Question

1. Define American Express’s overall business-level strategy.

2. Does Bank 2.0 fit into American Express’s overall business-level strategy? •

3. How does Bank 2.0 stand up against the competitors in the industry? •

4. What insights does a SWOT analysis reveal about how Bank 2.0 should be positioned in the future?

Integrate the results of the analysis into recommendations for growing the business and combatting competitive pressures to maximize performance.

Answer 1

1. Strategies for 2018 includes a commitment to invest a portion of American Express's expected tax benefits on customer-facing growth initiatives and other measures intended to boost performance in both the near and long terms. The American Express plans include:

• Investing up to $200 million more in 2018 than we originally planned for customer-facing growth initiatives.
• Boosting the company’s contributions to profit sharing plans in 2017 to support the financial well-being of its people and to recognize their enormous contributions to its financial performance.
• Using the remainder of its anticipated benefits to rebuild its capital and support earnings growth in 2018.

American Express will also build capital by suspending its share buyback program for the first half of 2018.

American Express's mission is to build on its positive momentum through a focused strategy that will drive sustainable growth.

• First, American Express aims to strengthen its leadership position with premium consumers. It will focus on delivering personalized benefits to customers who appreciate premium servicing, access and experiences. Pans are to expand its integrated network, grow its roster of business partners around the globe, and build its premium lending portfolio through broader relationships with existing customers and industry-leading risk management expertise.
• Second, it will push to extend its leadership in the commercial payment space, capitalizing on its unmatched global footprint and commercial capabilities. It will continue to focus on small and mid-sized businesses globally by expanding its diverse set of products and services to help fund and grow the businesses.
• Third, there will be work to make American Express an essential part of its customers’ digital lives by providing seamless access to benefits, personalized assistance and recommendations, spending and lending controls, and more globally-connected experiences. Finally, it will focus on strengthening its global, integrated network to provide unique value. The aim is to be the partner that merchants rely on to navigate the convergence of online and offline commerce with cutting-edge fraud protection, marketing insights, and digital connections to higher-spending Card Members. Most important, American Experss will strive to fulfill our company’s vision, which is to provide the world’s best customer experiences every day. It will do this by listening to its customers, by anticipating their needs, and by working with them to fulfill their hopes and ambitions.

Core elements of American Experss's strategy are:

• Designing innovative products and features that appeal to its target customer base and meet their spending and borrowing needs.
• Using incentives to drive spending on its various card products and engender loyal Card Members, including its Membership Rewards® program, cash-back reward features and participation in loyalty programs sponsored by its cobrand and other partners.
• Providing exceptional customer care, digital and mobile services and an array of benefits and experiences across card products to address travel and other needs and increase Card Member engagement.
• Developing a wide range of partner relationships, including with other corporations and institutions that sponsor certain of its cards under cobrand arrangements.

2. In June 2011, American Express announced the formation of a new group, Enterprise Growth (EG). EG was designed to challenge existing credit and charge business models and extend American Express's leadership into the world of digital and mobile forms of payment through the use of software platforms and mobile apps. American Express leadership was well aware of the magnitude of the potential market that was currently underserved by traditional banking services. They saw an opportunity to do something bigger-to move American Express into debit and checking spending. EG called the initiative Bank 2.0, indicating the application of technology to usher in a 'next iteration' of banking. Thus, Bank 2.0 definitely fits into American Express's overall busines strategy especially the strategy related to 'Designing innovative products and features that appeal to its target customer base and meet their spending and borrowing needs.'

3. American Express Bank 2.0 has its own stand alone market and has its own elite customer base. Just like there is an all together a different customer base for it's card division. Bank 2.0 is a premium product with premium features attracting creamy layer of customers. The stand alone features of Bank 2.0 leave behind the competitors in the banking market.

4. SWOT Analysis

Strengths in SWOT analysis of American Express

Brand Strength – American Express, also called as AMEX has the advantage of being one of the most valuable brands in the world. As of 2016, it is the 59th highest ranked Brand in the world. The goodwill that it has built for itself helps it to achieve a great response to its new initiatives.

Employee Strength – The company has over 60,000 employees and the levels of employee satisfaction are high. A satisfied, happy and a diverse workforce make for a great place to work.

Market Capital – American Express has a market capital of around $ 60 billion and is one of the largest players in the world in the area of financial services.

Credit Card Schemes – Its global recognition and high usage make American Express a trusted brand. Its tie ups with multiple companies to provide loyalty programmes, credit card programmes etc., make it a very popular choice all over.

International usage – One of the major advantages of American express is that it is known as the safest credit card to be used when you are traveling internationally.

Status symbol – American express is a status symbol and can be obtained only by high net worth individuals and people who are offered the credit card. Not everyone is given the advantage of possessing a credit card. Naturally in rich circles, holding an American express card becomes an immediate indicator of wealth.

Weaknesses in SWOT analysis of American Express

Traveller’s Cheque Business – The traveller’s cheque business of American Express is sharply declining and needs to be revived.

Lack of Debit Cards – Another concern is the lack of American Express debit cards. While American Express credit cards are widely seen, debit cards are not. Filling this cap can be useful for the company.

Lack of other products – The product line of American express is focused on one or two main products. But additional financial products by American express and implementation of cross selling will help AMEX a lot.

Opportunities in SWOT analysis of American Express

Expansion – There is huge scope in market expansion for American Express. The company doesn’t have a very strong global presence and can get competitive in global markets.

Innovative Schemes – Another opportunity that presents itself for American Express is the innovativeness of the schemes that are offered to attract more customers.

Increase in usage of debit cards – Increasing the penetration of debit cards in emerging economies is a great opportunity too. Emerging economies have a lot of debit card users as debit cards are used a lot to withdraw cash and this can be tapped by American Express

Leveraging Financial brand equity – American express is a known brand in the financial community. It can leverage this equity by offering more financial products and increasing its own turnover as well.

Threats in SWOT analysis of American Express

Rivals – While American Express is a leader in its area of operations, it is not the only one. There are lots of big fish in the sea that are eager to capture market share. Staying ahead of competitors is a challenge and it poses a threat.

Nature of business – Also, the very nature of business that American Express is in poses a threat to it. Volatile economic conditions and financial uncertainties make the system very susceptible to failure. Government regulations also put barriers on a lot of activities and staying highly profitable becomes a challenge.

Competitors – Visa and Mastercard are the major competitors to American Express and are also very popular names.

Bad debts – Obviously, with the type of customers that American express has, bad debts are not something of a major threat. However, when the fish is big, the loss can be big too. Naturally, a single bad debt will be of a huge amount in the case of American express.