Midterm: Analysis of E-Business - Case Study Example

Student Name: Tutor: Title: E-Business Mid-term Assignment-Case Study Analysis Institution: Due Date: Table of Contents Table of Contents 2 The impacts of the internet on the competitive landscape of corporate banking 3 What Citibank done to differentiate its e-business products from those of its competitors. Evaluation of Citibank’s Differentiation Strategy 5 Evaluation of Citibank’s Differentiation Strategy 8 What Citibank can do to create competitive advantages 10 How Citibank has successfully converted its traditional money management business into e-business. Issues that a company like Citibank can take into account to ensure successful implementation during the process of transforming traditional assets to digital assets 12 Actions Citibank has taken to serve the needs of two very different markets, MNCs and SMEs. 15 Bibliography 17 Question 1 The impacts of the internet on the competitive landscape of corporate banking The emergence of the Internet technology has resulted in both opportunities and threats for banking executives. This implies that managers who are capable of leveraging some of the competitive benefits from the Internet technology are significantly confronted with business potentials. Today, the Internet has deeply transformed traditional relationships and the associated services in the banking industry. The overall competitive landscape, individual and business requirements, technical as well as standards infrastructure have shifted due to the increased Internet applications. It is important to note that the impacts associated with the use of the Internet on banking industry as well as internet banking as the main source of corporate’ competitive advantage, have to a larger extent turned out to be the challenging issues for educational and business managers (Idowu et al., 2002). The Internet has developed into a commercial technology applications through a broad spectrum of the business people who are involved in E-Commerce. Therefore, the significance of E-Commerce is achieved through enhancing communication and the transactions carried out with customers, suppliers, government regulators, business partners as well as the public at large. This is ultimately moved towards electronic marketplaces where both goods and services are reachly transacted over the Internet, where a many areas in banking have been affected due to the changes in strategic decision-making within the financial institutions. Furthermore, technology has changed the expectations and needs of customers that imposed a challenge on the banking system to shift its traditional potentials to the internet in a manner that would increase the value of its customers (Simpson 2002). Web-enabling access points that allow the customers to have seamless connections to the bank are one of the major expectations from the Internet. Another major expectation from the Internet application on the competitive landscape of corporate banking is developing a new global infrastructure that can deliver both products and services online. For example, the integration of products in some news at Citibank changed its corporate activity strategy from decentralized strategy to centralized activities in order to attract more customers across the globe. In 1997, Citibank emerged as the most profitable banks within the US, and thus the bank did not value changing its traditional services, for instance, treasury market services, transactional and corporate finance when a centralized type of operation was introduced throughout the world. However, the Internet enabled most customers to have smart objectives and demand a lot from their banks. This forced Citibank to shift from its traditional financial practices to e-space where collection of payments is done online (McCauley & Khan 2002). Apart from the corporate customers, the middle-market companies as well demand for internet-based services. For example B2B market and sophisticated clients demanded for electronic invoicing, online payment guarantees, non-repudiation of all the transactions as well as automatic application of the payments made to accounts receivables that could work best with the digital receipts to be stored in archives. However, most of the Multinational Companies (MNCs) have over time developed some new internet-based applications to carry out their business activities (Gupta & Govindarajan 2000). Question 2 What Citibank done to differentiate its e-business products from those of its competitors. Evaluation of Citibank’s Differentiation Strategy Citibank has a vision to become leading e-business enabler in the world. This is aimed at empowering the local, regional, global customers as well as B2B2C marketplaces in providing solutions and the opportunities created by the e-commerce activities. Citibank has differentiated itself from the competitors by utilizing its customer service effectively, where several services are offered to their clients. For example, telephone hotlines, service experts, managers of customer relations to enhance individual attention to their customers are core services offered at Citibank. The bank has also continued to invest in technology for front and back-end banking systems. Citibank is committed to e-business strategy-Connect, Transform and Extend as a way to web-enable its core services, develop some integrated solutions as well as reach new markets. Besides being committed to both employees and customers across the globe, Citibank also has strong brand recognition as well as a continuous investment in technology. In order to position itself strongly in the sector of technology, Citibank decided to form alliances with the Oracle, Commerce One, SAP AG, Wisdom Technologies, Inc and Bolero.net” to enable transform its company management to an e-business model. This means that Citibank's