Citigroup Corporate Strategy

 Be #1, Global Financial Services One-Stop-Shop

 Contrast Citigroup vs, Financial Specialist Firms.
 Costs vs. Benefits of One-Stop-Shop Strategy
 Coordination Costs for Citigroup to Become the # 1
Global Bank, Investment Bank, Brokerage Firm. Asset
Manager, Insurance Firm, etc.
 Costs vs. Benefits of Citigroup’s Global Diversification
& Financial Diversification. Increased or reduced
risk?
 Citigroup Uses 4 Corp Strategies
 Portfolio Strategy = Diversify Business Risks of
Each Financial Services Sector: Risk Metrics
Turnaround Strategy = Sandy Weill’s M&A
growth pattern: at Shearson, Commercial Credit,
Prime America, Travelers, Salomon Brothers, C
Transfer Skills = Weill’s team, for 20 years; Bob
Lipp, J. Diamond (fired) F. Zarb & now R Rubin
Share Resources = Cross Selling Travelers and
Citibank products & services. Very Poor Start.
 Citigroup’s Size, Scale and Scope
 Did Citigroup’s many decades of global banking
relationships and transactions experience in over 100
countries, build Trust, Local Networks & Real Power?
 What are Citi’s scale economies from strong balance
sheet: $901 Billion Assets & $260 Billion Market cap?
 Did Citi’s Scale reduce risk of govt loans, businesses?
 Do Citigroup’s scope economies in many financial
services = Real Touch Points in cross sell relationships
for corporate & individual clients? Or is it just claims.
 Did Citi’s wide foreign scope break legal boundaries?
Citigroup Value Migration Strategy
 Citigroup used its strong balance sheet and bank lending
power to muscle itself into bulge bracket investment bank
ranks for giant debt and equity issues and M&A Deal
Management. These generate higher margins.

 Is Citigroup trying to change the rules of the game in

M&A, Underwriting and IPOs of Investment bankers to
require high capital, for whole range of deals?

 Result: Merrill, Goldman, Morgan Stanley Credit

Ratings were revised to Negative on July 16, 2001
 Financial Services Global
Growth Drivers
 Demographics of Global Baby Boomers Retire.
 Huge Generational Transfer of Wealth.
Global Financial Services grows faster than
OECD nations’ economies.
 Governments Investment Barriers falling
 Consolidation in each Financial Industry
Convergence among all Financial Services
Citigroup’s Competitive Advantage
 Why is Citigroup positioned to take advantage of global
financial trends? Its Breadth, Depth, Size, or Relations?
 Each Financial Industry is fragmented but consolidating
fast in many countries = Citi’s Key Targets
 Citi’s Aggressive Growth Management Team is
opportunistic & cherry picks best deals at low prices.
 Citigroup’s Culture of continual cost cuts for efficiency
in infrastructure, staff, technology and productivity.
 Citigroup is producer and distributor of its own
Financial Services products, plus those of key allies.
 Sandy Weill’s M&A Strategy

For 30 years he used M&As of clones to grow.

Weill Kept Layering each acquisition on top in
Brokerage, IB, Consumer Finance & Insurance.
Weill Memo: “We’re Nowhere in International.”
Global Acquisitions. Mexico, Japan & Europe
Several M&A Deals = Immediately Accretive
Great Acquirer = Halo Effect = He Hits Targets
 Does Citigroup Exploit
Network Economics?
 Do Network Economics Exist in Financial Services
Industries? Yes at Mike Milken’s Drexel Burnham.
 Are they Customer-Centric Relationships for Cross
selling via Touch Points? Is it Auction community?
 Are they Technology Standard Setting based like
Microsoft’s enter-once securities back-office code?
 Are Segments of Financial Services Industry “Winner
Take All Markets”?
 If so: Which? If not: Why Not?
 Can Citigroup exploit “virtuous circle”& “Vicious
Cycle?” Dynamics of Network Economics?
 How Can Citigroup Exploit
Network Alliances?
Can Citigroup use its global base in over 100
countries and over 100 million clients as a
Network to Leverage positive feedback loops by
forming linked Corporate Alliances?
Which Alliance networks would be most
powerful and most sustainable for Citigroup?
Can Competitors form alliance networks to
counter balance Citigroup’s global reach?
Citigroup’s Focussd Competitors

Focused Specialists in each Financial Niche Try

to Dominate narrow business lines.
They Target Securities Processing, Custody,
Asset Management, Credit Cards, High net
Worth, Sub-Prime clients, Innovative finance.
They gain economies of scale from size.
Are Cutting-edge Specialists: Faster to Market
More Flexible, Less Rigid with Less Layers?
 Citigroup’s Risks & Weaknesses

No clear successor to Sandy Weill.

Citigroup has ongoing Criminal Investigations
Citigroup has low P/E Ratio & may go down.
Credit Card write-offs and Weakening Retail
Lower Trading revenue and Invest Bank fees.
Citigroup may be hit by Global Recession.
 Citigroup’s 7S Framework

Citigroup Legacy IT Systems often Inefficient

Citigroup’s Mixed Strategies were Uneven.
Citigroup’s Aggressive Management Style
Its two Superordinate goals: Size vs. Stock Price
Is Citigroup Size/Scope too Big to Fail, Globally
Governments will step in to bail it out of trouble.
Has Citigroup excess Staff in US & Abroad?
Citigroup’s Future Strategy

Should Citigroup keep growing by Mergers

Should Citigroup grow via more Allliances
Has Citigroup Optimized its Use of Internet?
Has Citigroup preempted #1 Global Role?
Is Citigroup business model Copy-able?
Has Citigroup Diversified Major risks away or
bundled its many risks? Or Both?
Citigroup: Limits of Firm Growth

What are limits to Citigroup’s Corp. Growth?

Should sections of Citigroup be sold or spun off
as separate businesses, like Travelers P&C?
Is the whole of Citigroup greater than its parts?
Has Citigroup achieved maximum synergies?
Is Citigroup’s Global One-Stop-Shop the most
efficient Corporate Structure?
Critical Linkages in the 7-2

Corporate Strategy Triangle Figure 7-1

Competitive Advantage

BU
S
CE

SI
UR

NE
VISION
SO

S
SE
RE

S
GOALS & OBJECTIVES

Role of Corporate Office

Structure Systems Processes
Coherence Control

Corporate Advantage

Irwin/McGraw-Hill © 1999 The McGraw-Hill Companies, Inc.,