business analysis term paper

Running head: CITIGROUP 1

Citigroup

Student Team in BUAD 455 Spring 2012

Elizabeth City State University

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Mission Statement and Principles

Citi works tirelessly to serve individuals, communities, institutions and nations. With 200 years

of experience meeting the world’s toughest challenges and seizing its greatest opportunities, we strive to

create the best outcomes for our clients and customers with financial solutions that are simple, creative

and responsible. An institution connecting over 1,000 cities, 160 countries and millions of people, we are

your global bank; we are Citi. The four key principles, the values that guide us as we perform this

mission, are:

(1) Common Purpose - One team, with one goal: serving our clients and stakeholders,

(2) Responsible Finance - Conduct that is transparent, prudent and dependable,

(3) Ingenuity - Enhancing our clients’ lives through innovation that harnesses the breadth and

depth of our information, global network and world-class products, and

(4) Leadership - Talented people with the best training who thrive in a diverse meritocracy that

demands excellence, initiative and courage.

Citigroup’s mission statement is crucial in making sure that it successfully prospers in the future. Part of

Citigroup’s mission statement states that “Citi” works tirelessly to serve individuals, communities, institutions

and nations’. This part of the mission statement is geared to steer Citigroup in making sure that it provides

quality banking services to every part of society. The mission statement indicates that the bank has been

providing banking services for two hundred years. This means that the bank has extensive experience in banking

services and in customer satisfaction thus showing that Citigroup must be doing something right to be in business

for two hundred years. The mission statement also indicates that the bank has been through the world’s toughest

challenges, which proves that it has survived the test of time and thus provides the surety that it has great

experience in hard times.

The bank through its mission statement also strives at creating the best opportunities and outcomes for

its clients indicating that it prioritizes its customers (SMEWEB, 2012). The statement also provides principles

that act as value guidelines for the achievement and performance of the mission. One of the principles that guide

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the performance of the mission is the common purpose. The bank is rooted on a one team, with one goal policy

as a way to ensure that serving the clients and stakeholders is done with unity and cohesiveness. Another

principle that guides the mission is the responsible finance within the organization. The mission of

Citigroup is grounded on transparency, prudence, and dependence as the best responsible ways of guaranteeing

proper and effective financial control.

The other principle that guides the mission of Citigroup is ingenuity. Through ingenuity, the bank

certifies that it remains steadfast and committed to enhancing its clients’ lives through effective innovation that

harnesses the depth of its information, excellent products, and global network. The last principle that confirms

that the mission of Citigroup remains focused and effective is leadership. Citigroup believes that talented

leadership is paramount for proper management, which is enhanced through the best training in order to thrive in

various diverse meritocracies that demands excellence, courage, and initiative (SMEWEB, 2012).

Short History

Citigroup was originally the City Bank of New York and was founded on June 16, 1812. It was

formed on October 8, 1998 with a merger between Citigroup and Travelers Group. It acquired many

businesses between 1999 and 2006. It acquired Mellon Bank’s credit card business in 1999. Following

that, it acquired Associates First Capital and Santiago. In 2000, it acquired Schroder which doubled

Citigroup’s investment banking and equities in Europe. In 2001, it acquired AST StockPlan, European

American Bank, and Grupo Financiero Banamex-Accival.

Citigroup acquired Golden State in 2002 and expanded its retail distribution franchise in

California and Nevada. It collaborated with a Chinese bank in 2003 to enter the credit card market. The

group sold its Smith Barney index business to Standard & Poor’s in 2003. They soon acquired

Washington Mutual and Nikko Cordial in 2004. In 2005, Citigroup established 1,165 new Citibank and

consumer finance branches. Also that year, Citibank Direct was launched in collaboration with 7-eleven

to add 5,500 ATM’s. It went on to acquire a 20% equity stake in AK Bank in Turkey and acquired Grupo

Financiero Uno Quilter, Egg Banking, and Grupo Cuscatlán.

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Citigroup went into financial trouble in 2008 and the following year it paid off the help that it

received from the U.S. government through the Troubled Asset Relief Program (TARP) and terminated

the loss-sharing agreement it had with the government. In 2010, it created a new service called Collateral

Management Services and diversified its student loan business through Discover Financial Services and

Sallie Mae Corporation.

In 2011, it expanded its Open Wealth platform and signed an agreement with Orient Securities

Company for a joint venture in China for securities and acquired a stake in Vietnam securities from

Horizon Securities Corporation (Citigroup, Inc., 2011).

Major Competition

Bank of America Corporation was founded in 1998 and is headquartered in Charlotte, NC. Its

current CEO is Brian Moynihan. It is the second largest American multinational banking and financial

services corporation based on U.S. assets and it falls in fourth place for market capitalization. Bank of

America provides services in credit cards, consumer banking, finance and insurance, investment banking,

mortgages loans, private banking, private equity, and wealth management (Bank of America Corporation,

2012).

