Citigroup Corporate Strategy

Be #1, Global Financial Services One-Stop-Shop Contrast Citigroup vs, Financial Specialist Firms.Costs vs. Benefits of One-Stop-Shop StrategyCoordination 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 MetricsTurnaround Strategy = Sandy Weill’s M&A

growth pattern: at Shearson, Commercial Credit,

Prime America, Travelers, Salomon Brothers, CTransfer Skills = Weill’s team, for 20 years; Bob

Lipp, J. Diamond (fired) F. Zarb & now R RubinShare Resources = Cross Selling Travelers and

Citibank products & services. Very Poor Start.

Citigroup’s Size, Scale and ScopeDid 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 IndustryConvergence 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 & EuropeSeveral M&A Deals = Immediately AccretiveGreat 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 InvestigationsCitigroup has low P/E Ratio & may go down. Credit Card write-offs and Weakening RetailLower Trading revenue and Invest Bank fees.Citigroup may be hit by Global Recession.

Citigroup’s 7S Framework

Citigroup Legacy IT Systems often InefficientCitigroup’s Mixed Strategies were Uneven.Citigroup’s Aggressive Management StyleIts two Superordinate goals: Size vs. Stock PriceIs Citigroup Size/Scope too Big to Fail, GloballyGovernments 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 MergersShould Citigroup grow via more AllliancesHas 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 Corporate Strategy Triangle

© 1999 The McGraw-Hill Companies, Inc.,

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Figure 7-1

Irwin/McGraw-Hill

VISIONVISION

GOALS & OBJECTIVESGOALS & OBJECTIVES

BUSINESSESRESO

URCES

Role of Corporate OfficeStructure Systems Processes

Corporate AdvantageCorporate AdvantageCorporate AdvantageCorporate Advantage

Competitive Advantage

ControlCoherence