strategy largely focused on alliances in addition to the application of its partners' strengths. It is apparent that Citibank partnered with those companies which had complimentary technology or associated infrastructure in accessing markets. The key technology partners of Citibank include Oracle, SAP AG, Wisdom Technologies, Commerce Inc., and Bolero.net (McCauley & Khan 2002). CONNECT Web-enable Citibank’s core services to connect with all its customers. The main motive of this goal was to acquire more channels to reach Citibank, and thus the Internet enabled Citibank with the flexibility to meet the demand. For example, CitiDirect was purposely designed for the corporate customers to carry out full transactions on-line and anywhere cross the world. On the other hand, TRANSFORM represents the full collection of Citibank's capabilities to provide integrated solutions. In this case, transactional processing, for instance, cash management, trade finance as well as derivatives are the major back-office activities which are basic and repeatable processes. Lastly, EXTENT Reach to new markets, customers and products, shows that developing a new global infrastructure provided Citibank with the opportunity to deliver its e- products at scale that is more quickly and efficiently to its customers in addition to some capability improvements that concerned worldwide customers. Therefore, Citibank's priority was to shift all its corporate customers on CitiDirect to stop working old or the legacy systems. Since the bank faced with difficulties to stop working with the legacy systems so they offer services through the use of legacy systems for the conservative SME customers (Gurau 2002). Citibank-Differentiator’s global reach is achieved through factors such as commitment in country to the same degree that the local indigenous banks do in addition to the local commitment, global reach and expertise. Citigroup focused on creating products which catered to various industries and business needs. This has been achieved by taking appropriate actions, whether the bank was to create e-business groups or invest huge amounts of money in the online technology. Business clients, however, demanded for an online product to streamline and improve the traditional payment processes.  From the case study, it can be examined that customers demanded for electronic invoicing, automatic use of payments made to account receivables, some online payments guarantees in addition to the digital receipts accumulated online.  The rest of other requirements include the multi-currency imbursement management and compensation by invoice and currency.  The strong brand name of Citibank is considered as a resource which transforms into increased trust, making it a trusted provider especially when competing with the Deutche Bank as well as other competitors (McCauley & Khan 2002). Evaluation of Citibank’s Differentiation Strategy Based on the SWOT analysis, it can be examined that the strengths of Citibank’s e-Business strategy include global reach, local knowledge, strong brand, the leading bank in online security and committed to the delivery of innovative e-Commerce services and banking infrastructures. Citibank is also committed in the enhancement of the global reach for the online transactions, partnerships and success of the CitiDirect as a corporate banking platform. In addition, Citibank has transaction processing capabilities within over 100 countries. This is coupled with large capital based facilitated by the CEO-level of strategic commitment to outrival in e-commerce services. The weaknesses include the challenge of serving MNCs which requires custom built host to host type of product interface. It can also be observed that SMEs are not ready for the web-based solutions. The connectivity from bank to corporate is considered a biggest hurdle to enable a straight-through processing within the treasury and cash handling across organization borders. Furthermore, Citibank is not capable of matching of technology companies through the use of technological expertise as well as interests to provide some new services (Gupta & Govindarajan 2000). Some of the opportunities of Citibank include corporations which approach the bank and show their participation interest in the development of e-solutions. For example, the B2B market with clients who are searching for ways to streamline as well as improve their traditional processes of payments. Additionally, some clients are demanding for electronic invoicing, online payment guarantees and automatic application of the payments made to accounts receivable are the key opportunities that promote the corporate banking services of Citibank across the globe. However, there are threats limiting the provision of corporate banking services by the bank. For example, Deutsche Bank and ABN AMRO are making efforts to develop their product ranges. Citibank is also faced with stiff competition from the International Cash Management (ICM) companies. This creates difficult operating environment in which there is pressure of both revenue and earnings growth in intensifying the Citibank’s cost reduction efforts. Today, there are many competitors offering single web-enabled platforms, insecure business environments due to the outcry of the subprime mortgages. Some smarter and tougher clients also expanded their business activities globally, and thus became e-enabled. This forced most banks to shift from their traditional practices to e-space, demanding for extra range of services. It is important to argue that some of the MNCs cannot wait for the banks to develop their web-enabled financial products for them to build their own systems. This implies that new technology requires key investments in risk and technology services and people where some banks are not ready and capable of making Management Information Systems (Wilder 2008). Citibank also offers an array of some integrated investment options on multiple channels, such as automatic orders, branch services as well as online services. Furthermore, Citibank creates a central point of agreement to aid investment transactions within every main region. This has been achieved through bank’s network of the Liquidity Desks. The Online Investments carried out by Citibank is a global, secure and web-based system that allows customers to access a range of short-term investments by use of its award-winning as well as web-based platform for electronic banking and CitiDirect Online Banking which has been replaced by the Treasury Vision. This portal enables customers to dynamically manage their own short-term investment portfolios with fewer amounts of expediency and efficiency. This means that Citibank has been able to combine the advanced cash-management system with its own worldwide investment network in providing a powerful yet suitable way for all customers to invest (McCauley & Khan 2002). Question 3 What Citibank can do to create competitive advantages The most important question, however, is whether or not the global reach strategy or value turns to be a competitive advantage that translates into extra profits. Although Citibank meets the needs of their customers within the field of information technology, what matters most is how unique is their products and services? Cutting of edge technological strengths can be considered hygiene factors needed rather than perceived as a competitive advantage. The two do not necessarily become eligible for differentiation or competitive advantage. It is important to note that within a business environment where transformation is inevitable and competition is tough, Citibank requires a distinctive strategic direction which can create competitive advantages which cannot be easily replicated by the existing competitors. Additionally, Citibank should make its transformations on the global scale. This will enable the bank to deliver its e-business strategy as well as create a business culture that would embrace the e-banking concept as a key aspect of the highly integrated e-business in a rational budget (Wilder 2008). Potential growths within e-business are the common existent and continued developments of e-commerce. Citibank must, therefore, continue to align itself with the right partners so as to maintain their reputations in the e-business sector. This implies that for Citibank to have a continuous growth, it must develop within its e-Business model as well as create constant updates to all its online products. Some of the basic opportunities for Citibank are to expand on their widely spread good reputation, exceptional customer service and improved web features. Citibank should create a locally based capacity to enable it identify the burgeoning market dynamics. As a result, the strategic partnership focus of Citibank will favorably position it to acquire higher levels of the market knowledge transfer between other business units, domestic and international operations. The management of Citibank can as well introduce socialization mechanisms so as to facilitate knowledge flows into a corporate parent as well as other units (Essinger 1999). Question 4 How Citibank has successfully converted its traditional money management business into e-business. Issues that a company like Citibank can take into account to ensure successful implementation during the process of transforming traditional assets to digital assets For Citibank to transform all its traditional assets into some digital assets, it should first create the departments required to manage the process. The formation of Internet Operation Group in Citibank was focused on distributing some Internet activities among e-Citi and the entire business units. Furthermore, Citibank developed the e-Consumer and e-Business segments that were designed to introduce the Internet within the all the customer and corporate banking operations. The bank also included e-Capital Markets and e-Assets Management. The e-workplace was a tremendous boost to Citibank when transitioning from the traditional way of doing business to the electronic way.  The e-Business model entails constant attention to improvement in order to make more upgrades. This indicates that The Internet business model is not a system that can be lightly managed. On the other hand, consumer demands calls for regular attention given to development needs which revolve around the consumer deliverables (Andal-Ancion, Cartwright & Yip 2003). Porter’s two main approaches for a company to compete either on cost advantage or differentiation. Citibank decided not to base its competition on price, but instead based its competition on differentiation. Since several other companies provide similar products and services, Citibank directed its differentiation strategy on customer service. In traditional point of view, this involved providing telephone hotlines and relationship managers who are familiarized with the clients' needs, the consultants in products who rendered service expertise and the most significant, a constant investment in technology in order to support the front-end and back-end electronic type of banking systems. Therefore, Successful transformation of the traditional assets into digital assets requires companies such as Citibank to maintain or augment its differentiation. Since the Citibank’s differentiation strategy is based on the customer service, it implies that during the change from traditional assets to digital assets, Citibank or any other company must have a continuous and high responsive approach to the current and future needs of their customers, and thus must implement this to an advanced level than the competition (Large 2001). One of the major ways through which Citibank achieved a shift from the