Credit Suisse Group AG is a Swiss multinational financial services company located in Zurich,

Switzerland. It was founded in 1856 by Alfred Escher and its current CEO is Brady Dougan. It provides

services in investment and private banking as well as asset management (Credit Suisse Group AG, 2012).

Deutsche Bank AG is a global banking and financial services company based in Frankfurt, Hesse,

Germany. It has major influence in Europe, the Americas, Asia-Pacific, and other markets. Its current

CEO is Josef Ackermann and it was founded in 1870 as a specialist bank for foreign trade. Its services

include asset management, investment, commercial, retail and private banking (Deutsche Bank, 2012).

JPMorgan Chase & Co. was founded in 2000 by a merging of several U.S. banks and is

headquartered in New York, New York. It’s the largest U.S. bank in regards to assets and market

capitalization. Its services include asset management, consumer banking, corporate banking, credit cards,

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investment banking, mortgage loans, private banking, and wealth management. Its current CEO is Jamie

Dimon (JPMorgan Chase & Co., 2012).

UBS AG is a Swiss global financial services corporation located in Basel and Zurich, Switzerland.

It was founded in 1854 and the current CEO is Sergio Ermotti. Its products and services include

investment banking, investment management, wealth management, private banking, corporate banking,

private equity, finance and insurance, consumer banking, mortgages, and credit cards (UBS AG, 2012).

Fortis was one of the largest financial businesses in the world for revenue. It was founded in 1990

and is now defunct. It had headquarters in Brussels, Belgium and Utrecht, Netherlands. Its services

included retail, commercial, private and investment banking (Fortis, 2012).

Goldman Sachs Group is bulge bracket investment banking and securities firm in the U.S. It is

headquartered in New York, New York and was founded in 1869 by Marcus Goldman and Samuel Sachs.

Its current CEO is Lloyd Blankfein. Its products and services include asset management, commercial

banking, commodities, investment banking, mutual funds, and prime brokerage. It is a major dealer in the

U.S. Treasury security market (Goldman Sachs, 2012).

HSBC Holdings plc is a British banking and financial services company located in London, UK.

It’s the second largest banking and financial services group in the world. Its services include commercial

banking, global banking and markets, personal financial services, and global private banking. It was

founded in 1865 by Sir Thomas Sutherland under another name and was converted in 1991 to HSBC

(HSBC, 2012).

ING Groep N.V. is a global financial institution founded in 1991 through mergers with several

banks. Its headquarters are located in Amsterdam, Netherlands. Its current CEO is Jan Hommen. Its

products and services include retail, private investment and commercial banking, and insurance and asset

management (ING, 2012).

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U.S. Bancorp is a diversified financial services holding company located in Minneapolis,

Minnesota. It’s the parent company of U.S. Bank and the fifth largest commercial bank in the U.S. It

was founded in 1850 but was merged with other banks. Its current CEO is Richard K. Davis (U.S.

Bancorp, 2012).

Wells Fargo & Company is an American diversified financial services company located in San

Francisco, California and was founded on March 18, 1852 in New York, New York. Its current CEO is

John G. Stumpf. It offers services in credit cards, consumer banking, corporate banking, investment

banking, global wealth management, financial analysis, and private equity (Wells Fargo, 2012).

BNP Paribas Group is a global banking group founded May 23, 2000. Its headquarters are in

Paris, France and its products include retail, corporate and investment banking and asset management. Its

current CEO is Baudouin Prot (BNP Paribas, 2012).

GE Capital is part of General Electric’s operating division. It is located in London and offers

services in private label credit cards, personal loans, bank cards, auto loans and leases, mortgages,

corporate level travel and purchasing cards, debt consolidation, home equity loans, and credit insurance

(GE Capital, 2012).

Market Position

Citigroup is a diversified premier financial group with global networks in over 160 countries

which provides financial services in retail banking, corporate banking, investment banking and asset

management. Its operations span across North America, Latin America, Asia, Europe, the Middle East

and Africa. Citigroup has been known for 200 years as a leading financial services group whose

principles involve common purpose, responsible finance, ingenuity and leadership. Their common

purpose goal is one team, with one goal to serve their clients and stakeholders. They focus on responsible

finance that is transparent, prudent and dependable while using ingenuity to enhance clients lives through

innovation that harness the scope of information, global network, and world class products. Citigroup is

committed to leadership involving talented people with the best training who thrive in a diverse

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meritocracy that demands excellence, initiative, and courage in their employees (Citigroup Investor

Relations, 2012).

Citigroup has principle offerings in consumer finance, mortgage lending, retail banking products

and services, investment banking, wealth management, cash management, trade finance and e-commerce

products and services, and private banking products and services. Citigroup’s services are conducted

through four business segments: regional consumer banking, institutional clients group (ICG), Citi

Holdings and corporate/other business segments.

