American Express Company Analysis - Case Study Example

Running head: american express analysis 1st February Question A. Brief company history AmericanExpress, also known as AMEX is headquartered in Manhattan’s, New York. The company which was founded in 1850 is concerned with credit card, charge card and other traveler’s card. The company transaction in card exchange is approximated to be 24% dollars. American Express is ranked as the 22nd most valuable firm in the global credit cards industry and is estimated to be worth US$14.8 billion. The company is ranked among the top 20 companies that are concerned with the corporate social responsibilities and the most admired company by the customers. The company logo has the images of the credit cards, charge cards and has been working as a joint venture. American Express Company has expanded its operations in other areas like California among other locations. Question B. Part 1.Economic conditions The economic conditions of United States of American from 2012 have been increasing for example the Gross Domestic Product (GDP). As a result, demand for American Express cards has been increasing which is a positive impact for the company. Another economic condition that has been experienced is the change in the fiscal policy that has made companies and the residents to be worried. The assumption is that tax rates are going to be increased. Additionally, government spending would be cut leading to a recession. Recession was set to be experienced in 2013 and many industries were likely to be affected. Unemployment has been an economic condition that has affected American Express, though the company wants to create job for the local and foreigners, the revenue that is generated is not enough to expand the labor force. The government needs to pay the European debt but is not able due to insufficient capital from American Express among other companies. Despite the fluctuating of the economy, the company has been working towards addressing the situation to ensure that sustainable growth is attained. Question B. Part 2. Ethical issues American Express Company has a value for its customer. The employees believe in giving back to the society and the management encourages for high ethical practices to the customers. The company is committed towards accountability since regulations must be followed strictly. Due to high ethical standards in 2001, American Express was awarded catalyst award since it was able to embrace corporate culture and ensure that workplace diversity is achieved (Joanna, 2010). The company is known among the best companies that ensure that commitment to their operations is attained and workplace ethics is of high standards. The company mission to make difference in the lives of their customers. Leonard Shen, the American Express officer who is concerned with compliance and ethics has always stated that for ethics standards to be achieved, one must understand the team so as to achieve the required change in the business. Question B. Part 3. American Express marketing strategies In its effort to create strong positive customer-brand relationship, American Express has adopted strong marketing strategies. The company, which almost was not using social media in its marketing, has extensively used social media in the recent years. This makes its brands to build strong and passionate online community that is made up of the cardholders. Some of the sites where the company is active in includes Face book, YouTube Twitter, Foursquare Google+ and LinkedIn. By tailoring each message that is targeted for users on specific medium, American Express has maintained strong connection with its customers (Kerin, 2012). For example, through the Twitter account referred to as @AskAmex that handles questions and concerns from the clients, the company has created a strong brand awareness locally and globally. Another notable strategy that the company adopts is finding the balance between selling and hiding the sell. It is worth to note that customers do not like to be sold to but at the same time a marketer should ensure that customers become ultimate brand loyalists. This is a technique that American Express has adopted in order to retain its customers and attract new ones (Goldstein and Lee, 2005). The company also hires local and well known personality to promote its brands. For example, in 2014, the company hired Tina Fey, a US actress writer, producer and comedian to introduce the Everyday Credit Card, one of the recent American Express brands. Question B. Part 4. American Express strengths and weaknesses Strengths The company has a strong international marketing that instills stability, trust, and security American Express targets companies and businesses with the approach of making business activities to be easy Creates strong partnership with hotels and other companies in the traveling industry while at the same time it individualizes its marketing strategies (Terrance, 2008). It embarks on building business alliances to improve its profitability and presence in the US market The company applies its values in all its activities American Express places customer’s interest first The company values teamwork in its operations while at the same it embarks on becoming good citizen in the communities it works Weaknesses Poor US and global business economy in 2007 resulted to lower earnings Poor debit card market, which is a major product segment Lack of adequate financial resources to face of the competitors in the market Question C. American Express industry analysis Within the US market, credit card usage is closely related to retail sales as well as consumer confidence in the economy. This implies that as the real disposable income increases, there is an improvement in the level of consumer confidence leading to spiking of sales among the