Case Analysis : Strategies of Two Banking Giants

Submitted By :
Group No: 13 Amit Maheshwari 2012PGP032 Chandan Nikhil K 2012PGP092

Meghwant Singh Thakur 2012PGP203

Niyati Jhunjhunwala 2012PGP234 Pankaj Dhingra 2012PGP240 Vikalp Kumar Nigam 2012PGP436

Q1
Information technology used in both the banks is customized to achieve their objectives. They incorporate lots of modifications into their software to suit their needs thereby bringing about differentiation between them Since IT was being commoditized, IT based competitive advantages were rapidly disappearing. However, both the banks heavily customized IT to suit their needs and integrated them in to there day to day processes like finance and operations They used IT to diversify their business thereby reducing risks. Charles Schwab was heavily into e-trading. By leveraging on IT, both Citibank & HSBC were able to provide e-trading Internet banking system has a direct impact on cost savings i.e., transaction costs are much reduced as compared to the traditional banking system Citigroup was able to increase its online accounts to 800 Million in 2000 Citigroup was able to mobilize $10 billion of deposits through its e-deposits HSBC doubled its e-banking customers to 3 Million

Q2
The purpose of their IT investments are as follows: To increase their global reach and penetrate new markets To provide better customer services such as the online payment option that reduced the hassles of going to the banks for day-to-day transactions To diversify their businesses : HSBC started the online portal in conjunction with Merrill Lynch to provide brokering services The credit card payment option on the refurbished online portal of HSBC provided a credit opportunity & acted as a stimulus to increase the payments through this option Citibank called this- Diversified Financial Services Business Model Citigroup followed an integrated approach to their IT governance worldwide They used the IT capabilities for the analytics purpose. The data collected for various transactions was stored in a warehouse and relevant slicing/dicing was done

 They also used it to achieve their long term strategic goals

HSBC primarily used IT for operational efficiency HSBC used IT for cost cutting through outsourcing. Cost cutting resulted in an estimated savings of $30 million in a year HSBCs strategic investments came through JVs across various domains like ecommerce projects, broking, electronic wallet Citigroups approach incorporated a group-wide common system and standards to in order to ensure best services to their customers irrespective of where they are or what services they want Investments in infrastructure and transactional technologies has also enabled Citigroups global expansion Citigroup was the first institution to offer account aggregation which compiles different account information

Q3
The assessment of IT investments should be done over a longer term as it takes time for investments in IT to reflect on the bottom-line However as implemented by Citibank, all the IT projects should be thoroughly scanned for feasibility Both the banks had different strategic objectives and both were able to achieve it. Hence, we can say that both of them succeeded in there respective IT investments Citigroup had a near about stable IT expenditure from years 2003-06 but the expenditure done by HSBC increased by 40% Citigroup leveraged on its comparatively lower IT spending which can be seen from the net profit generated by the firm Citigroups increase in profits can be associated to their account aggregation which followed an integrated approach from the beginning, whereas the HSBC IT investments were done through various segments Hence, Citigroup IT-spending is cleverer compared to HSBC spending as they have a fairly constant IT expenditure while their profit is growing at a constant rate
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