SWOT Analysis: American Express

SWOT Analysis of American Express Organization:

Strengths

1. Diversity -

The company has added different products and services over the years. This diversity has made it able to spread financial risk over different channels. From business cards, to airline and city specific rewards cards, American Express has a credit card that caters to all needs.

American Express is a very different arrangement from other credit card organizations. Not only do they have their own payment system, but they also issue their cards directly to customers. If a card says American Express on it, you know instantly who issued it, what payments system it utilizes and everything else about the card.

From an organizational standpoint, American Express has a complete horizontal scale across payments, which gives them diverse opportunities to grow their business and drive innovation in the marketplace.

2. Innovation -

The company history is a study in innovation. It has pioneered many of the financial products we take for granted today, and consistently found ways to improve delivery of its services. Reward cards and cards which are affiliated with specific stores are common as well as travel rewards.

In relation to marketing, there have been several examples of innovation within the AMEX corporation. American Express has long been known for its inventive advertising. From ‘Mr Wong’ and ‘Don’t leave home without it’ to the ‘Membership Has Its Privileges’ campaign of the 1980s or the highly visible participation of Jerry Seinfeld and Tiger Woods as American Express spokesmen in the 1990s and beyond, advertising has long played a role in American Express’ sustained recognition. American Express takes a holistic view of its brand positioning and today’s advertising campaigns reflect the company’s innovative range of products and business solutions and its unique ability to provide its customers with access to unique experiences and privileges.

3. Global reach & presence –

American Express is one of the most recognizable brands in the global economy. With a global market, all developed countries in the world are home to American Express Service centers.

Total cards in circulation in U.S.

(Through year-end 2010, unless otherwise noted)

American Express credit: 48.9 million (Source: AmericanExpress.com)

Purchase/transaction volume

Issuer purchase volume

(Through year-end 2010)

American Express: $131.1 billion (Source: American Express)

Discover cards: $92.5 billion (Source: Discover)

MasterCard credit: $479 billion (Source: MasterCard)

MasterCard debit: $333 billion (Source: MasterCard)

Visa credit: $809 billion (Source: Visa)

Visa debit: $1.05 trillion (Source: Visa)

4. Travel services operations –

With a variety of travel cards, American Express appeals to consumers who are constantly on the move. Reward points and encouragement through offers and deals ensure that American Express cards are used all over the world

5. Brand loyalty –

American Express has a large consumer/client base. Within this group is an overwhelming majority that continues to use the service as their major financial facility.

Customer satisfaction.

J.D. Power and Associates 2010 Credit Card Satisfaction Study Rankings

American Express

Discover

US Bank

Wells Fargo

Chase

Barclaycard

Bank of America

Capital One

Citi

HSBC

Weaknesses

1. Financial Credit Crisis -

Credit and financial businesses are at the mercy of the credit market as well as consumer confidence. If consumer spending is off, as it is right now, and credit is tight, profits will be down.

SAN FRANCISCO (MarketWatch) -- Credit-card company American Express Co. said Thursday it "is seeing signs of a weaker U.S. economy" that is impacting its cardholders' ability to make purchases and pay their bills.

As a result, American Express AXP -0.12% said in a statement that it will take a pre-tax charge of approximately $440 million in its fourth quarter, due to a combination of lower spending and higher delinquencies and loan write-offs.

American Express shares fell nearly 6% to $46.02 in after-hours trading.

American Express is one of a number of credit-card companies suffering through the current credit crisis

New York-based American Express, which is expected to report its financial results Jan. 28, said that as a result of its fourth-quarter charge, it now expects earnings for the period to be 70 and 72 cents a share, a decrease from earnings of 73 cents a share in the same period a year earlier.

For the full year, American Express said it now expects earnings between $3.38 and $3.40 a share.

"We did see some negative credit trends among U.S. consumers during December, particularly in California, Florida and other parts of the country most affected by the housing downturn," American Express Chief Executive Kenneth Chenault said in a statement.

In addition, American Express cautioned that tough times may be ahead for 2008.

The company said it now "expects that growth in Cardmember spending will slow in the year ahead." It said it's assuming billed business growth worldwide to grow between 8 and 10 percent during the year, which will "represent a decline from the levels American Express has been generating in recent years."

2. Size -

The credit crunch has caused American Express to take measures to limit their default rate and minimize losses. As one of the largest credit card companies, they receive a great deal of attention in the press. This could end up hurting their corporate image many years after the economic crisis has passed.

Opportunities

1. Stability -

American Express remains a relatively stable financial service company in comparison to some of its counterparts. This could be a tremendous plus for them when the economy begins to recover, and customers have fewer choices in the industry.

2. Limit Risk –

Taking steps to limit risk, and becoming a leaner company could help the company to become even stronger.

3. Expansion into China –

China UnionPay and American Express announced that they have signed a memorandum of understanding that calls for both companies to explore the expansion of their current cooperative activities.

For the past several years, China UnionPay and American Express have reportedly cooperated within China where American Express Cards run on the China UnionPay network. This new agreement will establish working teams to develop potential new areas of cooperation between the two companies within China and in markets outside of China.

Established in 2002, China UnionPay is the bankcard association in China. As the pivotal role of China's bankcard industry, China UnionPay is responsible for operating the unified inter-bank clearing and settlement system in China and developing the international acceptance network for UnionPay cards.

Financial deals for this new deal have not been revealed.

Threats

1. Regulations –

Tighter regulations and government intervention could make the financial services industry much less profitable in the future.

2. Macro Effects –

As the US economy begins to affect the global economy, American Express may find itself a victim of anger and backlash around the world.

