upscale markets and over time are expanded to lower markets.

Phase I: Marketing the Gold Card to Upscale Markets

The majority of Asian markets see credit card ownership as a symbol of prestige and status. To continue Citibank's upscale image, Phase I would include offering a Gold credit card in the following countries to the more affluent population, Malaysia, Thailand, India and Singapore. The services that will be offered to all of the Gold Card markets are listed in Table 1. As can be seen, Citibank keeps its image as an upscale credit card company with superior services.

The pricing profiles for each country can be seen in Table 1. Customers will be enticed to own these credit cards because joining fees for all countries will be $0. This money will be recouped by offering higher annual fees. Annual fees are justified to the customers by the superior service that is offered.

Table 1: Citibank Credit Card Product

Phase I - High End Market (Gold Card)

General Services India Malaysia Thailand Singapore

Joining Fee FREE FREE FREE FREE

Annual Membership fee $ 60.00 $ 90.00 $ 130.00 $ 100.00

Payment Terms Monthly

Payment (Overdue Interest) 2.50% 2.50% 1.50% 2.00%

Gold Card Services

Card Replacement 24 or next business day

Loss/misuse liability $0 maximum

Purchase protection Included

Spending limits $25,000

Emergency check cashing $5000 at Citibank branches

$250 at hotels

$100 at airlines

Cash advance $500 to credit limit at Citibank branches

Year-end summary Yes

Interest-free period 30 days

Minimum payment 5%

Replacement card Free

Malaysia is the first country in which Citibank will expand its credit card operations because its economy is quickly growing, Malaysians are ok with revolving credit, and the market is not saturated. In addition, the political risk is lower in Malaysia than some of the other high growth countries, therefore, it is an ideal place to start the credit card expansion in Asia.

Thailand is the next country which Citibank should enter. It is one of Asia's rapidly developing countries, so there is a likelihood of high profits. In addition there is low credit card penetration and little competition in Thailand. Citibank can compete against the local banks because it has an upscale Visa and Mastercard, and prestige is important to their positioning. The political corruption in Thailand poses some risk, and is cause for concern.

India is a very high potential country for returns because there is low competition from American Express, Diners Club and local banks for the upscale market. It will need time to build more infrastructure, so large urban areas will be targeted. Because India has a culture where revolving credit is perceived as negative, annual fees will be higher than other countries. The risk to India is the political corruption and unstable federal government.

Singapore will be entered last because its credit card market is saturated and poses the least return. In addition, it will be the most difficult country to offer a differentiated product. Large international banks offering Visas and Mastercards were already established in Singapore had lower prestige than American Express but higher than the