Citi-Fudan University Banking Courses 2011

Term Assignment Paper Spiritual Takeaways

Edwin Kheng Wei Zhong ID: 11210690772 8 Feb 2012

Overview

One condition that was imposed on China for its admission into the World Trade Organization (WTO) in 2001 was that the domestic banking market would be opened to foreign players. Thus, the central government of China agreed to fully open the domestic market to foreign banks within a time span of five years. Post WTO

admission, the Peoples Bank of China released the detailed schemes for the openingup of the financial sector, which would be separated into phases. The main motivations of the phasing-in approach that has been adopted by the Chinese government have been understood to buffer off presumably large shocks to the domestic banking market and domestic banking institutions, borrowing time to address Chinese banking system reforms and safeguarding the stability of Chinas financial system.1 Regardless of the phasing-in system, the past decade have seen foreign banks entering China at an unprecedented pace.

A decade after Chinas WTO admission, the banking sector in China is characterized by a myriad of both local and foreign banks. According to the China Banking Regulatory Commission (CBRC) annual report of 2010, there are currently 40 foreign banks, which in total make up a mere 2 percent of the overall Chinese banking sector. In contrast, the big 4 local banks (Industrial and Commercial Bank of China, Agricultural Bank of China, Bank Of China and China Construction Bank) and the Post Office Bank make up 51 percent of the market. These statistics show that although China has slowly opened up its domestic banking market to foreign players, foreign banks still have a long way to go before they can be on par with local banks in China, and this would only occur in progressive steps as the CBRC and the Chinese government modify and relax current policies and guidelines.

Citibanks Presence in China

Citibank (China) Company Limited was one of the first foreign banks to incorporate locally in mainland China in 2007 although the Chinese unit of Citibank has been operating since 1902, being the first American bank to establish operations in China. Due to Chinas entry into the WTO, CBRC announced in December 2006 its approval for foreign banks to start preparatory work for local incorporations in mainland China and Citibank was one of nine foreign banks to have applied for the incorporation. Upon incorporation, its subsidiary Citibank (China) was founded in April 2007.

Today, Citibank (China) has a growing presence along the North-East and South-East of China, spreading across the eight provinces of Shanghai, Beijing, Guangzhou, Shenzhen, Chengdu, Tianjin, Hangzhou and Dalian. In addition, it is one of only five non-Chinese banks that can locally issue UnionPay debit cards and as of February 2012, the only foreign bank authorized to issue credit cards in China, giving it a competitive edge in the credit/debit card industry.

Philosophy of success

In my opinion, there are the five aspects for Citibanks success: Diversity and Inclusion Strategy Adaptability Improvement through Innovation

 Customer- Centric Approach and Commitment Leadership Development

Valuing Diversity and Individual Talents

Citigroup (parent company of Citibank) has the world's largest financial services network, spanning 140 countries with approximately 16,000 offices worldwide. The company currently employs approximately 260,000 staff around the world and holds over 200 million customer accounts in more than 140 countries.

Having access to and retaining talent from a worldwide diverse labor pool is key to gaining a competitive edge in the global marketplace as the cost of replacing a skilledemployee in todays knowledge-based economy is high. Employee departures cost a company time, money, and other resources. Research suggests that direct replacement costs can reach as high as 50%-60% of an employees annual salary, with total costs associated with turnover ranging from 90% to 200% of annual salary.2 Multiply that cost by the rate of attrition and cost would be significant enough to impact the bottom line. For Citibank, the compensation policies and career progression is based on meritocracy and unbiased, which provides a fair environment for all employees to strive hard and climb up the corporate ladder. The global pool also provides overseas exposures that serve to keep employees engaged and mentally challenged. In addition, diversity promotes cross-cultural learning which enables employees to further value-

add to Citibank as they gain new skills and knowledge. In short, a dedicated and skilled workforce gives Citibank an edge in todays intense banking services economy.

Adaptability

The Chinese banking landscape is still tightly regulated. Thus, foreign banks that wish to tap into the market must thus be willing to work closely and in-line with the governments directions, sometimes at the expense of certain policies that may not be in-line with their headquarters. For example, Microsoft complied with the censorship criteria of the Chinese government so as to operate their search engine Bing in China, in a manner that both respects local authority and culture.3 One may question the integrity of Microsoft but in my opinion, Microsoft was just being adaptable and practicing localization in its operations when it operates in the Chinese internet space. This adaptability is also seen in the case of Citibank. Before its formal incorporation in 2007, Citibank has always maintained business relations with China and its brand in the Chinese market. This goodwill was most probably one of the factors for the early success of Citibanks local incorporation. After incorporation, Citibank (China) has always worked closely with government policies on areas such as Corporate Social Responsibility (CSR) and education, by contributing actively in volunteerism, environmentalism and providing financial education.4 CSR provides both the Chinese government and Citibank (China) with a win-win situation: Chinas societal problems are alleviated while Citibank not only improves its brand but also its staffs

organizational commitment and retention.5 Besides the regulators, adapting to the ever-changing Chinese consumer demography is also a success factor for Citibank (China). In the past few years as the economic development lifted millions of ordinary Chinese citizens out of poverty, Citibank (China) was able to introduce new financial products and services that serve the emerging middle class. This allows Citibank (China) to not only remain relevant but also to increase its market share and brand awareness.