Regional consumer banking includes a global full service consumer franchise that provides

banking, credit card lending, and investment services through local branches, offices, and electronic

delivery systems. ICG provides corporations, governments, institutions and investors with banking and

financial products and services. Citi Holdings is tied to Brokerage and Asset Management, Local

Consumer Lending and Special Asset Pool. Corporate/other includes net treasury results, unallocated

corporate expenses, offsets to certain line-item reclassifications, and the results of discontinued operations

and unallocated taxes (Citigroup Investor Relations, 2012).

Citigroup is a multinational financial services group involved in the banking industry. It provides

financial services to consumers, corporations, and institutions. Its brand is synonymous with global

banking networks and financial services. Citigroup has established itself as the world’s largest bank and

subsequently created a strong franchise with strong sub-brands. Citigroup has a strong competitive

advantage through not only its brand but its ability to tap opportunities across geographic markets. Its

global franchise model has yielded larger mandates which have given it financial strength and flexibility.

Citigroup enjoys a heritage that has spanned 200 years of service, innovative products, and purpose.

Citigroup’s central mission since its development has been to support economic progress by using the

company’s core strengths. Citigroup has helped facilitate international trade, capital flows, and

entrepreneurism among consumers while keeping aligned with market trends and the global economy.

Citigroup’s role in all of this is to provide convergence between the world and their clients.

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Its strengths are not found only in its brand but its mission, its diversity, and its global network.

Citigroup set out to go beyond America’s only truly global bank to a premier multinational financial

group with a diverse conglomerate. Citigroup has built its brand so that it’s integral to its business and its

strategies as a global bank. Its focus to support global economies has made it the best positioned bank to

harness trends and deliver value to clients and stakeholders. Its mission involving common purpose,

ingenuity, responsible finance, and leadership have kept them aligned with their investments in talent,

technology, new products, customer acquisitions, and expanded distribution which have in turn provided

Citigroup with capital strength. Its capital strength has evolved into focusing on not only sustained

profitability but also sustained responsible growth which allows Citigroup to be proactive in meeting

consumer needs in through emerging market trends (Annual Report, Citigroup, 2012).

Apparent Strategy

Citigroup has deployed two different strategies; differentiation strategy and cost

leadership. It has differentiated itself as a global bank and as America’s only real global bank. Its

cost leadership shows up in its initiatives to better its cost efficiencies through technological and

operational restructuring. Its core competencies are its 200 year old brand, global network and

relationship with its clients, its ability to harness trends, its strong sub-brands, large mandates,

capital strength, and talented employees.

Citigroup’s apparent strategy is to use its brand and global franchise model to continue to

diversify and expand its business into other markets while maintaining financial strength and flexibility in

its home market. Citigroup is implementing strategies that involve a client focus emphasis on responsible

finance, leveraging its global network to increase market share in emerging markets, and becoming the

world’s digital bank while enhancing their U.S. consumer businesses and customer service to become the

number one source of ideas and content. They will continue to provide the best-in-class corporate and

investment capabilities while connecting with customers and attracting, developing, and retaining the best

talent and overall promoting financial inclusion.

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Citigroup’s 200 year old brand has been a vehicle for its expansion and reputation as a global

financial services company. Its competitive advantage is its strong franchise and sub-brands. This

franchise has been known for its “globility,” innovation and product breadth. It has the largest world

financial services network and its name is integral to its business and its expansion. Citigroup’s brand has

enabled it to be recognized and respected as a company to deal with in terms of services and allowing

them entry into global markets and strategic alliances that have garnered them many merger and

acquisition opportunities.

Besides its brand and global franchise, another part of its strategy and core competencies is its

employees. According to Citigroup’s 2010 Annual Report, its initiatives are to attract, develop, and retain

the best talent. For a group as diversified and widespread as Citigroup, it’s important for them to have the

best employees in this industry to continue creating innovative products and services as well as maintain

successful business operations.

Citigroup’s employees have helped with its other strategy initiatives to improve its financial

strength and flexibility. Citigroup’s significant franchise and sub-brands have acquired larger mandates

through ICG and Global Wealth businesses. In 2008, Citigroup took a TARP that they paid back within a

year. It’s important that Citigroup retain its profitability to not only uphold its brand image as a strong

franchise but to maintain its current market share and their ability to break into emerging markets.

Citigroup’s success is beneficial to the economy and its failure could bring it down.

This profitability is essential to Citigroup’s cost leadership strategy of technological and

operational restructuring that drives its initiatives for cost efficiency. In today’s rough economic times it’s

a smart move to keep costs down and improve the liquidity of assets. Citigroup is doing that by quickly

but methodically getting rid of its assets that are not client-focused but are product focused.

Critical factors for success in the industry

Every banking institution always aims at ensuring full customer satisfaction in order to attract

more customers and at the same time make a profit. These two reasons become synonymous to banking

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institutions since an increase in the number of customers always result to a gain in profits (Huang 120).

There is the need to note that all banking institutions offer the same services and thus, every banking

institution needs to come up with the utilization of specific critical success factors in order to successfully

carryout their activities and guarantee success of the institution. This will contribute to staying up to par

with factors such as competition and profit maximization without jeopardizing the essentiality of

customers and better services (Tser-Yieth 92).