American Express business credit card list. Project Documentation

- Business Green Rewards Charge Card

-Business Gold Rewards Charge Card

- Executive Business Charge Card

- Business Platinum Charge Card

- Platinum Business Credit Card

- Platinum Business Freedom-Pass Credit Card

- Business Membership Rewards Card

- The Plum Card

- Blue for Business Credit Card

- Blue Cash for Business Credit Card

- Simply Cash Business Credit Card

- Costco True Earnings Business Card

- JetBlue Business Credit Card

- Gold Delta SkyMiles Business Credit Card

- Platinum Delta SkyMiles Business Credit Card

- Starwood Preferred Guest Business Credit Card

Topic 6 - Continued

For all products, a value proposition is a necessary attachment.

"This product is worth ________ to this target segment because ______________________________________________"

The price/worth should be a $ value or a relationship to competing products and the "because" statement should be a description of the value perceived by the target customers.

Asset-revenue generating efficiency (ARGE):

- Optimise return by stimulating revenue from highest yield segments.

- Manage price also to optimise the profit mix and return on assets employed.

- Allocate volume/capacity and price differently to different segments and behaviours

- Manage prices through optimised yield.

Strategies for managing demand:

- Use price to regulate demand (damper in peaks to stimulate in troughs)

- Stimulate forward commitments

- Modify time/product offers

- Adjust communication strategy to demand patterns

Topic 6 - Pricing In Financial Services

Competitive pressure forces prices down whilst economic pressure and cost structure forces prices up to create a discretionary price region that businesses can use to set prices. The natures of services makes value hard to communicate and the nature o demand makes volumes and pricing hard to estimate. Additional prices must have additional value and prices include quality comparison and ability to solve a problem.

Value can change due to:

- increasing competition

- time elapses

- power of legislation, education and communication

Price discretion is the reward for good marketing which is effective when organisational and customer value is delivered. The price is "right" when perceived value outweighs perceived costs. Value occurs when perceived

value is equal to perceived cost. Actual price

= list price + added charges (discount + allowances + cost of credi/payment methods).

Pricing decisions rely on 2 factors:

Internal Factors:

- Marketing objectives

- Marketing mix strategy

- Cost

- Organisational Considerations

External Factors:

- Market and demand

- Competitor prices and offers

- Other external factors

There are 2 price demand relation ships for goods:

Most goods:

Whereby, as demonstrated, as price increases then quantity will decrease. The slope/gradient of this relationship is constant and ensure that for most goods, there is an appropriate level of quantity and price of goods on the shelves.

Prestige Goods:

When a prestige good is placed into the market if there is high demand then the quantity of items in the market will decrease. This occurs when the price of a good is low. When there is a intermediate price, then there will be a maximum amount of prestige goods within the marketplace.

Topic 5 - Branding and Brand Management

Benefits of brands to buyers:

- Provides lear information about quality and performance

- Speeds up decision making and identification

- Helps the customer to identity products and brands

- Tends to increase choice and variety

Benefits of brands to sellers:

- Can be legally protected

- Increases the efficiency of tracking, ordering, distributing etc

- Can become basis of loyalty

- Assits in marketing segmentation

- Provides a capacity for multiple positions

When marketed effectively brands tend to lead to better recognition, performance, customer loyalty and category membership. They will convey meaning as attributes, benefits, values, personality and uses. There is also a brand hierarchy:

1. Corporate Brands (Commonwealth Bank)

2. Family Brands and Product Class (Colonial; Comm Sec. Comm Insurance)

3. Product Brands:

- Product line (Flexible lifetime Super)

- Product type (Balanced Growth)

- Product item (Australian Equities)

Defining Brand Essence and Values:

The essence of a brand needs to be the central theme and overriding/main characteristic. Core values are other important factors that are essential in maintaining brand reputation and dynamics. For example, BMW brand essence would be driving pleasure and the core values would be BMW Dynamics, Civilised and Cultured.

Interesting Marketing Campaign

Below is an interesting analysis of the Apple Inc marketing strategy over the last 10 years.

"For several years Apple's product strategy involved creating innovative products and services aligned with a "digital hub" strategy, whereby Apple Macintosh computer products function as the digital hub for digital devices, including the Apple iPod, personal digital assistants, cellular phones, digital video and still cameras, and other electronic devices. More recently, the full impact of a very well throughout out brand strategy has come into focus - and one in which customer experience is central"

http://www.marketingminds.com.au/branding/apple_branding_strategy.html

Topic 4 - Continued

Topic 4: Ansoff Matrix

Market Penetration:

Here we market our existing products to our existing customers. This means increasing our revenue by, for example, promoting the product, repositioning the brand, and so on. However, the product is not altered and we do not seek any new customers.

Market Development:

Here we market our existing product range in a new market. This means that the product remains the same, but it is marketed to a new audience. Exporting the product, or marketing it in a new region, are examples of market development.

Product Development:

This is a new product to be marketed to our existing customers. Here we develop and innovate new product offerings to replace existing ones. Such products are then marketed to our existing customers. This often happens with the auto markets where existing models are updated or replaced and then marketed to existing customers.

Diversification:

This is where we market completely new products to new customers. There are two types of diversification, namely related and unrelated diversification. Related diversification means that we remain in a market or industry with which we are familiar. For example, a soup manufacturer diversifies into cake manufacture (i.e. the food industry). Unrelated diversification is where we have no previous industry nor market experience. For example a soup manufacturer invests in the rail business.

Ansoff's matrix is one of the most well know frameworks for deciding upon strategies for growth.