Citigroup Case Study

Running head: CITIGROUP CASE STUDY

Citigroup Case Study

Citigroup in Post-WTO China

Lorenzo E. Pina

November 6, 2006

Abstract

This summary provides a debate of the Citigroup Corporation. The main arguments, debated by Team E, discuss whether Citigroup has displayed adaptability on expanding its operations into China. The conclusion summarizes Team E agreement that Citigroup has displayed environmental adaptability in its attempt to expand operations in China.

Citigroup Case Study

China has made it difficult for foreign banks to go into their country and offer their services by controlling their growth and only providing licenses for limited commercial activities. Citigroup, a premier foreign bank operating in China, has become one of the most successful financial services company in the world. This bank has outperformed and leads in the most profitable and attractive growth areas. With operations in more than 100 countries and over 268,000 employees, Citigroup's 2001 annual report provided an extremely optimistic view on the company's strengths in investment banking activities.

The privatization of state-owned enterprises (SOE) in China has provided an investment opportunity for Citigroup. Citibank, a branch of Citigroup, has developed a strategy for targeting strong SOEs by identifying 10 industries that will develop the fastest in a country and targeting profitable companies within those industries. Companies are chosen not only by their financial statement numbers, but also by the industrial sectors they are in and the qualities of the management team.

Adaptability to Expand Operations in China

Several factors illustrate Citigroup's attempts to display its adaptability into expanding its operations into China. The company's primary strategy is based on the achievements accomplished by Citibank. Citibank was one of the first foreign firms to obtain licenses to conduct a limited range of commercial activities in China. Citibank's current global network is large enough to conduct business with several of the most powerful corporate businesses in the offshore market. In relation to technology and financial innovation, Citibank is known to be 'ahead of the curve' and perceived as a top market bank in the United States and internationally. Through the years, Citibank has won numerous awards for providing better corporate banking services than other local banks.

Citibank's attempt to expand into China can be based on the previous accounting practices experience it had with this country. Citibank previously worked with the Public Bank of China (PBOC) "to improve the internal auditing requirements within the Chinese banking system" (p. 19). As a result, the PBOC recommended these practices to other banks throughout China. Citibank has established a human resource structure for training local people into becoming successful managers. Unfortunately, competitors are readily willing to seize these employees for their services and skills.

No Adaptability to Expand Operations in China

In 2002, Citibank obtained a license to be able to deal with foreign currency; however, it was only in one city. Citigroup has focused too much on banking services instead of focusing on the insurance market, which has been profitable to various U.S. companies in China. According to Li, Young and Conklin, "By 1995, AIG was a successful operation, generating annual premiums of U.S. $50 million, accounting for 88 percent of the market