It is in the regard of these success factors that this section aims at looking at how those factors

can influence the success of banking institutions and with specific interest given to Citigroup.

Technology and resources

Technological advancements especially in the world of banking are critical to every banking

institution. Every banking institution needs to be up to date with the latest technologies since the latest

technologies introduce innovative services to customers and clients. Online banking is one of the major

factors that every banking institution focuses on (Gup 102). Resources are also crucial factors to banking

institutions. Banks need to have adequate resources in terms of personnel and even financial adequacy for

proper and smooth operation. Banking institutions require up to date resources that have the capability to

keep up with the financial crisis that major banks are still struggling to recover from (Tser-Yieth 86).

Allocation of these resources as part of proper planning is extremely vital. Since there is a direct

relationship between allocations of resources with technological changes in that more resources should be

allocated to the various changes in technology, banking institutions need to integrate both the two factors

for effective operations within the competitive world.

Taking specific contemplation to Citigroup, the bank needs to invest more on the use of

technology and should consider proper allocation of its available resources as it is still in the verge of

recovering from the financial crisis (Tser-Yieth 91). Since Citigroup bank is one of the major banks in the

United States, it forced the U.S. government to intervene and prevent the collapse of Citigroup bank

during the financial crisis, especially in 2009. As one of the strategies to help Citigroup bank during

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recovery, there is need for the bank to invest in the use of technology. This is evident in the fact that

Citigroup entered an agreement of exploring and using the Watson supercomputer technologies with

International Business Machines Corp. (IBM) in order to improve modified banking and data examination

(Babad 1). The use of these computers and latest technological advancements is also crucial in managing

huge volumes of data and in decision-making.

Best rates and competition

In every banking institution, there are speculated and favorable banking rates that the banking

institutions determine (Tser-Yieth 88). These rates are crucial to the banks since they are what determine

the profits and revenues that the banks get. Banking rates are determined by how well the banks perform

within the stock markets. The performance of these banks is a factor that contributes to competition. One

fact that determines these two factors is the type of bank. Virtual banking is essential since it is attracted

by low costs. Therefore, in order for banks to do well in competition, the banks have to be concentrated

on low cost and thus major banks should focus on virtual banking. Competition is a major factor for the

survival of various banking institutions. Competition determines the position of banks in terms of how

well they do in the stock markets. Therefore, competition is a contribution factor to the ratings of banking

services.

Taking specific interest on Citigroup as a banking institution, the rates of the bank are currently

on the decline. The expected fourth-quarter profit has fallen because choppy capital markets did

overshadow the continued recovery of the bank from the financial crisis the bank suffered some time back

(Tser-Yieth 87). Therefore, Citigroup needs to focus on virtual banking since it is a major banking

institution, which is currently rated the fourth largest bank in the United States and the 12th largest

company in the whole world. The most efficient way of beating competition for such an enormous

organization is through focusing on virtual banking, since virtual banking will reduce the level of

competition especially in terms of the services provided to their various customers. Because of virtual

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banking, Citigroup will not concentrate its resources on the installation of additional ATM branches in

various countries since it will be trading its revenues through the internet (Babad 1).

Product innovation and competence

For banking services, product innovation is crucial (Gup 97). It is a common fact that various

banking institutions offer similar services. Therefore, this calls for banks to determine efficient and

different ways to formulate their services to gain preference to customers. Various banks need to come up

with different innovative methods to offer the same service with the aim of ensuring efficient service

delivery. In the banking industry, the banks need to be innovative since these innovations are what

differentiate them from other banks (Tser-Yieth 89). However, it is of essence to note that, as much as

these banking institutions strive for differentiation through innovation, there is the need for them to also

consider competence. There should be consistency in terms of these innovative products. It is also

through competency that these banks continue to have better trading rates within the stock markets.

Competency is also another key factor in maintaining continuity of the bank since it ensures continuous

running of the banking institutions.

Product innovation and competency are very crucial to Citigroup. As one of the major banking

institutions that more than one hundred governments depend on, it is only paramount that this bank

determines various innovations in order to prevent collapse. This is more evident in the fact that, due to

lack of proper innovative ways of managing the bank, the bank edged to the verge of collapsing. It took

the intervention of the U.S. government to ensure that the bank stays operational without incurring major

losses. Citigroup needs to incorporate product and service innovations to succeed in the future. Currently,

Citigroup bank is trying to cope and recover from the financial crisis that forced the United States

government to take control of the company (Babad 1). However, various factors still affect the

competence of the bank. Critics argue that the current chairperson of the Company, Dick Parsons, is to

blame for the lack of competency within the organization. Therefore, in order for the Citigroup bank to

develop competency it needs to re-evaluate the leadership structure.

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Brand image and market achievements

Another critical factor that is useful for the success of any banking institution is the brand image.

