Citibank Launching the Credit Card in Asia Pacific
Citibank had many competitive advantages. In 1989 Citibank was the largest banking company in the US, leader in foreign exchange market with wide range of services all over the world. Head of its international consumer businesses had extensive experience managing huge US card businesses and was disposed towards international expansion.
Asian government had strict regulations limiting expansion of foreign banks, so it was critical to offer the most innovative and high-quality products and services. So the only choice to succeed in this environment was being a differentiator. Citibank pioneered telephone banking in much Asia. It developed alternate distribution channels for products such as automobile loans. Introducing credit card products was a necessary step to compete with growing international presence, mainly of American Express. Citibank did that by acquiring proprietary card payment system and offering exclusive services to its customers.
When launching a credit card in Asia Pacific Citibank took several advantages of scale economies. For example with respect to software development, the programming could be done centrally and simply downloaded to the countries with no need to customization, therefore greatly reducing the costs. It also took advantages of easily transferrable established best practiced allowing a quick card product launch in Asia Pacific.
Offering credit card products in Asian market is a clearly Demand Scope economy. Citibank was selling the original domestic product in new countries, replication domestic strategy and best practices in the new market.
In selecting countries to roll out products first, Citibank should first focus on countries that are closer to US or European mentality, way of living and infrastructure, such as Australia or Hong Kong. This way transferring experience, practices and business model would be the most successful and efficient. Other countries that are a very good choice for expansion of the products and services are the ones rich in resources and high economic growth and rapid industrialization, such as India, Indonesia, Malaysia, Philippines and Singapore. Australia, although with already saturated credit card market was still rapidly growing domestic and international retail acceptance and was highly regarded overall. Hong Kong had an impressive economic growth and used to credit cards but still with high demand for more. India, being mostly rural country with very low credit card acceptance was still a very good market for Diners Club card and local currency transactions which gave Citibank good competitive advantage. Indonesia was relatively poor country, but with rapidly growing small wealthy class, where credit cards became a sign of status, so high quality of services was very important. Malaysia was a growing industrial nation, where convenience and extra credit were important reasons to own a card. Philippines was in the midst of a booming recovery after recession making it a very good market as well. So was the Singapore as a world’s largest centers for international trade and services.
Therefore, we can see that Citibank had a very good chance of success in countries with growing economies, increasing middle-class and wealthy population. On the other hand Citibank should avoid poor and predominantly rural countries, where there wouldn’t be much demand for credit card products. If should be very careful with countries with inadequate telecom infrastructure, since many of the services would be simply unavailable. Also countries like Korea, where very strict foreign control measures make them almost impossible to have successful business.