card services firms. Another notable aspect that has made the cards industry to expand in US is the increased demand for credit and debit card usage. The table below indicates worldwide annual credit and debit card payment volumes. (Figures in $ billions) 2006 2007 2008 2009 2010 2011 2012 Debit card payment 1,000 1,100 1,300 1,400 1,500 2,000 2,100 Credit card payment 3,000 3,500 4,000 3,900 4,200 4,500 5,000 As indicated above, growth in the payment volume across the globe is important for US card companies. For instance, MasterCard earns approximately 61% of its revenue from foreign operations while Visa earns more than 45% of its revenue from outside markets. Based on the expanded services by American Express and other firms in the industry, the US card industry has continued to have a strong impact on local and foreign business operations (American Express 2013 Annual Report). The table below indicates the card industry statistics as in 2013. Industry statistics Amount ($) Total volume of US credit card purchase 2.05 trillion Total volume of US debit card purchase 1.64 trillion Average US household credit card debt 7,150 billion Total US outstanding revolving debt 847 billion Total US outstanding consumer debt 3.03 trillion Average number of credit card per consumer 1.96 As one of the major players in the United States card services industry, American Express has been successful in processing credit and debit cards on behalf of its clients including banks, merchants and other card issuing companies. Question D. Financial information of the competitors The three major competitors for American Express include Visa, MasterCard and Discover Network. Together with its competitors, American Express transfers funds across the globe through the networks as well as other authorized financial institutions. In order to ensure that the companies operations are continuous, the companies collect charges from their customers. The charges are split into a transaction fee and a discount fee. In terms of financial performance, American Express stands at the third position after Visa and Master Card. Visa Incorporation, which deals with credit and debit cards transactions, is the largest payment processing networks globally. The company which was listed in 2008 has continued to offer quality and competitive services that make Visa to remain competitive in the industry as compared to other American Express, MasterCard and Discover Network (Peter, 1987). On its part, MasterCard (MA) is in the second position and a major competitor of visa. MA major brand, Maestro debit network, makes it to be one of the most recognizable brands in the US market. In terms of purchase volumes, MA has the largest market share. Discover Network remains behind American Express although it acts as an alternative credit card network for quite a number of consumers. The table below indicates the performance of the four companies in the US market. Visa Master Card American Express Discover Network Global purchase volume in 2012 6.29tr 3.65tr 888bn 308bn Total revenue in 2012 10.4bn 7.5bn 34bn 7.7bn Number of cards in force 2.1bn 1.36bn 104m 52m Question E. Recommendations for American Express Base on the stiff competition in the US card industry especially from Visa and MasterCard, American Express should embark on entering the emerging market. It is vital to note that the demand for credit and debit cards has been on the increase in the developing countries for example in the African and Asian countries. In this way, the company will be in a better position to exploit that market before the main competitors takes over. In terms of marketing, American Express should consider sponsoring of social events in US as well as in the growing markets. One of the strategies that have made a company like MasterCard to enjoy global awareness is sponsoring of social and cultural activities. The company should thus initiate sponsoring activities for example in the developing countries. In this way, it will create strong brand awareness especially among the young consumers in the developing countries who have turned to be great users of debit and credit cards. I also recommend that American Express diversify its brand portfolio. In this way, it will not only enjoy increased revenue, but it will also spread the risk among its brands. This will ensure that during poor business economy the company is not adversely affected. In order to meet the increasing demand for the cards in the exporting as well as importing countries, I recommend that the company establishes more outlets especially in the renowned airports. In this way, the company will attract high number of travelers to and from the targeted foreign countries. The company should establish partnership with the traveling companies in the third world countries where there exist quite a number of opportunities. Once it opens new outlets, it will be essential to undertake an extensive advertisement for example through the use of banners, competition, through traveling magazines and through television. These marketing strategies will ultimately expand the company market share. References American Express 2013 Annual Report, accessed January 19, 2015 Goldstein, D and Lee, Y. (2005). The rise of right-time marketing. The Journal of Database Marketing & Customer Strategy Management 12 (3): 12–25. Joanna, L. (2010). American Express Named as One of the World’s Most Ethical Companies for the Fourth Year in Row. New York: New York Press. Kerin, A. (2012). Marketing: The Core. New York: McGaw-Hill. Peter, G. (1987). American Express: The Unofficial History of the People Who Built the Great Financial Empire. New York: Crown Publishers. Terrance, H. (2008). SWOT Analysis American Express. Available from http://www.chainetwork.net/profiles/blogs/swot-analysis-american-express Read More