Marketing is a vital component of banking institutions. It is also with no doubt that, self-marketing which

is through brand image that a specific organization portrays to the public, is of crucial aid to that banking

or service providing institution (Tser-Yieth 90). It is through the brand image that a banking institution

displays that it either gets more customers or loses customers. Another synonymous factor that comes

with brand image is market achievements. How good or how successful a company is depends on the

marketing strategies that the company has in place with brand image being one of the most outselling

marketing strategies. With higher banking institutions, immense resources, and major stake in market

share they become key players in brand imaging or recognition. Due to the presence of huge and major

market shares, most people feel safer banking with such institutions because it will take long for their

collapse.

Having a specific concentration on Citigroup, brand image or recognition is a crucial factor to this

organization. Citigroup is among the biggest financial institutions in the world since it has huge resources

and key market shares. Due to this fact, most customers feel comfortable and secure to bank with

Citigroup (Tser-Yieth 85). Before the financial crisis, Citigroup was the largest financial bank in the

world and due to this it developed a good marketing brand or recognition. However, with the financial

crisis, the bank underwent a massive meltdown. This had a tarnishing effect on the bank’s brand image.

Therefore, the bank needs to have proper management strategies, which will ensure effective image

branding. The fall of the bank during this crisis had a negative impact on the image recognition of the

bank. Therefore, it is upon the bank to work out effective strategies, which will make sure that the bank

improves its image branding and recognition.

Location and convenience

Location of a banking institution is an essential aspect of banking. Banks should be located at

strategic places where access to their services is convenient to the customers (Gup 67). One indisputable

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fact is that most consumers are always attracted by convenience. Convenience ensures that customers

need not travel longer distances in order to access banking services (Tser-Yieth 83). This also ensures that

the consumers feel cared for since its bringing services closer to consumers and this leads to improving

the confidence and loyalty of customers. For this reason, virtual banks have advantages over brick and

mortar banks since their services are accessible from anywhere as long as there is internet. For this

reason, various major brick and mortar banks need to consider developing online banking as a key

investment since this ensures that customers can access banking services in the convenience of their

homes or offices without necessarily going to the banks.

Taking a specific look at Citigroup with relation to location and convenience, it is true to note that

currently Citigroup has numerous and large branches all over the world. However, the main part of the

bank is in the United States (Babad 1). For convenience purposes, the location of the bank was strategic

because its main headquarters being in the United States enabled it to withstand the financial crisis

through the help of the government. The bank also has various branches worldwide and thus is convenient

for banking services for its consumers. However, the bank needs to consider expanding its online banking

services since this will ensure successful banking for its customers and convenience even to those

countries where the bank still does not have branches.

Entrepreneurship and quality of services

Another key factor that banking institutions need to consider is entrepreneurship and quality of

services that these banks offer to customers. Every bank always aims at ensuring customer satisfaction

and this is only achievable through making sure that the quality of services that it offers is up to par. Brick

and mortar banks always utilize the advantage of having strategic points; thus, having direct contact with

customers and this is extremely vital, as it guarantees improvement and better customer services (Gup

34). Virtual banks always face the uncertainty of quality of services due to the interference of factors such

as poor internet receptions and interference with communication lines.

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Citigroup needs to more be entrepreneurial oriented. One fact that is clear with Citigroup is that

the chairperson of the Board has been blamed for the failures of the bank especially for the financial crisis

of 2009. This shows that the management of the bank has not been involved in effective decision making

and planning. In order to have proper decision making strategies, this bank needs to work on its

management skills because it is through management and leadership that the bank can achieve its goals

and objectives. Critics indicate that the various critical financial situations that the bank has faced have

been majorly due to poor management. In order for the bank to succeed, there is a need for the change in

management of the organization. This failure clearly indicates the importance of entrepreneurial

orientation.

Market Orientation

Market orientation refers to the inclination of trends with influence to marketing as a means to

either favor or discourage the success of any business venture. History has shown that banking

institutions that are market oriented always are up to date with the trends of what customers prefer and

require in order to ensure full customer satisfaction (Mendoza et al 918).

Market orientation is a critical success factor to Citigroup because they need to understand its

customers in order to make certain that the services and products it offers to its customers are up to

standard. Citigroup is now focusing on capturing the larger market share of capital trade. The company

plans for proper utilization and improvement of client coverage models with the aims of moving and

adding key talents within and to the key markets (Athey, 2012). The bank is currently considering making

capital more readily available to various clients in the markets it has identified as of priority. The

company, as per 2010, has become market oriented in ensuring that it keeps constant track of market

trends and thereby making sure that it puts strategies that work as an advantage to the bank (Enrich &

Mollemkamp, 2008).

One of the weaknesses of Citigroup that led to a meltdown was the fact that the marketing

strategies that it laid down were not satisfactory (Huang 102). Therefore, for the bank to guarantee

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success in the coming years, the bank needs to understand marketing trends, and should put its customers

first in order to make sure that it understands its customers.

