Case Study:

Citigroup, Inc.

Submitted to:
Prof. Rahul Gupta
Chowdhry
Submitted By:

Group
8:

Arpita Bahadur

Gaurav Kumar

Manish Gupta

Pavan Kumar

Ranjini K Ballal

Vani Vyas
 Citigroup, Inc.

Overview:
Citigroup Inc., doing business as Citi, is a major American financial services
company based in New York City, NY. Citigroup was formed from one of the
world's largest mergers in history by combining the banking giant Citicorp
and financial conglomerate Travelers Group on April 7, 1998. Citigroup Inc.
has the world's largest financial services network, spanning 107 countries
with approximately 12,000 offices worldwide. The company employs
approximately 358,000 staff around the world, and holds over 200 million
customer accounts in more than 100 countries. It is the world's largest bank
by revenues as of 2008. It is a primary dealer in US Treasury securities and
its stock has been a component of the Dow Jones Industrial Average since
March 17, 1997. Citigroup, which had huge losses during the global financial
crisis of 2008, was rescued in November 2008 in a massive bailout by the
U.S. government.

Merger and Tie-up:

On April 6, 1998, the merger between Citicorp and Travelers Group was
announced to the world, creating a $140 billion firm with assets of almost
$700 billion. The deal would enable Travelers to market mutual funds and
insurance to Citicorp's retail customers while giving the banking divisions
access to an expanded client base of investors and insurance buyers.

Although presented as a merger, the deal was actually more like a stock
swap, with Travelers Group purchasing the entirety of Citicorp shares for $70
billion, and issuing 2.5 new Citigroup shares for each Citicorp share. Through
this mechanism, existing shareholders of each company owned about half of
the new firm. While the new company maintained Citicorp's "Citi" brand in its
name, it adopted Travelers' distinctive "red umbrella" as the new corporate
logo, which was used until 2007.

The chairmen of both parent companies, John Reed and Sandy Weill
respectively, were announced as co-chairmen and co-CEOs of the new
company, Citigroup, Inc., although the vast difference in management styles
between the two immediately presented question marks over the wisdom of
such a setup.

The remaining provisions of the Glass-Steagall Act - enacted following the

Great Depression - forbade banks to merge with insurance underwriters, and
meant Citigroup had between two and five years to divest any prohibited
assets. However, Weill stated at the time of the merger that they believed
"that over that time the legislation will change...we have had enough
discussions to believe this will not be a problem". Indeed, the passing of the
Gramm-Leach-Bliley Act in November 1999 vindicated Reed and Weill's
views, opening the door to financial services conglomerates offering a mix of
commercial banking, investment banking, insurance underwriting and
brokerage.

Cross-Marketing:
Cross Marketing is a partnership of at least two companies on the value
chain level of marketing with the objective to tap the full potential of a
market by bundling specific competences or resources. Companies recognize
partnerships as an effective means for untapping growth potentials they
cannot realize on their own.

The general objective of cross-marketing strategy was to sell products

and services of one of citigroups business to customers of another (i.e. to sell
insurance policy to banking customers and vice-versa). Citigroup had
undertaken cross-marketing initiative at various levels. Citigroup had utilized
citicorp’s international distribution system and customer base to cross
market products and services. Citigroup had also used traveler's existing
sales force and customer database to cross market Citicorp’s products and
services and utilized traveler’s demonstrated cross-marketing expertise to
increase Citicorp's market penetration with existing Citicorp’s customers.

Formation of Cross-Marketing Group:

Citigroup formed the cross marketing group to facilitate its strategies.
The CMG met regularly to review results, identify issues, and promote
successful business transfers and jumpstart key cross-marketing initiatives.
CMG defined and distinguished cross-marketing revenue from core-product
sales in order to accurate measure the success of initiative.

For this CMG had divided the groups’ business into 2 primary categories:

• Consumer eccentric initiatives

• Corporate eccentric initiatives

Approximately $350 million of the efficiency improvements will be achieved

in the Corporate business, both to realize synergies and operating
efficiencies and to reflect market turmoil in certain regions and businesses.
These savings will come from all areas of the Corporate business, including
emerging markets, global relationship banking and investment banking, as
the company rationalizes its presence in countries with multiple operations,
consolidates Citibank and Salomon Smith Barney locations, integrates
trading platforms and exits non-strategic businesses. Cross-marketing
between Citibank corporate bankers and Salomon Smith Barney investment
bankers has already yielded more than 100 opportunities which would not
have been open to either operation on its own, from issuance and custody of
yen-denominated debt instruments for an executive incentive program, to
co-managing one of the year's largest IPOs, and to advising on and providing
short-term financing for a Latin American privatization.

Creating value for consumers:

CMG defined cross-marketing for consumer awareness as “the sale of

incremental products outside the core product portfolio”. For example
transits and loans were core products for Citi Banking North America (CBNA –
subsidiary of Citicorp), and when sold by CBNA did not constituted cross
marketing. However sale of insurance products on mutual funds by CBNA
was considered to be cross-marketing. In total Salomon Smith Barney
generated nearly $3.4 billion I ncross marketing as defined by CMG.
Creating value for corporates:

The CMG defined cross marketing for corporate business as “the sale
of products and services different than a core product for that corporate
customer”. The Global Relationship Bank, which focused on servicing large
multinational companies and their subsidiaries, proved the most effective
Citigroup cross-marketer in 2000 facilitating the increased sale of investment
banking services and institutional investment management to its corporate
customers. The Global Relationship Bank created nearly $2.8 billion in
additional revenue for Citigroup in 2000.

Global Universal Bank Model:

Citigroup has over 200 million customers in more than 100 countries
and provided customers, corporations, government and institutions with a
range of financial products and services providing consumer banking and
credit, corporate investment banking, insurance, securities brokerage and
asset management. Citicorp was engaged primarily in banking business in
locations around the world. At the time of merger, it was ranked as the
largest banking institution in terms of consumer and corporate customers.

Hence the process of value delivery by global bank model is: