Date post: | 01-Dec-2014 |
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Mariette
Lena Pia Than
Abovici Flickschuh HochgernerRassadanuku
l
Launching the Credit Card in Asia Pacific
[2]
Content
Q.0: Breakeven Analysis
Q.1: To launch or not to launch?
Q.3: Where to launch?
Q.5: Achieving $100 M without launching card
How many customers does Citibank need to breakeven on its investments?
BREAKEVEN ANALYSISQ0
[4]
Breakeven Analysis: Assumptions
Targeting and market share between classes are same as Hong Kong (Table B)
Average revenue per customer (from Table B) = $162.65 Linear interpolation used for direct cost
$25 for 250,000 customers $7 for 1,000,000 customers Guessing the breakeven at 450,000 = $20.2
Acquisition strategy same as Singapore (Table A) Acquisition cost (from Table A) = $51.47 Direct cost applies to both new and existing customers Acquisition cost only applies to new customers Make two guesses, then take the average:
Same number of acquisition each year 250,000 in the first year, whatever left on the second year
[5]
Number of Customers 250,000 425,727 442,104 500,000 750,000 1 M 1.25 M
Avg Rev per Customer $162.65 $162.65 $162.65 $162.65 $162.65 $162.65 $162.65
Less
Avg Direct cost/cust $25.00 $20.20 $20.20 $19.00 $13.00 $7.00 $7.00
Avg Acquisition cost/cust $51.47 $51.47 $51.47 $51.47 $51.47 $51.47 $51.47
Total Direct Costs $76.47 $71.67 $71.67 $70.47 $64.47 $58.47 $58.47
Contribution – New $86.18 $90.98 $90.98 $92.18 $98.18 $104.18 $104.18
Contribution – Existing $0.00 $142.45 $142.45 $143.65 $149.65 $155.65 $155.65
# of New Customers 250,000 175,727 221,052 250,000 250,000 250,000 250,000
# of existing customers 0 250,000 221,052 250,000 500,000 750,000 1,000,000
New Contribution 21.5 M 16.0 M 20.0 M 23.0 M 24.5 M 26.0 M 26.0 M
Existing Contribution 0 M 35.6 M 31.5 M 35.9 M 74.8 M 116.7 M 155.7 M
Total Contribution 21.5 M 51.6 M 51.6 M 59.0 M 99.4 M 142.8 M 181.7 M
Fixed Cost: Infrastructure 35 M 50 M 50 M 50 M 75 M 100 M 115 M
Profit/Loss before Advertising (13.5 M) 1.6 M 1.6 M 9.0 M 24.4 M 42.8 M 66.7 M
Advertising 1.6 M 1.6 M 1.6 M 1.6 M 1.6 M 1.6 M 1.6 M
Cumulative Profit/Loss (15.1 M) $39 $38 7.4 M 22.8 M 41.2 M 65.1 M
[6]
Breakeven Analysis - Results The results were around 425,727 and 442,104 The average is 433,916 customers
In order to reach breakeven point,
Citibank must acquire approximately
430,000 customers in two years after launching
Should Citibank launch the card product? Why or why not? Support your decision with data (numbers).
TO LAUNCH OR NOT TO LAUNCH?Q1
[8]
Q1: To Launch or not to Launch? From the financial perspective
Assuming that the credit card gets 250,000 new customers annually (same as the table from Breakeven analysis)
0.25 Million customers on the first year, to 1.25 Million customers on the fifth year
Use the average of five year averages of each country for inflation rate = 5.6%
Net Present Value (NPV) = $94.4 Million Internal Rate of Return (IRR) = 118%
[9]
Q1: To Launch or not to Launch? From the marketing perspective
Many countries’ market are still underdeveloped Rapid growth in the ASEAN region High market potential Some markets are saturated or unsuitable, simply
avoid them
Citibank should launch their credit card product. The
potential is good from both financial and marketing
perspectives.
Which countries should Citibank enter first? Which countries should it avoid? Support with numbers and data.
WHERE TO LAUNCH?Q3
[11]
Q3: Where to Launch?
Thailan
d HKMalaysi
a
Population 55.0 5.6 16.9Urban Population (%) 20% 90% 38%
Urban Population 11.0 5.0 6.4
Target Population (%) 25% 85% 35%
Target Population 13.8 4.8 5.9
Growth 10.8 % 7.3 % 8.1 %
5 year Growth 7.2 % 8.4 % 4.2 %
Inflation 3.8 % 7.4 % 2.0 %
5 year Inflation 2.3 % 5.5 % 1.6 %
Politics B B B
Consumer Good Good Good
Competition Low High Medium
Launch as soon as possible (mandatory)
Thailand Everything’s
good Hong Kong
Regional financial center
Malaysia Almost all good
[12]
Q3: Where to Launch? Australia Indonesia Singapore
Population 16.5 167.7 2.7Urban Population (%) 85% 25% 100%
Urban Population 14.0 41.9 2.7
Target Population (%) 80% 7% 20%
Target Population 13.2 11.7 0.5
Growth 4.0 % 4.8 % 11.0 %
5 year Growth 4.6 % 4.2 % 5.6 %
Inflation 7.6 % 8.0 % 1.5 %
5 year Inflation 7.1 % 7.6 % 0.7 %
Politics A C B
Consumer Good Good Good
Competition High Medium High
Launch later, when the market condition is good (optional)
Australia Stable and large
market Indonesia
Potential future market
Singapore Future finance
center
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Q3: Where to Launch? India Philippines Taiwan
Population 797.0 61.9 19.8Urban Population (%) 23% 50% 72%
Urban Population 183.3 31.0 14.3
Target Population (%) 5% 30% 78%
Target Population 39.9 18.6 15.3
Growth 9.7 % 6.8 % 7.3 %
5 year Growth 6.1 % 0.5 % 9.3 %
Inflation 9.8 % 8.7 % 1.2 %
5 year Inflation 8.2 % 16.6 % 0.5 %
Politics C D A
Consumer Cash Good Cash
Competition Medium Low Restricted
Do not launch (avoid)
India Too
undeveloped Philippines
Too unstable Taiwan
Too soon Korea
Too problematic
[14]
If you choose not to introduce the card, what would you do to achieve the $100 million earnings target by 1990? What kind of branch banking products should the bank offer?
ACHIEVING $100 M WITHOUT CARDQ5
[16]
Q5: Achieving $100 M without card
Current: earning before tax (EBT) $69.7 millionwith $209.0 Million net revenue from fund
Target: earning before tax (EBT) $100 millionwith $299.9 Million net revenue from fund (linear extrapolation)
Have to earn $91 million more in annual revenue
[17]
Q5: Achieving $100 M without card
Market Development IPB – offer in more
markets Citigold – improve
or start new locations
[18]
Q5: Achieving $100 M without card
Market Penetration Citigold – acquire
customers Mortgage –
acquire customers/partners
Autoloan – acquire partners
[19]
Q5: Achieving $100 M without card
Diversification and Product Development Technology –
Internet and Mobile Banking
Insurances Financial – New
types of loans
Presentation slides available at:http://slidesha.re/citibankcase
THANK YOU!