Introduction China entered the World Trade Organization (WTO) in 2001 and immediately experienced rapid growth. China was also experiencing problems with state owned enterprises and large debts. State banks needed radical reforms. Chinese banks did not manage Pension funds properly and subsequently were unable to collect a major portion of loans that made up state owned enterprises. Citigroup took advantage of China’s financial shortcomings and seized the opportunity to expand Citigroup’s services in China by offering investment banking and personal financial planning. Citigroup Displays Environmental Adaptability in China?
Citigroup has displayed environmental adaptability in China. Citigroup’s goal is to “grow our market share over the next five years through or embedded bank strategy” (Pearce and Robinson, 2004, p. 18). Through “strong brand equity”, which is Citibank’s strategic marketing approach has also led to the expansion in China. The following reasons display Citigroup’s environmental adaptability and expansion in China: ? Citibank had an emerging markets and global advantage; ?Citibank had been in the foreign market for 100 years; ?Due to Citibank’s experience in volatile markets created a level of operational expertise; ?
Citibank had the reputation unlike other banks to move in early with the intent to stay. Employees were seconded to central banks. Technology was transferred. Locals were trained. ?Citibank groomed the politicians which lead to the expansion of Citigroup in China; ? Citibank technological was “ahead of the curve” with respect to technology and innovation; ? Human resources practices were broadly perceived as a powerful competitive advantage; ? PBOC chose Citibank to improve internal auditing with the domestic banking system that lead to Citibank’s accounting practice in China. ?Citibank served global companies globally; ?Citibank was a one-stop shop for consumer financial services; ?
Citibank’s joint venture strategy” (Pearce and Robinson, 2004). Facts that Citigroup Did Not Display Environmental Adaptability in China A major task in strategic management is to assess the company’s environment. Citigroup did not assess the company’s environment and therefore did not display environmental adaptability in its attempt to expand operations in China. Citigroup possessed the necessary licenses to provide corporate banking services and foreign invested enterprises in certain cities that were open to foreign banks.
Citibank needed licenses from the Central Bank in order to expand their business to more cities in China and grow into a more lucrative business. Citibank took pride in being one of the first foreign banks to get its “foot in the door” in China, which would help them to be the first to expand to other cities in China. The two political groups that Citigroup had to deal with was China’s regulatory agency, People’s Bank of China (hereinafter referred to as PBOC) and the State Owned Banks (hereinafter referred to as SOE’s). The bureaucrats who ran the PBOC made many of the financial decisions.
“Should the PBOC felt that Citigroup was too large, too ambitious or too successful in China, it might respond by putting the brakes on Citigroup’s China expansion plans and giving early licenses to smaller, less threatening foreign financial institutions instead” (Pearce and Robinson, 2004, p. 4). The PBOC and several restrictions from the WTO made it very difficult for Citibank to expand its operations in China. Conclusion Citibank’s strategy is as follows: “Build on what the bank was already good at and on what was already profitable” (Pearce and Robinson, 2004, p.18).
In today’s change-or-die business environment, companies that achieve the highest levels of performance are “robust organizations”–those that adapt quickly and without losing their strategic direction. Citigroup senior executives established a good working relationship and rapport with the PBOC that lead to Citibank becoming the first foreign bank to deal with Chinese customers. “Other divisions of Citigroup would need to develop China strategies” (Pearce and Robinson, 2004, p. 4).
Citigroup operated in an increasingly complex environment that demands adaptability and innovation. Citigroup has developed effective strategies to sustain and grow their business while serving a more diverse constituent group. Due to Citigroup’s competitive advantages, strategic financial approach, from corporate governance to regulatory compliance, and to defining their customer base displays an environmental adaptability in China. References: Pearce, J. and Robinson, R. 2004. Strategic Management: Formulation, Implementation, and Control, 9e. The McGraw-Hill Companies.