...Alpen Bank: Launching the Credit Card in Romania ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- Problem Brief ------------------------------------------------- As Alpen Bank’s country manager for Romania, Gregory Carle was contemplating a credit card launch in Romania market, which he would pursue if he could be confident that it would add 5 million euro in annual profit to the Consumer Bank Segment within two years. ------------------------------------------------- Alpen Bank had developed a reputation for excellence in serving affluent clientele. In addition to basic deposit, checking and personal loan services, customers had access to a wealth management program composed of financial planning and investment products. ------------------------------------------------- Some of the key...
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...DATE: Oct, 18th, 2013 CASE: ALPEN BANK CLASS: MBA586 GROUP C: CHIAWEN ‘TRACY’ CHANG CHIENYU ‘SHAWN’ HSIAO DANIEL GUTIERREZ NING ‘NINA’ BAI WENSHAN ‘NESSA’ XU Intro: Having 15 branches in Romania, Alpen Bank, a premium banking service provider is trying to expand its business in Romania and launch its credit card system. Considering the low per-capita income level and low acceptance of credit cards in Romania, we evaluated the profitability of this plan carefully and suggest Alpen Bank to enter the Romanian credit card market and explore the middle class in long run. PEST Analysis: Political • Capital market in Romania is more stable through annex to the European Union and implementation of directives. • The European Legislation to protect investors, safeguard market integrity by establishing harmonized requirements governing the activities of authorized intermediaries and to promote fair, transparent, efficient and integrated financial markets. • Substantial ascending evolution of Romanian capital market since 2004 helped by the government opening it for competition. • No limit of foreign participation in commercial companies (up to 100% ownership in Romania), full repatriation of capital and profit, equal treatment of foreign and domestic investors. Economic • Macroeconomic indicators (GDP, inflation rate, unemployment rate, etc.) registered in the past have not reached a stable point comparing...
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...Case Analysis: Alpen Bank The main issue that Alpen bank is facing is whether or not they should launch the credit card business in the Romania market and which group of target audience they should select while applying the launching strategy. Moreover, specifically to Carle, he needs to come up with a program from which, Alpen bank can generate at least €5 million in profit within 2 years. Moreover, clarified positioning strategy and customer segmentation is also needed to secure the success of the program. In the case, it seemed that Alpen had the opportunity to act since economic environment in Romania had changed from 2006 after its entering into the EU: the economy there was developing; a growing trends of luxury purchasing emerged; there was also an increasing likeliness of using card instead of cash; other competitors had already taken similar strategies in the market; Alpen’s traditional banking business had a great penetration throughout the country, etc. However, such a growth was not enough compared with other countries of the region. Besides, to launch the credit card business in Romania might be risky and do harm to the customer base. Then what should Alpen do? According to the charts 4 & 5 in the appendix, regardless the target audience, launching credit card business in Romania is profitable with the premise that if the customer base is big enough. (All the calculations in the charts were based on revenue potential and acquisition costs.) Comparing between...
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...Carle, Alpen Bank's country manager of Romania, has one week to decide whether Alpen should launch a new credit card in the Romanian market. There are many factors to take into consideration and if it is decided to be launched, Carle also needs to decide how it should be positioned in the market. Situation Analysis Context: Alpen bank had balked at launching a credit card in Romania due to the low usage of credit cards. Transactions were based on cash, but after 2000, by the entry into European Union, the Romanian economy started to grow and disposable income increased dramatically. In 2006, total financial cards grew by 35% compare to prior year. Moreover, required infrastructure (ATMs, point-of-sale terminals) was developed significantly but still the market is underpenetrated. Customers: In Romania, there was a huge income inequality that the top 10% of households by income had almost 24% of the wealth. Credit cards are used mainly by affluent and middle class consumers. Affluent segment consists of career oriented professionals and they are not very price sensitive. On the other hand, there is a big middle class in Romania and it is growing economically. These people are a mix of young professionals and families and they are price sensitive. Also, this segment's card utilization is lower compared to affluent segment. Company: Alpen Bank has entered to Romania in 2000 and since then it is growing in the market and as of 2005 it had 15 branches in the country. The bank is known...