Learning Orientation

In every institution, there is a need to develop a learning culture where current employees, new

employees and even the management is constantly engaged in learning to guarantee improvement of

service delivery to customers (Mendoza et al 920). Due to the fact that banking institutions offer the same

services, there is a need to remain alert and research current banking trends. Banking institutions also

need to adapt to technological advancements and this is only possible if these institutions continuously

engage in learning activities that enhance banking services delivery (Huang 98). The management needs

to be engaged in the learning process too with an aim of ensuring that they have the adequate and current

management skills that can enable the banking institutions to cope with the current financial and

economic situations that such institutions face.

Putting specificity on Citigroup, it is probable to first state that lack of proper and up to date

management skills was a contributing factor to the economic meltdown the bank underwent some years back. In

order to make sure that the bank remains stable and keeps up with changes, there is a need to engage in serious

learning especially of new market and management skills that are current (Athey, 2012). Citigroup is utilizing

learning orientation in that it is realizing the importance of new ideas and skills in management and in utilizing

technology in bettering its service delivery process. This is evident in the deals that the bank currently made with

IBM in the use of their supercomputers. Learning orientation for this institution will make certain that the bank

continuously understands current management, market, and banking trends that are more applicable and efficient

(Mendoza et al 932). Citigroup needs to integrate learning into its routine so that the employees are kept up to

speed with better ways of customer satisfaction since the relationship and impression created by these employees

becomes the marketing brand for the bank.

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Creative Climate

Creativity is a critical requirement for any business institution especially banking institutions

since there is a need to develop a factor of uniqueness in their service delivery. Another important thing to

note is that creativity comes with motivation. In order to be creative, a person or an organization must

develop various opportunities for this creativity which is mainly through motivation (Mendoza et al 933).

In banking institutions, creativity creates the uniqueness that differentiates one banking institution from

another. The uniqueness of ideas of operation in terms of development of services such as coming up with

an online banking system where customers can access banking services from anywhere through the

internet is an example of creativity.

In banking, creativity always goes hand in hand with technology (Mendoza et al 943). Since

Citigroup is one of the major banking institutions, there is a need for the bank to be in the forefront in

coming up with various innovative product and service delivery methods and ways in order to encourage

more customers. Citigroup is currently the bank with ideas concerning global market and with these ideas

and creativity; the bank is in a better position to apply the available skills in safeguarding full customer

satisfaction (Athey, 2012). The bank’s long history, iconic brand, and in depth relationships warrant

refining employee skills and learning new markets.

Organizational Flexibility

Organizational flexibility refers to the possibility of developing a tendency of being able to adapt

to various challenges and opportunities that an organization is subjected to. In banking institutions,

market trends are always changing and it is upon the various banking institutions to be able to adapt to the

changing trends (Huang 88). Technological advancements are also changing at a rapid rate and therefore,

the banking institutions need to be flexible enough to ensure that they are up to the challenges they face.

The organizational structures of current banking institutions should also be flexible to make sure that

there is no shortfall within one department or area of the organization due to common defaults. Banking

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institutions should be integrated such that tasks within the organization can be performed by various

people within the organization without full dependence on a specific employee or system.

Taking specific concentration on Citigroup, it is evident that the bank has faced serious flexibility

issues (Mendoza et al 923). This is why the bank could not manage to adapt to the effects of the financial

crisis. The bank could not come up with effective strategies to help them come out of the meltdown it

faced. Therefore, Citigroup needs to be flexible in such a way that it can come up with various

management and institutional strategies to enable it to withstand challenges just like other major banks

(Heinecke 145). Organizational flexibility is evident in the fact that the bank has decided to relieve the

chairperson of his duty since it is claimed that he did not embrace flexibility. The fact that the bank is

considering having a new manager is an indication that it’s currently practicing organization flexibility;

thus, flexibility is an unavoidable factor.

It is clear that Citigroup needs to fully focus on the above-mentioned critical success factors in

order to gain back its initial stable position within the financial market and to succeed in the future.

SWOT Analysis

Strengths Weaknesses

x One of the world’s largest credit card issuers x Diversified financial products x Global franchise x Technological and operational restructuring initiatives x Strong market position and market share leadership x Strong and reputable brand name x Improved financial strength and flexibility x Loyal customers and online growth x Policies and procedures

x Significant risk positions held in Citi Holdings x Increased risk profile due to the termination of loss sharing

agreement with the government x Exposure to subprime mortgage market x Debt obligations related to asset backed securities and

subprime market x Some very complicated financial products that are

unattractive to clients

Opportunities Threats

x Restructuring efforts making way for better opportunities x Focus on global wealth management which ensures market

expansion x Innovative products and services could increase the loyalty

and business of its clients x Wide array of services offered which enhances its cross-

selling opportunities to weak financial markets x Online and mobile banking services x Acquisition of Automated Trading Desk

x Increase in FDIC insurance premiums and other fees which will affect margins

x Limitations imposed by deferred tax assets (DTA) regulations

x Fluctuation of interest rates x Huge liability and high risk due to being one of the world’s

largest issuers of credit x Weakening financial markets and product substitution x Growing competition and lower cost competitors x Regulatory changes increase tax expenses

