-Assignment 1

BUMGT5926

Topic:

“Citibank’s E-Business Strategy for Global Corporate Banking“

Submitted by:

Student ID: UB30069042

Student Name: Vishal Patel

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ContentsIntroduction...........................................................................................................................................3

Capabilities of Citibank..........................................................................................................................3

SWOT Analysis for Citibank....................................................................................................................4

Strengths...........................................................................................................................................5

Weaknesses.......................................................................................................................................5

Opportunity.......................................................................................................................................5

Threats...............................................................................................................................................5

Sustainable Competitive Advantages....................................................................................................5

Recommendations.................................................................................................................................6

References.............................................................................................................................................8

Appendices............................................................................................................................................9

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Introduction The present case study brings together a case of strategic management by one of the

globally recognised banking company Citibank that has been aware of the opportunities and

has responded timely to the threats in its way. Strategy is basically about the creation,

appropriation, and sustainability of value. (Noboa, 2004) One of the basic strategies of Citibank

is to involve in corporate banking activities with much attention focused on 1,400 large

global corporations and institutional investors. (Citibank Corporate, 2011) The study moves

through the various initiatives that Citibank has taken to improve its competitive strength

mostly by making use of the emerging web and internet technologies to strengthen its

unique capabilities. By strengthening its resources and investing in technology, the Bank

has been able to respond to the significant challenges like the boom of dot com (increasing

use of web technology), rising customer expectations and intense competition in Banking

industry. The rising web technologies and use of web sites for business activities put a

significant pressure in the Banking industry during early 1990s and the Banks wanted to to

transform their business in the new economy. (Mudmigh, 2007)The response by Citibank

was entry into online banking services (for banking with use of internet) and later moving to

global corporate banking (for international level transactions) under its full blown e-business

strategy. This was aimed at providing the customers with alternative, more responsive and

less expensive options for banking. This report will talk about such capabilities of Citibank,

its core competencies and will do its SWOT analysis to further recommend a path ahead.

Capabilities of CitibankToday’s competitive environment has made companies to think and considerably develop

not only the external factors impacting profitability but also the internal resources and

capabilities of a firm to gain a complete insight on competition. Capability can be thought as

the ability to execute a small part of the transformation process by which relatively low

value inputs that the firm purchases are transformed into a higher value outputs that are

sold for more than the cost of inputs from which they were created. (Rodan, 2003) This

simply means that the capabilities of the form assist in growth and making profits and also

in developing a unique and differentiating position. The capabilities of Citibank increased as

the Bank provided customers with a wider range of options like online banking (any time

banking), electronic or e-Billing instead of traditional paper based billing and all this before

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the competitors could do so. The company provided the tools and channels for its

customers to receive money efficiently and to make payment in a timely fashion. (Mudmigh,

2007)These capabilities being unique helped the Bank to gain advantage over the

competitors for a longer period of time. Distinctive or core competence is a bundle of

capabilities that allow the firm to do something better than its competitors and that cannot

be easily imitated. (Rodan, 2003, refer Appendix B) Gradually other banks also offered

similar solutions to the customers and Citibank was forced to introduce more and better

innovative services to be able to retain its core competence in online web-based space.

The resource-based theory or resource-based view (RBV) of firms is based on the concepts

of view of a firm with a set of capabilities achieved by the effective and efficient use of its

various resources, those lead to a competitive advantage for the firm. (Culow, 2003)

Citibank’s e-business strategy “Connect, Transform and Extend” helped the firm in

maintaining such capabilities as Citibank customers were to easily connect online with the

web based core banking services available, develop integrated solutions, and reach new

markets (extend into new markets with more services). The ultimate goal was to build a

single Web-enabled platform for all customers with similar needs. As Noboa (2004) analyses

in her research paper that firms develop innovative ways of doing business through the

Internet and may create value by bringing to the market transactions that would not have

been performed offline. Citibank offered e-business as one of its core competencies in the

online world that empowered corporations and financial institutions globally to connect to

the Web, transform their business using Internet-related technologies and extend their

reach to new markets. (Refer: Appendix A) Citibank also understood that many banks had

similar product offerings. It differentiated itself through customer service across the

spectrum, by offering telephone hotlines, relationship managers who understood clients’

needs, product consultants who provided service expertise, and most importantly,

continuous investment in technology to support both the front-end and back-end electronic

banking systems

SWOT Analysis for CitibankA SWOT analysis will help to analyse Citibank’s internal environment i.e., we will be able to identify its strengths (S) and weaknesses (W) and also the environmental opportunities (O) and threats (T).

