AMERICAN EXPRESS
Do you really know American express?most people think of the firm as credit card company.many also know that it was among America most successfull and admired corporations in the 1980s.during that period it more than triped its revenues,earned anaverage return on shareholders equity of better than 15 percen ayear,and was cited as the most admired financial services firm in fortune surveys of top executives every years.but where did that revenue and earnings growth come from?what strategies guided the success of american express?
Corporate strategy-two avenues toward growth
American express corpooration has traditionally focused main business,financial service and travel.As James D Robinson 111,the CEO of American express,point out, it helped open up the savings and investment side of the equation by acquistions shearson loeb rhoades and investors diversified service [IDS] the acquistion also helped american express appeal to a new segment of the financial service markets.while the firms credit cards and others service were targeted primarly at upper income groups IDS sold annuities,life insurance and mutual funds to middle income.IDS proved asuccesful to addtion american express.however ,was generated by internal expantion into new,though related,businesses and marked segment indeed,adaptability and an entrepreneurial spirits has become the keystone of corporate strategy at American express.
Busines-level competitive strategy
campaign began such as Master card and visa proliferated by offering cheaper annual fees and enticing lines of credit American Express managed to increase its share of cards outstanding inthe united states and its share of domestic charge volume grew.American Express improve its performance inthe face increasing competiton by finding ways to differentiate its cards from others on the basis of superior service.
for example;
1.service center answer the phone[the standart is seven second]
2.how long it take to replace lost card[48 hours is the goal]
3.reguler training for line employees and their managers and their managers toensure that new ideas for improving customer service are put into practice.
Marketing strategy
certainly,effors to improve service quality do little to give the firm acompetitive advantage,by promotion and advertising thus,American Express spends as much as 250 million dollar ayear-twice as much as master card visa combined-remainding people and convincing them that American Express cards offers more service and prestige than any competitors.
more important American Express works diligenly to keep abreast of customer wants and tofind way satisfy them.the company also mantains and updates weakly aprofile of 450 attributes.this information is used tosegment the market based on income lifestyle characteristics and to determine what service attributes appeal most to each segment.American Express marketing managers have used the information gained through their ongoing market analiysis card at spesific customers segments.
finnaly,AMEX is also pursuing growth by attempting to improve the penetration of its credit cards and financial service into global markets where demand growing faster than it is domistically.consequenly the company is actiely to improve its international competive by engaging in lobbying activities aimed at changing goverments trade and economic policies for example services in future tariff agrements and to find ways to solve the third world debt crisis.
Implementation
among the keys to American Express success is that top management has clearly demontrated its commitment to the firm strategic principles and that the organization structure policies,and process are designed to enable and encourage employees to perform in ways that are consistent with those principles
more subtantively the organization and its internal processes are designed to facilitate and reward behavior that is consistant with the company strategis thrust.to encourage innoation enterpreneurial actions by bussines and marketing managers,for instance decetion making autority is relatively decentralised. the firm tries to hire strong,ambitious managers and give them substantial fredom tomanage their own businesses and to react quakly to new opportunites in the environtment,the company also constanly monitors its employees perfomance,and its ties financial rewards promotion to that performance.as result,American Express strategies are more than just plans on paper,as its record of continuing growth and profitabily reflect
MULTIPLE LEVELS OF STRATEGY;DIFERENT ISSUES AT DIFFERENT LEVELS
The recent history of american Express illustrates some important point strategy. first,most firms particulary those with multiple business units pursue a hierarchy of interdependent strategies.Each strategy is formulated at different levels in the organization and deals with different issues.this level of strategy primarily addreses the way abussines competes within industry.finnaly ,interrelated functional decisions about how to divide the markets into customers segments,which segment to targets,what products and service enhanchements to offers each segment,what promotial appeals and media toemploy,and whatfees to charge all refflect the marketing strategy.each marketing strategy provides a plan for pursuing the company objectives within specific market segment.
the marketing objectives and strategy for particular product market entry should be concistent with direction and resources provided by the firm corporate bussiness level strategies Regardless of who is involved in formulating the various levels of strategy or how appropriate those strategy are,they will not lead to succesfull outcomes unless implemented effetivly.
