Citibank and Renminbi Debit Cards

Case Summary

Situation – Decision by Citibank (China) to enter into strategic alliances with domestic and international financial services providers in China.

Company review – Citi group is one of the world's leading global financial services companies serving over 100 countries and approximately 200 million customers. It established its first office in China in 1902 in Shanghai. Citi was among the first international banks to locally incorporate in China. Citi's locally incorporated entity is known as Citibank (China) Co., Ltd. Citibank has a growing presence along the North-East and South-East of China, with a total of 47 consumer bank outlets in 13 cities across China.[ ]

Industry review – The modern Chinese banking system originated in the 1950s. People's Bank of China was the major player with over 15,000 branches. However, the foreign banking industry remained at a nascent stage pre-2001 in China. It was only after China joined the WTO in 2001, it sent a wave of optimism in the banking environment which provided the necessary impetus for foreign banks to start playing a major role in China.

Case Analysis

Citi's strategy shift in China

Post-2001 Citi realized that China's market now provided plenty of opportunities for Citi to bring its diverse range of products to China. However, it knew that expanding in China by itself would be a really slow and expensive proposition and also entering China on a fully fledged basis meant competing with the domestic banks who not only had a huge network but were also low cost. These factors made Citi realize the necessity for the development of strategic alliances with domestic players.

Co-operative Strategy

Jack Welch, the former CEO of GE, once famously said, "If you think you can do it alone in today's global economy, you are highly mistaken." This really summarizes the importance of co-operative strategy and strategic alliances in the corporate sector. Co-operative strategy is where two or more firms work together to achieve a shared objective by creating value for the customer which exceeds the cost and in turn establish a favorable position with respect to its competitors. It generally involves the exchange and sharing of resources and capabilities to co-develop or distribute goods and services. Business level co-operative strategies are of the following types

1)Complementary Strategic Alliances : Vertical and Horizontal

Horizontal: formed when partners agree to combine their reso

urces and skills to create value in the same stage of the value chain (the main focus of Citi's co-operative strategy)

2)Uncertainty