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...after the successful implementation of Alpen Bank in Romania in the years 2000, Gregory Carle the country manager is wondering whether Alpen Bank should consider launching a credit card in the market. In order for the launch to be profitable several points have to be clarified such as who would the company target, what would be the positioning of this new card and how should it be marketed. Situation Analysis Context: After a period of recession, the economy in Romania is on a rising trend. The total disposable income of the population has increased and the middle- and upper- middle class is developing as their income is increasing. Consumers: A consumer survey indicates a clear change in the Romanian’s behavior; they are getting more interested in luxury goods and in products coming from the EU. Also, a strong increase of total cards on the market of 35% indicated that consumers are getting more likely to use cards rather than cash. This trend is supported by the fast development of the infrastructure required for a payment system. Even though for now cards are mostly debit ones and used to withdraw cash, as the country economy is growing and the behavior of consumers changing it is very likely that credit cards have their place on the Romanian market. Another important data to consider is the income distribution in Romania which is very unequal as only 10% of the population holds 24% of the wealth. Competitors: The competitors of Alpen bank have already launched the service...
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...Q1. How would the credit card opportunity compare to focusing on the core business of banking services for the affluent? By launching a credit card, Alpen Bank could exploit Romania’s rapid economic growth and rising incomes, which is especially the case for middle- and upper-middle class. Since Alpen has already build a good reputation in serving affluent, who cares more about image and less price sensitive, it will cost less in advertising their credit card service and generate more profit if Alpen positioned its credit card as high end premium products. Moreover, Alpen enjoys a second mover advantage in launching credit card. Regardless of the low credit card utilization and merchants’ cash priority attitude, competitors had been marketing credit cards for several years already, which assist building customers’ need awareness and introduce the utility and purposefulness of the card. Alpen could further market its product on this basis with less effort and lower costs. (Please refer to appendix A for detailed statistical description) Q2. Please choose between open or sealed bid auctions and justify why you are using it. Alpen Bank should utilize open auction. The value of Alpen’s credit card corporation is largely composed with common value, which is dispersed among bidders. Assuming all four bibbers are risk neutral and are experienced bidders, they could adjust their pricing strategy in response to rival’s latest bidding price in an open auction. Such new information...
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...Date: February 13, 2013 To: Alpen Bank Subject: Alpen Bank Case To whom it may concern: This is to address whether or not the Romanian market holds any opportunity for Alpen Bank and our credit card services. Based on our analysis, Romania holds opportunity for us to launch our credit card services with potential for growth year after year because of a growing middle class that looks for a better standard of living. Romania’s acceptance in the e European Union should strengthen its economy. Compared to other central and eastern European countries, Romania has the least financial cards per household at 1.2 cards. With the growth that we are expecting, Romania will follow in the footsteps of its neighbors and double the amount of financial cards per household. Alpen Bank should position itself by targeting all customers. Alpen bank has previously only targeted affluent customers as far as its banking sector. Alpen bank card services should be available to all customers with the right credentials in order to grow with the growing middle class. We predict that by targeting all customers, we provide ourselves with a larger target market. Though targeting affluent only customers seems like a better opportunity for the first two years, we are looking long term. Targeting all customers will allow us to hit our $5 million profit target with 142, 248 customers in year one and 146,788 customers in year two. These numbers can be achieved by combining direct mail, take...
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...ALPEN BANK CASE By 11/06/2014 TO: Gregory Carlyle FROM: XYZ RE: Alpen Bank: Recommendations for new Credit card Business in Romania DATE: 11/06/2014 Mr. Gregory Purpose: The purpose of this memo is to report my observations after careful analysis of economic opportunity of credit card business for Alpen Bank in Romania Recommendation: After thoughtful research, I would recommend you that starting a credit card business for affluent and most affluent will be more profitable. The break-even point, return of investment and profits after breaking even are all favorable for Affluent classes alone. Analysis: I have started with my analysis of customer acquisition. Keeping in mind the importance of publicity for a successful launch of credit cards from our bank, I went ahead using all the modes of publicity. After careful calculations (Seen in Exhibit 1 and 2) of customer acquisition, I came up with the cost per customer value. To begin with, the cost per customer for affluent population alone is less compared to all customers. Having decided to check the feasibility of starting the credit card business for both middle class and affluent or just for the affluent class, I calculated the weighted revenue of these classes. (Exhibits 3 and 4). It is clear that the revenue from affluent class alone is about 40 Euros higher. Then I proceeded in calculating the Net profit for a customer size of 50000, 100000 and 150000 individually for two cases.(Exhibits 5 and 6) After...
