Question

Company: Citigroup

Company analysis:

1)The Company’s External Environment. Using the Porter Model determine the most significant strategic conclusions from examining the factors that exist in their external environment?

2)The Company’s Internal Environment Using the VRIO process determine the most significant strategic conclusions about their ability to compete based on their internal resources and capabilities?

3)Conclusions and Recommendations: From the information and insight gained above what would you say are their most significant Strengths, Weaknesses, Opportunities and Threats. Also, what strategic recommendations would you make?

Answer 1

Company: Citigroup

Company analysis:

1)The Company’s External Environment. Using the Porter Model, determine the most significant strategic conclusions, from examining the factors that exist in their external environment?

Answer:

As per Porter model, there are five forces which together constitute a competitive environment. These forces can have negative impact on profitability of the organization. These forces are analyzed for Citigroup below and most significant strategic conclusions determined.

a.      Competitive Rivalry: Here, we will analyze the numbers and strengths of Citigroup competitors.

Citigroup has relatively few competitors, namely Bank of America, JPMorgan Chase and Wells Fargo. This shows that there are only a few firms competing for the customer segment of Citigroup. This is a positive indicator.

But all these competitors have considerable strength and can pose threat to Citigroup. But the positive indication is that these competitors have geographical distribution of markets.

Strategic conclusions: Citigroup is successful in differentiating itself from the competitors and it has created it’s own segment – for example, it has strong presence and Asia and Middle East where it’s competitors are weak. Also it has focused more on higher middle class population unlike it’s competitors who have focus on high net-worth individuals.

b.      Supplier Power

There are numerous suppliers for Citigroup. Also some of them are quite powerful to negotiate well and reduce Citi groups profitability.

Strategic conclusions: Citigroup should build an efficient supply chain with multiple suppliers so that it’s dependency of suppliers gets reduced. This will reduce bargaining power of suppliers as it will break monopoly of suppliers. Citigroup can also finance suppliers and make then their priority suppliers so that their powers can be controlled easily by determining terms.

c.      Buyer Power

There are numerous buyers for Citigroup with varied bargaining powers enough to impact Citigroup’s profitability.

Strategic conclusions: Citigroup should broad base the customer base so that the dependency on specific group of buyers is reduced. Citigroup should be innovative in it’s product offerings and must innovate new products and services. This will allow it’s buyers to pay more and will not impact profitability.

d.      Threat of Substitution

With multiple banks offering similar products, the Citi groups products can be easily be substituted by similar or better products.

Strategic conclusions: Citigroup should keep performing continuous research on market trends and products and services available in market. It should identify the offerings by competition which can pose threat to Citi groups products. It should then carefully create strategy to overcome this threat. The solution lies in innovation and offering new products and services much before other can offer.

e.      Threat of New Entry

For Citigroup, threat of new entry is very low (almost negligiable) as there are only handful of entities which can attempt to do this. The main obstacle is requirement of huge investments, very high risks and time required to build brand and customer confidence.

Strategic conclusions: Citigroup is very safe on this aspect but it must keep looking for possible new entrants or existing players who are growing very fast to meet Citi groups size.

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2)The Company’s Internal Environment Using the VRIO process determine the most significant strategic conclusions about their ability to compete based on their internal resources and capabilities?

Answer:

Citi groups internal environment using VRIO process is presented below:

Resource -- Valuable? – Rare? – Costly to imitate? – organized to capture value?

Citi groups technology Platform is a highly valuable resource. It is rare and not available outside. As it has evolved over years, it is almost impossible to imitate. It is organized very well to capture value. The challenge Citigroup is facing is to keep this technology platform up to date considering new technologies emerging. It has risks o getting obsolete any time.

Citi groups processes are highly valuable, very rare (created specific to Citigroup requirements). Some of the processes can be imitated but that won’t add must values to whoever imitates. The citi group processes are very well organized to capture it values.

Diverse product lines and services offered by Citigroup are unique and highly valuable. These are not really rare but not many offer similar products and services together. This can be easily imitated but that won’t reduce Citi groups value.

Broad basing: Citigroup is well diversified in almost every sector of financial management – including core banking, credits, corporates and personal finances, from US & China to small countries in Middle East.

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3)Conclusions and Recommendations: From the information and insight gained above what would you say are their most significant Strengths, Weaknesses, Opportunities and Threats. Also, what strategic recommendations would you make?

Answer: The SWOT analysis of Citi group is done below.

Strengths:

1.      Strong technology base

2.      Knowhow and financial expertise

3.      Strong financials – topline as well as profitability

4.      Branding – well known and respected brand in many parts of the world.

5.      Credit card business- Largest in the world

6.      Existing large number of loyal customers

7.      Existing presence in growing markets of Asia Pacific including India and China.

Weaknesses:

1.      Rigidity and lack of lean and flexibility

2.      Technology platform can become outdated

3.      Expensive to upgrade/ replace technology platform to state of the art platform.

4.      Moving towards focused markets instead of broad-basing. This can erode it already established presence in developing countries.

5.      Scandals and other allegations with number of charges in various courts of law.

Opportunities:

1.      With world economy improving over last few years, better business opportunities are emerging

2.      Already strong presence in emerging markets of Asia Pacific.

3.      Can use strong financial power to make way in smaller economies

Threats:

1.      Smaller financial institutions are growing rapidly, can become threat to Citigroup.

2.      Number of cases in courts can result into heavy fines and penalties

3.      Political instability in many parts of world can increase bad debts and NPAs (Non Performing Assets)

4.      Existing Competition is becoming more and more aggressive

Strategic Recommendations:

1.      Be innovative – introduce new products and services

2.      Keep broad base of presence in various markets

3.      Keep technology platforms updated with state of the art technologies

4.      Make the business model leaner and flexible

5.      Listen to customers – Focus on customer loyalties

6.      Improve goodwill

7.      Prefer out of court settlements sooner as possible

8.      Focus on emerging markets and key sectors.

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