STRATEGY:a definition
Althouugh strategy first become apopuler bussiness buzzword during the 1960, it continues to have widely differing definitions and interpretations.the following definitions and interpretations.the following definition,however,capture the essence of the term as it is most commonly used.
A strategy is afundamental pattern of present and planed objectitive
recoucers,deploiments,and interactions of an organization with markets
competitors and others environment factors.
As this definition suggests,a good strategy should specify [1] what is tobe accomplised;[2]where,that is ,on which industry industry or product markets it will focus;and[3] how,or which recources and activities will be allocated to each product -market to meet environmental opportunities and threats and to gain a competitive advantage.
The components of strategy
[1] scope.the scope of an organization refers to the breadth of its strategic domain,that is,the number and type of industries,product lines and markets segments it is competes in or plans to enter.decisions about organizations strategy scope should reflect management view of the firm mission or strategic intent .this common thread among its various activities and product markets defines the essential nature of what its various activities and product markets defines the essential nature of what its bussiness and what is should be in future.
[2]goals and objectives.stratiegies should also specify desire level accomplisment on one or more dimentions performants such as volume growth,profit contribution or return on investment.
[3] Resource deployment.Every organization has limited financial and human recources.strategy should speciy how such recources are to be obtained and allocated accros bussineses,product market and the activities and functional department.
[4] Identification of asustainnable competitive advantage.how the organization will compete in each bussines and product market within its domain.the manager mustexamine the markets oppotunities in each bussines product-market and the company distinstive competencies or strengths relative to its competitors,
[5] synergy.synergy exist when the firm business,product market,recource deployments,and competencies complement and reinforce one onather synergy enables the total perfomance of the related bussines to be greater than it would be otherwise;the whole becomes greater than thesum of its parts.consequenly,strategies should be designed to exploit potential sources of synergy across the firm bussines and product markets as a meansof improving the organization overall efficiency and effetiveness.
The hierarchy of strategies
these five basic dimention are part of all strategy,most organizations pursue a hierarchy of interrelated strategies,each formulated at different level of the firm the three major levels of strategy in most large,multiproduct organization are
1.corporate strategy
2.business level strategy
3.functional strategy
strategies at all three levels contain the five component outlined above,but because each strategy serves adiffernt purpuse within the organization,each emphasizes different sets of issues.exhibit 1-3 summarizes the focus and the specific issuees dealt with at each level of strategy.
1.Corporate strategy
decisions about the organization scope and appropriate resource deployments across its various divisition or bussiness are the primary focus of corporate strategy.attempts to develop and maintan distinctive competencies at the corporate level tend to be broadly focused concentrating on chanels or marketing program
2.bussines level strategy
different customer segments may want different benefits from the same category of products a bussines unit may not have the competencies needed to compete effectively in all markets segment bussines level strategy must deal with is appropriate scope.how many and market segment to compete in,and what product offerings and marketing programs are needed to appeal to thesse segments.finnaly synergy should be sought accros product markets and across functional department within the bussines.
3,marketing strategy
the primary purpose of marketing strategy is to effectively allocate and coordinate marketing resource and activities to accomplish the firm objectives within aspecific product market,there fore,decisions about the scope of marketing strategy involve specifying the target market segment tobe pursued and the product line to be offered.then,firms seek acompetitive advantage and synergy,planning a well integrated program of marketing elements[product,price,promotion, and place distribution]tailored to the needs and wantsof customers inthe target segments.for example,abroad line of customer services and heavy advertising focussed on upper income proffesionals and stressing service and prestige are elements of the marketing strategy marketing for the american Express card.