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...CRM- Case analysis Alpen bank Submitted by Team Pandavas (PGPME Group 2) Bhawna Gupta (P131011) Deepak C (P131015) Esha Pandey (P131016) Magdalene (P131021) Shashank (P131032) Overview: Alpen bank is one of the prominent banks headquartered in Zurich. The bank was known in the banking circles with serving mostly affluent clientele. Shopping with cash was a trend that was getting altered soon with the changing conditions of advancement in the European countries and most of them were becoming synonymous with high end customers going for shopping with credit and debit cards, A fact being quoted in the case that in 2006, the bank expected the credit and debit category growing by 35%. Alpen bank was looking at this lucrative proposition of expansion by trying to capture this segment by launching its credit card business in Romania. Romania being a small and low income country offered less possibilities for the growth of credit card business but as the country became the member of European Union it started becoming a lucrative market for the development of such products. The major players operating in credit card business in Romania were Romanian bank for Development having the largest number of customer base (606000 credit cards) while Raifessen bank was the second largest bank in this segment with the credit card utilization standing at 70%. As a result the Alpen Bank was looking for possibilities where they can tap a significant share of credit card business in Romania...
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...Case Analysis: Alpen Bank The main issue that Alpen bank is facing is whether or not they should launch the credit card business in the Romania market and which group of target audience they should select while applying the launching strategy. Moreover, specifically to Carle, he needs to come up with a program from which, Alpen bank can generate at least €5 million in profit within 2 years. Moreover, clarified positioning strategy and customer segmentation is also needed to secure the success of the program. In the case, it seemed that Alpen had the opportunity to act since economic environment in Romania had changed from 2006 after its entering into the EU: the economy there was developing; a growing trends of luxury purchasing emerged; there was also an increasing likeliness of using card instead of cash; other competitors had already taken similar strategies in the market; Alpen’s traditional banking business had a great penetration throughout the country, etc. However, such a growth was not enough compared with other countries of the region. Besides, to launch the credit card business in Romania might be risky and do harm to the customer base. Then what should Alpen do? According to the charts 4 & 5 in the appendix, regardless the target audience, launching credit card business in Romania is profitable with the premise that if the customer base is big enough. (All the calculations in the charts were based on revenue potential and acquisition costs.) Comparing between the 2...
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...Alpen Bank In Romania Question 1 By taking a look at table A that is provided in the case study you can see that they created a Net revenue impact table. On it, it shows that the lowest income they are looking for in a household is €3,000, and that from €3,000-4,500 is listed as middle class. If we then look further down we see Exibit 5 witch lists the Annual income in Romania and we see that 18.2% of Romania’s population would fall into this middle class range. Now if we do the same for the group table A has listed as Affluent, €4,500-6,000, we find that 15% of the population falls into this category. And finally if we add up all the households that make over €6,000 a year, listed as most affluent, we find that 12.9% of the total population goes in this category. So it looks like only 46.1% of Romania’s total population has enough income to afford a credit card at Alpen Bank. Out of the 46.1% of the total population that can qualify for a credit card 39.5% is made up of the middle class (18.2/46.1=39.5%). Table A also lists the annual revenue that would be made from card holder in each class, and it shows that an individual in the middle class would make €60.63. So 39.5% of their credit card income would be €60.63. Using the same process we can find that the Affluent, (15/46.1=32.4%), would make up 32.4% of their income and produce €123.38 per card holder. And the most affluent would compose 28% (12.9/46.1=28%) and each card holder in this bracket would produce €209.75 per...