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Strengths

Looking at just one of Citigroup’s strengths - global franchise - they are already at a competitive

advantage. Diversification reduces the company’s overall risk and allows the company to produce

favorable results consistently even when there are economic and/or banking changes. Citigroup’s

presence is in 160 countries, connecting over 1,000 cities and millions of people. Citigroup is one of the

world’s largest banks and financial services provider with $78.4 billion net revenues in 2011. Its brand

name proves to be strong and reputable in that they have been in existence for 200 years and have many

loyal customers. In addition to its primary brand name, Citi, the company owns other brands such as

Citibank, CitiFinancial, and Banamex, to name a few. Citibank offers a variety of banking, lending and

investment services not only to individuals but also to small businesses.

CitiFinancial offers a community-based lending service through a variety of network systems. Last but

not least, Banamex is the largest commercial bank in Mexico in terms of equity and earnings.

Citigroup has shown that their financial strength and flexibility has been improving over the past

few years. For example, in 2009, Citi started the year as a (TARP) Troubled Asset Relief Program

institution receiving financial assistance, however, by the end of the year its capital and liquidity positions

were among the strongest in their industry. Their improved financial strength and flexibility will enable

Citi to overcome any market volatility in the coming years (The Banking Group, 2009).

Weaknesses

Within Citi Holdings, there are businesses and portfolios of assets that Citigroup discovered are

not central to its main business. This means that those businesses are more asset-intensive and reliant on

wholesale funding and it may also be product-driven rather than client-driven. With this in mind, Citi

wants to stop these businesses quickly but in the most economical way possible through business

divestitures, portfolio run-off and asset sales.

In December 2009, Citi terminated their loss sharing agreement with the government resulting in

their risk profile increasing. The agreement covered assets with the US Treasury, FDIC and the Federal

CITIGROUP 20

Reserve Bank of New York. As a result of terminating the agreement, their risk increases and that could

affect their financial performance in the near future (Citigroup, Inc. 2012).

Opportunities

The restructuring of Citigroup into two operating units – Citicorp and Citi Holdings- gives

Citigroup better opportunities. Citicorp is made up of the Global Institutional Bank, which includes

Global Transaction Services, Corporate Investment Bank, Citi Private Bank, and the Retail Bank. Citicorp

has relatively low-risk (two-thirds of their balance sheet is deposit-funded), high-return assets and it

operates in the most affluent areas of the world. Citi Holdings include some companies that have strong

market positions and they are made up of brokerage and asset management, consumer finance, mortgage

loans and private labels credit cards, and a special asset pool (Citigroup, Inc. 2012).

Citigroup has been focusing on global wealth management and in 2009 they sold Smith Barney in

the U.S., in Australia, and the U.K., to a joint venture with Morgan Stanley in exchange for a 49% stake

in the venture and a cash payment of $2.7 billion from Morgan Stanley. In 2010, Citigroup started

Citigold Private Client, which is a wealth management program for individuals with assets between

$1million and $10 million. These programs have helped make Citigroup one of the largest wealth

managers in the world of assets with $93 billion of assets at the end of 2010 (Citigroup, Inc. 2012).

Innovative products and services will increase the loyalty and business of clients. In most markets,

Citigroup is developing mobile consumer banking. This will enable them to upgrade their innovations

quickly around the world. For example, Citigroup can take a new product, service, or technology in one

country and easily integrate it with other countries. This will also contribute to revenue and profit

increases (The Banking Group, 2009).

Threats

Regulatory changes could increase tax expenses and increases in FDIC (Federal Deposit

Insurance Corporation) insurance premiums and other fees are likely to affect margins. The FDIC

insurance premiums have increased in the past 2 years as high levels of bank failures during 2008-2010

CITIGROUP 21

have increased resolution costs of the FDIC and wiped out the deposit insurance fund. These changes can

significantly increase Citigroup’s FDIC assessments and in turn will negatively impact its earnings

(Citigroup, 2012).

The deferred tax assets (DTAs) that Citigroup can utilize, may be limited if they go through an

“ownership change”. Citigroup had recognized gross DTAs of approximately $56.4 billion. Not adhering

to the ownership change code could lead to a revaluation in DTA assets resulting in the tangible common

equity being negatively affected (Citigroup, 2012).

A fluctuation in interest rates can negatively affect Citigroup’s investment portfolio because it

contains interest rate sensitive-investments, such as municipal and corporate bonds. If the market interest

rates increase, there would be a decrease in unrealized capital gains on fixed income securities. However,

if the market interest rates decline, that could have a negative impact on Citigroup’s investment income.

These affects may lead to operating losses and Citigroup’s capital and surplus will reduce. Governmental

monetary policies, domestic and international, economic and political conditions all contribute to making

interest rates highly sensitive and a significant interest rate increase could have an adverse effect on the

book value of Citigroup (The Banking Group, 2009).

