Citibank’s E-Business Strategy for Global Corporate Banking

Hanindita Guritna – 29114713Michelle Monica Alexandra – 29114727

Edwin Lumenta - 29114760Eska Anisa N. F. A. - 29114777

Rini Amelia - 29114857

Introduction

1812 : Incorporated as City Bank of New York

1976 : Experienced several mergers after its inception, the name Citibank N.A. was adopted.

1990s : Citibank’s corporate banking activities evolved from a highly decentralized set of operations to becoming more centralized

• 1998 : Following its merger with Travellers Group, the holding company changed its name to Citigroup Inc. (“Citigroup”)

2006 : Citigroup employed 325,000 staffs serving 200 million customers in over 100 countries and had an information technology (“IT”) expenditure of US$3,762 million

2008 – present : Developing its e-business by serving several segments of customer (MNCs, SMEs, and individual customer.

What are the impacts of the internet on the competitive landscape of corporate banking?

Definition of competitive landscape

A form of analysis that helps a business identify its primary online and offline rivals / competitor. It begins with a review of the competitors' market presence by customer segment, along the value chain and/or by geographical market. Analysis of competitors' strategies may then be conducted in terms of products and services, strengths and weaknesses and growth models.

The impacts of the internet on the competitive landscape of corporate banking

1. Increasing demand of the customers of corporate banking about e-transactions, such as e-payment, e-invoicing.

2. Forcing the corporate banking to provide more sophisticated e-business solutions

3. Emerging collaboration between the multinational company (MNC) with the bank for creating more developments

What has Citibank done to differentiate its e-business products from those of its competitors?

- Theory of Differentiation

Literally, differentiation is result of efforts to make a product or brand stand out as a provider of unique value to customers in comparison with its competitor

Citibank’s strategy to differentiate

• Serving people by creating efficiencies and opportunities through e-commerce

The vision: to become the world’s leading e-business enabler (delivering online transaction worldwide)

E-business Strategy : Connect, transform, extent

Besides, it has 6 key elements of its E-Business Strategy

E-Business Strategy

Connect

Web-enable its core services to connect with its customers

Transform

Draw the full range of Citibank’s capabilities to deliver integrated

solutions

Extent

Reach new market, ne customers, and new

products

Six Key Elements of Citibank’s E-Business Strategy

• Forming an internet operation group (E-business structure)

Task: The committee charged with spreading responsibility for internet activities

Programs: E-consumer and e-business in purpose of infusing internet into consumer and corporate banking activities

• Having continuous improvement in technology and having alliances in technology

- The alliances are Oracle, Commerce One Inc., SAP AG, Wisdom Technologies, and Bolero.net

What can Citibank do to create competitive advantage?

Theory of competitive advantage

Competitive advantages give a company an edge over its rivals and an ability to generate greater value for the firm and its shareholders. The more sustainable the competitive advantage, the more difficult it is for competitors to neutralize the advantage.

Porter’s Generic Strategy

The Emergence of Competitive Advantage

How does competitive advantage emerge

Internal source of change

External source of change e.g.,•Changing customer demand•Changing prices•Technological change

Resource heterogeneity among firms means differential impact

Some firms faster and more effective in exploiting change

Some firms have greater creative and innovative capability

Competitive Advantage

Based on the case, it is known that Citibank used differentiation focus as its competitive advantage. To create its competitive advantage, several ways Citibank took were:

1. Implementing an embedded bank strategy and differentiating through customer service so that Citibank could behave as a local bank in each country

2. Setting senior management from country’s citizen

3. Developing a strong brand recognition

4. Investing heavily on technology: for the main goal is to provide the most cost effective, cutting edge, reliable, and secure solutions

Citibank Converted Into E-business

In 2000, in response to intense competition and the dotcom boom, Citibank made a decision to develop Citibank's e-business strategy ("connect, transform and extend").

Citibank aimed to build a single web-enabled platform for all customers to access Citibank banking services.