Improvement through Innovation

The significance of continuous improvement goes far beyond the quality movement. It is about organizational renewal and efforts to prevent organizational ossification.6 For Citibank (China), continuous innovation is the key to improving the companys product and services. For example, Citibank (China) cooperated with Mobile Mobey Ventures to offer the first browser-based mobile banking solution of its kind in the Philippines, a country that boasted a huge base of mobile phone users, which allows customers to securely manage their banking needs from their mobile handsets at any time and from any location.7 Innovation is also seen in the e-banking segment, in which Citibank (China) won the Asian Banker 2010 award for the best e-banking project.

Customer- Centric Approach and Commitment

Success of a service provider depends on the high quality relationship with customers 8 which determines customer satisfaction and loyalty.9 Research has shown repeatedly that service quality influences organizational outcome such as performance superiority, increasing sales profit and market share, improving customer relations, enhance corporate image and promote customer loyalty. Furthermore, service quality and customer satisfaction were found to be related to customer loyalty through repurchase intentions.10 For Citibank (China), delivering quality service to customers is a must for success and survival in todays competitive financial services industry. Citibank (China) has developed comprehensive customer-centric programs that aim to provide customized solutions to customers as a one-size-fits-all customer strategy no longer works. Banks need to serve the rapidly diverging needs of all markets: aging baby-boomers, time-stressed mid-lifers and younger technophiles.11 For example, Citibanks Smart Banking consumer outlets in Shanghai and Beijing allow for on-thego banking experience by utilizing state-of-the-art digital devices. This unique experience is carefully designed around the customer, leveraging technology to firmly put the customer's experience centre-stage. Through such investments, Citibank (China) shows its commitment to providing the best there is for its customers.

Leadership Development

Citibank won the 2011 Asian Banker Award for Talent and Leadership Development,

which shows the organizations commitment to nurturing and empowering highcaliber individuals to take leadership roles within the bank. The Summer Internship, Management Associate Program and the Global Markets Associate etc. are all designed to equip promising graduates with advanced training and exposure, giving them the opportunity to explore multiple business areas through the rotation in front, middle and back office. Besides the diversity of learning from on-the-job trainings, senior management would be assigned by mentors to provide career development guidance. Employees are also exposed to the ideas and perspectives of Citibankers from other countries, either through working with them locally or by serving on multinational and multifunctional client service teams. A talent management system such as Citibanks allow for leadership succession from a pool of in-house globalized and experienced executives, who are able to lead in-line with the organizations direction, ensuring continuity in the upper management policies.

Conclusion

In this paper, I have strived to identify the core strengths of Citibank, its philosophy of success in sustaining a leadership position in todays competitive banking marketplace. Being a world-renowned financial service provider, Citibank's success, both worldwide and in China, is due in large measure to the dedication of its people men and women recognized around the world for their professionalism and talents. In China, Citibank's reputation is its most valuable institutional asset, as it conveys

global diversity, integrity and respect for everything the bank does. The resulting expansion of business, intellectual, and cultural horizons enhances both

professionalism and personal accomplishments of Citibankers. As Citibank (China) continues to expand into new environments where people are of different demography and banking practices, its standard for business integrity and for respect for both employees and customers must be maintained and protected as consistent quality performance is at the base of continued organizational growth.

References [1] Liping He, Xiaohang Fan. Foreign Banks in Post-WTO China: An Intermediate Assessment [2] SHRM Foundations Effective Practice Guidelines Series Retaining Talent [3] Microsoft's Bing To Partner With Baidu, China's Search Behemoth. www.huffingtonpost.com

[4] 2010 Citi China Corporate Citizenship Report

[5] Chia-Chun Saprina Chiang, University of Nevada, Las Vegas. How corporate social responsibility influences employee job satisfaction in the hotel industry. [6] Robert E. Cole, University Of CaliforniaBerkeley. From Continuous Improvement to Continuous Innovation. [7] Mobile Money Ventures Teams With Citibank to Launch First Browser-Based Mobile Banking Offering in the Philippines. www.bloomberg.com [8] Panda, T. K. (2003). Creating customer lifetime value through effective CRM in financial services industry. Journal of Services Research, 2(2), 157-171 [9] Lymperopoulos, C., Chaniotakis, I.E., and Soureli, M. (2006). The importance of service quality in bank selection for mortgage loans. Managing Service Quality, 16(4), 365-379. [10] Caruana, A. (2002). Service loyalty. The effects of service quality and the mediating role of customer satisfaction. European Journal of Marketing, 36(7/8), 811-828. [11] Pat Russ, Global Practice Leader, Financial Services Industry. Customer relationship management in retail banking. EDS Viewpoint Paper.