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Alpen Bank: Launching the Credit Card in Romania - Essay Example

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The companies that issue credit cards however have to do extensive market research to determine the markets that are likely to be lucrative and those that are likely to respond slowly. Such market research…
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Alpen Bank: Launching the Credit Card in Romania
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Launching the Credit Card in Romania Credit card usage is a fairly recent phenomenon in many countries. The companiesthat issue credit cards however have to do extensive market research to determine the markets that are likely to be lucrative and those that are likely to respond slowly. Such market research depends on several variables. It’s not merely a derivative of the size of the middle class as many analysts at times easily attribute it. There are different cultures that respond differently to money. Some societies for instance might have a large middle class but at the same time have a ‘saving culture’. This is where people prefer to save patiently then spend rather than use credit services that can at times come at a premium. All these are factors that the head of Aspen bank must have considered before presenting his idea to his boss.
Broadly defined, the financials of any company are the financial tools with which you can measure the well being or not of a company. These financial statements can take the form of balance sheets and so on. The segments under consideration here are the middle income earners, the affluent and the most affluent. The financials used are income statements, statements’ of cash flow, sales revenue, discounts, cost of goods sold, expenses and even a balance sheet.
For any business, breaking even and eventual profitability is the main aim. Breaking even is when costs equal expenses. Alpen would spend eight million Euros a year on the affluent segment. This includes advertising, overhead costs and billing on 50,000 affluent customers in a year. Every affluent customer would in turn bring in on average 5,000 Euros each year. All would therefore bring in 250 million Euros a year. .In the affluent segment, Alpen would break even after a year in operation.
The most important factor to note is that the net spending on each customer in each category is directly proportional to their income. For instance, the middle income rakes in 3000-4500 Euros on average annually while their interest revenues and other revenues are small as a result. The most affluent on the other hand bring an income of 6,000 Euros each year. On the other hand, their interest revenues and other revenues are higher.
It is also very clear that targeting only one market segment at a time would result in a downgrade of the expectations. For instance, there is not one market segment that would, on its own bring profit. The best approach is to introduce the product to the different categories of consumers all at once. This way, some costs such as advertising could be shared. If introduced to the market differently, it would be a waste of these kinds of resources that could be shared.
The last chart also clearly shows the untapped potential that resides in Romania. It is the country with the lowest number of credit and debit cards per household. There is only one card per household in Romania while there are five in Croatia, the most of any Eastern European nation considered. This shows that the only way as far as card uptake in Romania is concerned can safely be assumed to be upwards. The number of accounts and customers continues to grow too, although at an anemic pace.
Carle needs to go ahead with his plans. Romania is ready for the credit card business. All indicators are positive, the most encouraging being that the surface as far as credit card uptake is concerned has barely been scratched. In such cases, the earlier the better. After all, Romania is entering the biggest economic club in the world, the European Union and its customers shall need to share some of these financial services that are already awash in the rest of the continent.
Kasturi Rangan, Sunru Yong. ‘Alpen Bank: Launching the Credit Card in Romania’.Brief Cases May, 19,2010: 8p.Harvard Business Publishing Read More
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