traditional to digital management was by forming alliances with technological companies such as the Oracle, Commerce One Inc, Wisdom Technologies, SAP AG and Bolero.net. Initially, Citibank invested huge amounts of money on its own many areas of e-business. However, technology is not an area of expertise for Citibank. Thus, discovered dealing with the regularly changing technology as an expensive and great effort, which the company ultimately lost. In 2000, Citibank had already changed its common strategy to one of the garnering alliances as well as using the strengths of partners to develop the technological infrastructure which the company required to access markets in addition to meeting its customers’ varying demands. This is a clear indication that operating through alliances widely reduced Citibank's risks and the associated. The company raised its effectiveness which allowed it to maintain its flexibility in meeting the varying technological and the high customer demands (Wilder 2008). The transaction processing, for instance, cash management, derivatives and the trade finance were the main bank-office activities identified not to be at the forefront of the Citibank customer’s minds Transform phase of the e-Business strategy. During the traditional transaction period, transaction processing for the corporate customers was the function of bank-customer relationship. However, with the global presence, Citibank managed to translate to a big transactional business. This was important in supporting over 200 data centers that involved in basic and repeatable processes. Through regionalization, Citibank carried out its transformation process by consolidating all its data centers in each country and shifted them to Singapore. The data used were centralized and systems developed to handle the automatic processing of Citibank’s transactions. For operations management, Citibank introduced the regionalization of both cash and trade which made the bank to completely focus on the process. However, one of the major obstacles hindering Citibank to migrate its customers from the traditional transaction to digital service provision involves meeting their highly seated concerns on security (Andal-Ancion, Cartwright & Yip 2003). Question 5 Actions Citibank has taken to serve the needs of two very different markets, MNCs and SMEs. Citibank extended a strategy for its own corporate banking business, and thus its target corporate client base incorporated MNCs, financial institutions, local corporations, government sectors and SMEs. Therefore, through its Extend phase of e-Business strategy, Citibank has been forced to contend with difficulties faced in shifting the customers from relying on traditional means to utilizing the newly developed products and services. This means that Top-tier MNCs and SME are the key corporate clients of Citibank. Initially, Citibank did not focus on SME until in 1997 when it considered the SME segment as well as introducing CitiBusiness. Although MNCs operating e-business exactly were aware of their needs, SMEs that were interested in e-business presence seemed not to be sure of how they could move forward. At this time Citibank was still delivering its services by use of legacy systems, especially for the conservative SME customers. This was a simultaneous delivery because at the same time, Citibank was serving the global customers, for instance, MNCs that highly demanded to transact via the Internet. Citibank has realized that building the customer’s trust within the web involve a long education process. Therefore, encouraging the conservative customers to utilize CitiDirect, Citibank included the pricing incentive scheme in its plan to build the global strategy (Gupta & Govindarajan, 2000). The various financial services offered by Citibank across the globe makes it easier for the bank to cater for both MNCs and SMEs. Initially, only the financial institution such as Citigroup, with huge capital could venture in a similar ambitious endeavor of catering such groups identified with different needs. Although SMEs relied more on direct relationship and trust, MNCs always demanded for IT systems which are secured, fast and individualized. Therefore, Citibank has taken a step to address the MNCs’ needs by providing a secure platform that adapts to their local as well as global needs, offering fast and worldwide capabilities. This means that by offering the required online fraud and personality theft protection in addition to educating MNCs the value of online real-time banking, range of reports and information as well as the convenience which could be easily achieved are Citibank’s ways of encouraging MNCs to identify the significance of e-banking. Citibank also applied the Classic disintermediation strategy based on direct relationship between the supplier or customer and information intensive. On the other hand, SMEs have poor view of the significance of the Internet, while others lack the needed infrastructure to access the Internet Service Provider (ISP). As a result, the strategy of Citibank follows with SME to develop their trust by providing a combination of a face to face and the technology based services as well as offering rewards as the business develops into a complete online institution. Citibank introduced the Citi-business that offered products and services like internet banking, foreign exchange and trade asset-based finance. This included a customer centre, document collection as well as citifax and the citibusiness direct that provided the required online account information. Apparently, by providing SMEs with free internet access and a custom-made internet site easy to build, access and manage could be an ideal suggestion for Citibank to partner with SMEs in e-banking service provision (Gupta & Govindarajan, 2000). 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