Performance Analysis of the company-financial and other

Analysis of Revenue

Citigroup increased their revenue from the FY2009 in to FY2010 by recording revenues of

$86,601 million, which was an increase of 7.9%. Revenues by division, such as the ICG division had a

decrease of 11.5% over FY2009 which recorded revenues of $33.118 million. The division of regional

consumer banking had an increase of 42.5% over FY2009 recording $33,442 in FY2010. Citi Holdings

division had a decrease of 37% over FY2009 with recording revenues of $19,287 million in FY2010

(Citigroup, Inc., 2011).

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Flow Chart Analysis

Motivation drives performance and success. Giving adequate resources helps performance, but

performance without motivation means problems. So, in selecting employees the assessment is only

accurate when the employee possesses job knowledge and motivation. Training can overcome these

obstacles of knowledge and motivation.

Citigroup Overview

The turning point for Citigroup was in 2010. They achieved their primary goal returning to

profitability, with posting a positive net income for each quarter. Citigroup was really America's only

global bank, and it was the best-positioned bank in the world that harnessed and delivered value to their

shareholders and customers. Citigroup inherited a great foundation, maintaining an unparalleled physical

presence in over 100 countries and jurisdictions.

Citi was profitable in 2010 earning $10.6 billion, or $.35 per share. These numbers are a dramatic

increase from the net loss of $1.6 billion, or $.80 per share in 2009. Luckily, Regional Consumer Banking

and Global Transaction Services (GTS) are posting solid gains for the company. Citicorp has seen

MOTIVATION

RESOURCES OR ENVIRONMENT

SELECTION TRAINING

LOW/WEAKNESSES

HIGH/STRENGTHS

HIGH/OPPORTUNITIES

TREATS

CITIGROUP 23

increasing numbers from its international operations, generating 59% of its revenues, which is a testament

of power all in itself. With a continuing goal to align the bank around major trends for the near term, the

rise of growth in emerging markets are growing consistently faster than developed economies.

According to estimates, by 2020, incremental consumer spending from three-quarters will come

from emerging markets. Another major fact is the vast increase of capital flows and trade in emerging

markets. Emerging markets rose from 21% in 1995 to 35% in 2009, rising faster than the global economy.

The regulatory reform landscape is constantly changing, and we don't know what the form

changes will be. Citi supports the rules of both reforms, which include the Dodd-Frank and Basel III,

which has not been finalized yet. The changes in consumer preferences are growing globally. There are

more than 750 million people around the world using social networking sites for means of

communication. It's not only been beneficial for personal use, but for business use as well.

Technology advancements over the next several years are going to reshape the industry. With the

cost of computer memory already at zero, the processing approach will also be approaching zero. Cloud

computing has become a meaningfully way to increase and store data. Not only is it cost effective, but

convenient as well (Citigroup, Inc., 2011).

Execution priorities for 2011

Increase emerging-market flows, including flows and capital trades, and becoming the world's

largest digital bank is a priority for Citigroup. Consumers will appreciate the way technology enhances

and simplifies their lives; it just makes for an easier way for high demand in the financial service world.

Citigroup will provide exceptional customer service by expanding the US consumer business. They will

become the number one source of ideas and content in the industry. Providing the best investment and

corporate capabilities, and connect with the customers. Attract the best talent and build from it, and

promote the company's financial inclusion (Citigroup, Inc., 2011).

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Conclusion

Citigroup’s strategies have been successful so far. It’s financial strength and flexibility has

improved since the 2008 TARP that they received. The fact that Citigroup has lasted for 200 years as a

company and has continued to expand into multinational markets shows that Citigroup is more than just

financially fit but also strategic enough to keep itself afloat. Its threats and weaknesses are relatively small

compared to its strengths and opportunities. With Citigroup’s initiatives to delve into responsible finance

and to restructure components in its company to drive cost efficiencies, its strength will be even more

enforced.

One area of concern that Citigroup may want to look at is its market positioning. Citigroup has

positioned itself as a diversified global financial company but it still needs that distinctive edge that

makes it stand out from competitors. Citigroup is more than capable of having that edge not only in its

brand but its company that can take it to a class over the rest of the competition. We recommend that

Citigroup delve into that component of their positioning and brand equity. When we think of Citigroup

we think of it as just another bank. We do not see something in it that makes us think of it any differently

than any other bank that we have ever known.

Another aspect that Citigroup needs to look at is its assets and its initiatives. Getting rid of their

product focused assets and focusing on the client driven assets will keep the company profitable.

Citigroup also needs to continue to design their company initiatives around market trends and be the first

movers on providing the supply for those trends. With their flexibility and capability of harnessing their

assets to provide these elements for consumers it should keep them here for another 200 years.

Citigroup’s current strategies are pretty much solid and they should keep them that way and listen

carefully to their clients and watch the market avidly.

CITIGROUP 25

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