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SM American Express Card

SM American Express Card

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Published by Prashant Chaturvedi

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Published by: Prashant Chaturvedi on Sep 09, 2012
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08/26/2014

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A CASE STUDY ON AMERICAN EXPRESS

SUBMITTED TO: PROF P.K.SARKAR

SUBMITTED BY: BIKRAMJIT SINHA (51) MUKESH MISHRA (62) PRASHANT CHATURVEDI (66) SHIVAMKAPOOR (77) RAJIV PATHAK (69)

CASE HISTORY
• Ken Chenault is new the CEO of Am Ex and is planning to go on a credit card war with Master Card and Visa by issuing their own range of credit card to a niche segment of customers all over USA. Visa and Master Card alone hold 79% of market share. They get an opportunity when the a new law was formed that banks will not support their competitors. Their strategy is very simple – to get the customers, improvise and maintain their customers. The research shows that Am Ex can get a lot of market share and profits by this strategy. With every 1% increase in credit cards their communication cost will increase by 1.5% and the ROE will be 20% a big boost, so if more cards will be issued than more the firm will lift. They had another competitive advantage that being one of the most profitable banks in the world they have maintained the firms financial position and have lifted it towards profit with this strategy which has turned out to be $100Bn for the second quarter. They also got a supporting edge of MBNA who is the largest distributor of credit card all over America.

ABOUT THE COMPANY • • • • • Also known as AmEx Diversified global financial services company Headquartered in New York City Founded in 1850,as part of Dow Jones Industrial Average Worth US $ 14.97 billion

ABOUT THE CASE • Case is about American Express credit card launch to steal the market share from their competitors-Visa and MasterCard. • It stresses on the strategies adopted by AmEX to capture the market. • Case talks about the ideas to make AmEX Cards stand out among 848 million circulating in U.S.

CORE PROBLEMS FACED BY AmEx • The whole matter was how to share from one another, being innovative, and to tap new markets. Even after holding a card, American consumers were still using cash or checks to pay for about 59% of the $8.2 trillion a year they spend on everything from housing to hamburgers.

• AmEx was facing a challenge on its own fees.

CORE PROBLEMS

• They had to gain market share without allowing their margin’s to shrink too much.
• They had to coax enough extra merchants to accept his card and pay his extra fees. • AmEx had to persuade banks to let him offer AmEx’s financial services alongside their own.

CORE PROBLEMS

• Visa and MasterCard were also providing a great competition to AmEx as they were everywhere AmEx wanted to be. • Small merchants filed an antitrust suit alleging that AmEx charges excessive fees. And this appeared to be a great headache for Chenault because AmEx gets about 65% of its card revenues from merchant fees.

AmEx game plan

• American Express was fighting a huge credit-card war against industry giants Visa USA Inc. and MasterCard International Inc.

• Visa and Master together control-79%

AmEx game plan

• Firstly, “ Get more cards in people’s hand” ie they focused to increase there customer base. They persuaded banks to switch customers from Visa and Master cards to AmEx. • Secondly, “Target on cardholders who spend more” ie they focused on affluent class who can pay off their balances in full.

AmEx gam plan • Their marketing tool was their “reward program” ie cash rebates bonus points • They not only focused to sell their cards but also financial advices, insurance and investment products.

• They were also providing commercial cards to small business owners.

• Instead of debit card they wanted to introduced new prepaid/charge card which American may customaries for big events

• 1 Billion loss on junk bond was swallowed and cut risky corporate landing by half • In the wake of September 11, Slashed 14500 jobs, 16% of work force and outsourced 2000 technical job to IBM

ACHIEVEMENT • Before September 11, 2/3 of it card billing came from corporate T&E and 1/3 from regular consumer spending. But in 3 years the ratios were reversed

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