Citigroup's strategy
A recent Business Week article ("Citi: A Whole New Playbook", 2/14/2005) details the ways in which Citigroup's culture has changed since Chuck Prince took over as CEO, replacing empire-builder Sanford Weill. In 18 years as CEO, Weill built the largest financial institution in the world. His boldest move was the 1998 merger with Travelers Insurance.
Times have changed. Prince sold off the last piece of Travelers Insurance recently. And the growth strategy has been altered as the company concentrates on core profitable businesses, banking and credit card operations. According to the article, Price "took a large step from its original goal of becoming a one-stop financial shop that produces all its insurance and banking services." The idea of synergy between banking and insurance was a reasonable one, but the reality was that there was little crossover between business units.
Prince now looks for "small, targeted investments that play to its strengths while selling of businesses that have become dead weights."
That describes perfectly the gin rummy strategy that oligopolies have to master to survive. Among units recently discarded are the Electronic Financial Services unit and the equipment-leasing business, as well as a 20% stake in a Saudi financial group.
On the pickup side, Citigroup recently bought Washington Mutual Finance, a consumer loan company, Knight Trading Groups' derivatives trading group, and ABN AMRO's securities-clearing business. It's expected that more international expansion in commercial banking can be expected, given Citigroup's new cash influx from the Travelers sale.
The process of getting just the right cards and making a coherent oligopoly is a complex and dynamic one. Being big isn't enough; it's a matter of being big in the right market segments.