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Strengths Early adoption of web technologies and entry into online banking e-business strategies for gaining large customers offering single window for multiple banking needs of customers e-billing replacing the traditional time taking paper-based billing electronic payment clearance options saving customers’ time

Weaknesses high capital requirement to stay focused for new technology huge capital required to manage e-commerce and e-business solutions difficulties with adding more solutions to its service portfolios with technology

changes higher prices for few options

Opportunity continuous investment in technology research and development in banking products and services add more solutions to its service portfolios

Threats adoption of powerful technology e-commerce solutions by competitors changing expectations of customer security threats in online banking and web based services long education and training process for building customers on the web

Sustainable Competitive Advantages According to RBV theory, a firm’s ability to attain and keep profitable market

positions depends on its ability to gain and defend advantageous positions in underlying

resources important to production and distribution (Cooner 1991). These profitable market

positions are referred by some scholars as sustained competitive advantage. “A competitive

advantage can be sustained if “those resources are valuable, rare, imperfectly imitable, and

not substitutable”. (Amis et al, 1997) As Amis et al suggest that a firm’s strategy depends on

their resources and capabilities which are the reason for a sustainable competitive

advantage and Citibank has implemented many strategies in e-business and online banking

segment to maintain its SCA with the capabilities derived from its strategized resources.

Citibank has consistently being engaged in (which the case study clearly details) in

development, improvements and additions to its capabilities in online services and e-

business towards the goal of competitive advantage effectively. The value to Citibank can be

seen in its capabilities of offering outsourcing services to lock in its corporate customers

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where Citibank secured all the business from the customer and gained a total relationship

with them. Also, managing the processes for a large number of customers provided Citibank

with economies of scale.

E-business relies on the development of new business strategies based on networks.

(Dahni, 2009) Citibank implemented many strategies in development of e-business as the

company wanted to cash on the increasing inter-connectedness of the world that has

resulted from the boom in telecommunication networks and computers. With the

developments in technology, Citibank added more services for its customers on similar lines

to offer them fast, flexible, and cost-effective ways of doing business. Citibank’s vision was

to become the world’s leading e-business enabler. It aimed to empower local, regional and

global customers and the B2B2C marketplace and provide solutions to help them take

advantage of the efficiencies and opportunities created by e-commerce (Citibank corporate,

2011) This definitely helped Citibank to sustain its competitive advantage that it already

built by entering the online banking and e-commerce arena quickly and earlier to other

players in the industry.

Recommendations In my opinion, making strategies towards the goal to maximize profit is very common

for businesses where the RBV theory discussed above suggests that this can be reached

through a competitive advantage attained by effective and efficient use the resources by a

firm. Citibank would be able to retain its competitive advantage over its rivals with a

combination of different (heterogeneous) resources to develop capabilities or competencies

that rivals could not easily acquire or develop. Such a combination is technology and

innovation as competitors have also entered now the e-business space where Citibank used

to be a distinguished player. Citibank now needs exceptional customer service and more

innovative tools in its portfolio so unique in their value creation that it could help Citibank to

generate a sustainable competitive advantage to the extent that no competitor has the

ability to use this unique set of resources. To have such a sustained growth and gain the

extra revenue, Citibank must work on its resources such as its management capabilities, and

difficult-to-imitate combinations of organizational, functional and technological skills. The

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Bank should also work to create another arm for deepening customer relationships through

cross sell and acquisitions of new customers

To develop such capabilities Citibank may focus on areas such as management of

Research and development (R&D), product and process development, technology transfer,

intellectual property, and organizational learning. A combination of such intangible

resources and its existing capabilities could assist the Bank in staying ahead of competition

because the challenges of technological changes since last few decades have been almost

similar. This means that it was the dot com boom at that point but is the social networking

and mobile banking which is being preferred these days. In any case, it is the challenge given

by the technology. The Internet is driving the new economy by creating unprecedented

opportunities for businesses around the world. Companies worldwide need to recognize the

strategic role that the Internet plays in their company’s ability to survive and compete in the

future. (Dahni, 2009)To be competitive in the Internet economy, Citibank needs to harness

the power of the Internet by developing its technological resources successfully and timely

to win the race. Citibank has been successfully responding to this challenge by being an

early adopter of web-enabling technology to allow customers to connect seamlessly to

Citibank and build a new global infrastructure to deliver products and services on-line,

integrating products in new ways

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References1. Amis, J., Pant, N. & Slack, T. (1997) Achieving a Sustainable Competitive Advantage: A

Resource-Based View of Sport Sponsorship. Accessed online from Journal of Sport Management, 11(1) Retrieved online From Ebscoshost

2. Conner, K. (1991) A historical comparison of resource-based theory and five school of thought within industrial organisation economics: Do we have a new theory of the firm? Journal of management, 15 (5). Retrieved online From Ebscoshost

3. Culow, V. (2003) The resource-based view and sustainable competitive advantage: the case of a financial services firm. Journal of European Industrial Training, 27(5) Retrieved online From Ebscoshost

4. Dahni, R. (2009) Enabling business with e-commerce and e-business. Acce3ssed online from www.findarticles.com

5. Mudimigh, A. (2007) E-Business Strategy in an Online Banking Services: A Case Study. Journal of Internet Banking and Commerce JIBC April 12(1). Accessed online from Ebscohost University Database

6. Noboa, F. (2004) E–BUSINESS: a framework for examining creation and appropriation of value. Journal of E-Business, 4(1) Rodan, S. (2003) Rumelt, Barney and The Resource Based View. Making Above Normal Returns without Barriers to Entry. Strategic Management Journal 14(1) Retrieved online From Ebscoshost

7. Citibank Portal (2011) accessed online fromn www.citibank.com

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Appendices

Appendix A

Appendix B

Source: Firm Level Strategic analysis by Simon Rodan

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