Citibank was targeting different corporate customers, such as:

Multinational companies ("MNCs") that required custom-built host-to-host product interfaces.

Small and medium-sized enterprises ("SMEs"), were more conservative and were not ready for web-based solutions.

Citibank Converted Into E-business

Citibank’s huge transactional business which did basic, repeatable processes could be commoditized.

Regionalization by consolidating all data centers within each country and moving them to Singapore where centralized data and automated processes were established.

Integrating the web into business processes by incorporating secure databases into processing of a transaction.

Straight-Through-Automation (e.g. intelligent programs).

Issue That Citibank Should Take Into Account To Ensure Successful Implementation

Citibank need to pay attention in foreign exchange transactions, equities, deposits, settlement of trade transactions and payment of insurance policies when implementing e-business.

Citigroup's revenue grew 8% between 2005 and 2006. However, its operational expenses grew by nearly 15%.

in April 2007, Citibank announced an overhaul of its IT operations and cut 17,000 positions in order to save the company more than US$10 billion in three years' time.

Issue That Citibank Should Take Into Account To Ensure Successful Implementation

Since 2007, most large corporate customers had begun using a new legal model for accessing SWIFTNet: Standardized CORporate Environment ("SCORE").

By using the SCORE model, a corporate customer could access all participating banks with only one agreement in place.

SCORE also laid down rules for the messages that could be sent within the SCORE framework.

If Citibank want to ensure successful implementation, then Citibank should follow SCORE model.

Actions Citibank Has Taken to Serve The Need of Two Very Different Market Segments, MNCs and SMEs

Characteristic : Required custom-built host-to-host

product interfaces

Action:

Offered Citidirect

Characteristic :

More conservative and were not ready for web-based

solution

Action: Offered Citibusiness

Actions Citibank Has Taken to Serve The Need of Two Very Different Market Segments, MNCs and SMEs (cont’d)

Citidirect for MNC

• Citidirect was designed for corporatecustomers to do full transactionsonline anywhere around the world. Itwas a browser-based delivery channeldesigned to deliver all of Citibank’scash management and trade productsand services online, enablingcustomers to make inquiries abouttheir account balances, requeststatements, provide transactioninitiation details and requeststatement transaction reports onlineand real time.

Actions Citibank Has Taken to Serve The Need of Two Very Different Market Segments, MNCs and SMEs (cont’d)

Citibusiness for SME• Citibusiness was a one-stop financing solution

offered to SME entrepreneurs. Products andservices included: Citibusiness Direct (internetbanking); Cash Management ; Trade Services andTrade Finance (trade products); CitiCorpCommercial Finance (asset-based finance);treasury products such as Spot and and ForwardForeign Exchange, lnterest Rate Hedging, andYield Enhancement Investment Products; and acustomer center. Thc customer center providedCitiService (an integrated customer inquiry linefor after-sales services), Document Collection (anexpress collection service), CitiFax (a convenientway to update account information) andCitiBusiness Direct (providing online access toaccount information and transaction initiation).

How has Citibank’s cash and trade group managed to develop different e-business products for varied industries? With the market changing so rapidly, how does Citibank identify market needs?

Continuous investment in technology

Formation of Internet Operation Group: committee charged with spreading responsibility for internet activities

Created 2 units: E-consumer and E-Business

Aim: infuse internet into all consumer and corporate banking activities

Decentralized approach: bring people from business lines and internet side of operations together

Alliances: Oracle, Commerce One, SAP AG, Wisdom Technologies and Bolero.net FinancialSettlement Matrix.com: Connect buyers and sellers in e-

marketplace Identify market needs

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?

Make sure that vendors and suppliers were aware of their strategy and would not exploit Citibank’s strength in financial industry

Citibank’s values and strengths:

Financial service expertise: est. 1812

Global presence: Operated across 100 countries

Trusted brand: Viewed as innovative, global bank offering excellent customer service