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...4 ) Should Alpen Bank launch a credit card? W hy? And how does the credit card opportunity tocore business operations? C onsidering the economic and market conditions as explained in the case, Alpenshould launch a credit card. Economy is growing rapidly with increasing incomesand making upper middle and middle class a substantial part of the society.Moreover disposable income is also increasing dramatically. The country has10%households who have 24% of the wealth so they have sufficient income permonth. They are conscious about their social image and are less sensitive toprices.The middle class is also a potential market for the credit card. This class includesyoung professionals who make price driven decisions so the bank might think about lowering the interest rates for them. Todays middle class may becomeaffluent tomorrow.The credit and debit card market of Romania is also seen to grow at a good paceof 35% in 2006 and about 9.5 million cards were being used in the market.Romania has ATMs and point of sales terminals for card transactions too.On the other hand, there are some problems in the credit card market too.Firstly, majority of the cards being used by customers are debit cards whichmeans Alpen has to convince and make special efforts to make use credit cardstoo. People use cards generally for withdrawing cash rather than for buyingproducts or services so there is less revenue driven from transactions. Evenmerchants are still ignorant in accepting credit cards...
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...1) H ow should Alpen Bank position its card? Alpen bank should position its credit card as a high end premium product as itsexisting customers belong to the affluent class and it would be easier to establishitself in this segment. Furthermore this class represents the top 10 % of population which has about 24% of wealth. They are less price sensitive andmore conscious of their image so positioning the card on high end would bebeneficial for the bank. This segment includes professionals who would like topurchase products and services through credit card considering it a statussymbol.Moreover, for countries like Romania, it is seen that credit cards are somewhat stickier as compared to the developed countries. This shows that if Alpenpositions its card as a high end product, it will gain a share of market whichwould stick to its card.The middle class also has a huge potential especially in terms of the size of market however they are more price-focused and would only welcome this newcredit card if the interest rates are low. They also have a monthly income whichsupports them to have a credit card. Based on the attitudes of customers in otheremerging economies it can be said that customers in middle-income class have alower actual utilization rate when compared with affluent class. 2 ) W hat is the cost of acquisition of customer? C ustomer acquisition cost is the cost associated with convincing a consumer tobuy your product or service, including research, marketing...
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...growing trend in purchasing luxury goods and increasing likeliness of using card. Although Romanian banks has already been marketing in the business, other competing banks are bullish the market (Exhibit 4) and it is hardly for them to take the same strategy in the near future. With the premise that top 10% of households by income have nearly 24% of the wealth (Exhibit 5), launching credit card business is profitable in the long term. Affluent are less price-sensitive to annual fees and are more likely to use cards with great frequency. Revenues generated by annual fees and interchange are sustainable, for affluent customers in emerging market are more sticker than in developed market. (Alpen bank should position its credit card as a high end premium product as its existing customers belong to the affluent class and it would be easier to establish itself in this segment. Furthermore this class represents the top 10 % of population which has about 24% of wealth. They are less price sensitive andmore conscious of their image so positioning the card on high end would be beneficial for the bank. This segment includes professionals who would like to purchase products and services through credit card considering it a status symbol. Moreover, for countries like Romania, it is seen that credit cards are somewhat stickier as compared to the developed countries. This shows that if Alpen positions its card as a high end product, it will gain a share of market which would stick to its...
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...underpenetrated (Exhibit 3), thus competition will be less fierce when entering into the market as a first mover. Since the economic environment has changed a lot in 2006, there is a growing trend in purchasing luxury goods and increasing likeliness of using card. Although Romanian banks has already been marketing in the business, other competing banks are bullish the market (Exhibit 4) and it is hardly for them to take the same strategy in the near future. With the premise that top 10% of households by income have nearly 24% of the wealth (Exhibit 5), launching credit card business is profitable in the long term. Affluent are less price-sensitive to annual fees and are more likely to use cards with great frequency. Revenues generated by annual fees and interchange are sustainable, for affluent customers in emerging market are more sticker than in developed market. Open Auction or Sealed Bid Auction? Sealed Bid Auction is a better choice in this case. The common value of the Partnership is difficult to determine, so the price of the bid mainly depends on the private value of each partner which could be very different. Therefore, price might be irrational as four partners are eager to work with Alpen Bank. In the seal auction, both four partners bid simultaneously means that they can not adjust their valuation without knowing their counterparties bids. Since no one knows each others private value, each partner just bid for the price he thinks is the highest to win, which...
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