American Express
Creating ROI in a New Environment
American Express (Amex) is one of the world's largest financial services company in the world, as well as the largest provider of many travel services. The company has a long history of building value for consumers by offering many services that are often free to them. Most credit card companies charge the consumer an interest rate for the use of their services, however Amex created an innovative strategy to differentiate that model. AMEX typically does not charge interest rates and the company generates its revenue through merchant processing activities, annual fees, and various fees. However, has struggled with many of its growth initiatives in recent years and faces and increasingly competitive environment in the financial services industry as there is a high level of innovation from within the industry. This analysis will consider the company's current operations in light of the evolving industry and recommend a strategy for capturing greater returns on their investment in future initiates.
Statement of the Problem
There has been a substantial amount of evidence presented that indicates that Amex will have to innovate to stay competitive in the evolving industry. For decades the company had a strong niche with loyal clients, but it is now experiencing increased competition and has lost some key clients. Costco, for example, is ending its 15-year relationship with AmEx and defecting to Citigroup and Visa (Franklin, 2015). It has also lost a major antitrust lawsuit that will influence its future opportunities. Therefore, the problem for Amex is that its current model will no longer provide the same types of returns and the company will have to create a new strategy based on internal and external aspects that can help it diversify its product and service mix.
Purpose of the Paper
This analysis will conduct research on the company, the industry, and the regulatory environment and formulate a strategy for increasing the company's returns on its future investments and recommend where it might best focus its resources.
Research
It has been estimated that card companies charge merchants more than $50 billion a year to process consumer transactions (Stempel, 2015). For decades, American Express was the undisputed credit card of choice among corporate road warriors, the wealthy and the well-traveled, who lived by the company's slogan, "Don't leave home without it" (Franklin, 2015). They developed a model that was different than most of its competitors and did not charge them a monthly interest rate to use Amex service but rather charged the merchants a higher rate instead. They also offered many useful services that were relevant to the business class consumers and was able to create a strong brand image and loyal consumer base. Furthermore, Amex was also able to craft many sub-niches in which conduct more focused target marketing such as these segments (DogFrog, 2016):
The American Express Costco credit card targets an audience who shops at bulk warehouse retailer Costco. The card offers an annual rebate for redemption at Costco warehouses for cash or merchandise.
The American Express Mercedes-Benz credit card targets niche, high-income earners and spenders that are loyal to the Mercedes-Benz brand. Signing up for this American Express card option ties the user to both luxury, prestigious brands.
The partnership that Amex formed with Costco represented an exclusive partnership that lasted sixteen years before Costco announced that it was breaking ties. The loss of this client for Amex represented a fairly major announcement since Costco was a valuable client. For some consumers, American Express's exclusive relationship with Costco was the only reason to get an American Express card at all, said Eric Wasserstrom, a managing director at Guggenheim Securities LLC, who covers American Express (LaMagna, 2016). Furthermore, consumers tend to be brand loyal, especially in the Amex niches, and will be loyal clients for many years. As one industry analyst explains " ... and AmEx, more than any credit-card issuer has cultivated that sort of brand loyalty over the years. People are like, 'Well, I'm an AmEx user,' and when that changes, that can be disruptive" (LaMagna, 2016).
Costco will automatically be sending their customers new Visa cards to their members and this segment will be transferred from Amex's accounts all at one time. Thus Amex will be losing a bulk of its clients all at once. While this is expected to have obvious economic impacts on the company, it is only one of several segments that they manage. American Express's Chief Executive Ken Chenault has said losing the partnership with Costco will impact one in 10 AmEx cards in circulation and would likely eat into the company's earnings in 2015 and 2016 (LaMagna, 2016). Furthermore, it is likely that...
American Express This report is an analysis of the American Express company. Company Background Founder, date incorporated -- "Established in 1850 in New York, American Express Company was among the first and most successful express delivery businesses to arise during the rapid westward expansion of the United States." (American Express) Initial source of Capital -- "Although in its early years American Express was not itself a financial services company, its largest and most consistent
Investment Analysis Investing money for the future is one of the key components of creating a secure future, and retirement. While many Americans do not plan for future years, other then a company retirement plan and social security retirement benefits, research shows that when a person takes an active role in their retirement planning, they are more likely to create a future which will support their standard of living after they
Return on Investment Health Management Health Management and Services: Return on Investment Strategy, Solutions and EMR as an Incentive for Increased ROI As the medical field continues to grow and therefore continues to become more and more complex and complicated -- especially in viewing the integration of health services and cost analysis -- one can understand the need for critical improvements in the area of health management and services in order to ensure
Retirement Options Almost one-third of American workers are failing to prepare themselves for a comfortable retirement, according to a new survey conducted by American Express. The national telephone survey of working adult men and women who had recently left or lost their jobs revealed that 30% did not invest for retirement in their company's 401(k) plan. The survey also revealed that 16% of these participants rolled their money into an IRA, and
Blues The title of Sherman Alexie's first novel, Reservation Blues, sums up the two central themes that reverberate throughout the story: reservation life and the particular, peculiar status of blues music in American history and identity. The novel follows the story of a Native American blues rock band based near Spokane, Washington, whose rise and fall is dictated, at least partially, by the cursed guitar of blues legend Robert Johnson. However,
"For Koreans, there exists a strong belief in filial duty - treating parents with respect and obeying them, caring for them when they are old, giving them a proper burial, and even worshipping them with ceremonies after death. All of these are incorporated into the fundamental ideas of strong kinship values and family ties from Confucianism." (Beller, Pinker, Snapka, Van Dusen). As much as the Koreans transmitted their strong
Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.
Get Started Now