This paper discusses in detail the research proposal that examines the perception of the administrators in CitiFinancial regarding branch expansion. Basically, the researcher attempts to identify the impact and factors related to branch expansion. It attempts to discover the feasible plan in order to have a successful branch expansion.  This includes discussion of its history, the current status of CitiFinancial in terms of branch expansion, and its impact to the overall progress of the organisation. Specifically, this proposed research explores the perceptions of the respondents and their view regarding branch expansion.


Founded in 1912 as Commercial Credit, the company was bought by Sandy Weill in 1986. Citifinancial is consumer lending subsidiary of financial services giant Citigroup Inc. Thus, CitiFinancial offers bill consolidation, debt refinancing, home equity, home improvement and other personal loans through approximately 3,000 offices in the US, Canada, Mexico and Japan. In addition, the CitiFinancial group reaches customers through retail partnerships.



The banking industry faces a lot of incurring issues and challenges when it comes to certain business branch expansions as it can be due to diverse banking processes within bank sector industry as for Citifinancial it is imperative to involve the aspects of branch assimilation, assumptions as well as implications of the such desire to adopt to the process of total branch expansion to various regions globally. Thus, the research investigation will identify descriptively the branch expansion factors as well as positive outcomes of the expansion in determining strong and weak points of the expansion process in the banking sector industry and determine the value levels of branch networking paradigms and context of Citifinancial respectively.



RESEARCH QUESTIONS


The following research questions will be explored in the study:


  • What are the supplies needed for the project? (e.g. labour force, building materials, supplies after expansions such as office personnel, office materials, etc.)

  • How much will 25 branches expansions cost?

  • Which locations are potential places for CitiFinancial to operate?

  • How much people does CitiFinancial need for a single expansion project?

  • a. the number of people for the project management of the expansion?


    b. the required number of staff once the expansion has been completed?


  • Is using integrated supply chain described OSD Comptroller iCenter effective for the project?


  • The research questions will be explored qualitatively by conducting interviews with the engineering management of CitiGroup Inc. in Hong Kong.


    Thus, the questions provided below are to be answered also for more depth of research meaning and relevance. 


    1. What are the value of branches and core competence?, and How it is realized in Citifinancial for possible success of their branch expansion?


    2. How imperative is Citifinancial’s roles and responsibilities models in realizing better branch networks? Explain the value and importance of Citifinancial’s goal statements of the matter.


    3. Determine and Discuss briefly Citifinancial’s focus for strategy, Is it moving towards a better and a positive branch expansion network? How and in what way?


    4. What are the branch expansion challenges that Citifinancial may face upon the realization of such branch expansion plans?


    5. Is Citifinancial well prepared to exert full effort in expanding its branches? Any evidence or support for the latter?



    STRATEGIC IMPORTANCE OF THE RESEARCH


    The research will have a strategic importance in identifying barriers and problems that CitiFinancial may face during its expansion. Further, the research will make the expansion easier for the company. Expansion projects are difficult because there are many issues to consider. There is the budget, the time-frame, the supplier and the resources (human, space, equipment, etc). CitiBank is planning to expand with an additional 25 branches for CitiFinancial in Hong Kong – an exercise that requires much preparation and background research. This study will assess the process by identifying the key variables that would affect the successful completion of the expansion. By estimating the budget necessary, the timeframe necessary and staffing required, this study will be able to predict the success of the expansion in Hong Kong. Furthermore, identifying the advantages that an integrated supply chain approach can contribute to the project would help in its development.



    Research Goals


    This study will try to achieve the following research goals:


    -          To be able to acquire useful research evidences and information and the finding out of certain possibilities for CitiFinancial to increase more of their branches internationally and expand their networks within the banking sector industry not just in the US but other countries as well


    -          To interview and survey head and staffs of Citigroup for the possible branch expansion


    -          To study the data collected from literatures and the respondents and look for relationships that are important in the study’s issue



    Research Plan and Methodology


                The first month will be dedicated on the knowing more about the problem of the research. This will be followed an in-depth literature search on the internet and local libraries. Literature search will continue for as long as four months. The three among those four months will also be dedicated in knowing more about the research design and methods chosen for the study. The following months will be dedicated in data collection. A letter of permission to conduct research will be submitted to the management of Citifinancial as appropriate. Several branches of Citifinancial globally will then be chosen for interviews and surveys. Data analysis will soon follow. The data will be analyzed both qualitatively and or quantitatively. Quantitative testing is for the data collected from Citifinancial, basically to find out the statistical prevalence of branching and expansion issues and prevalence of such applied measures. Multi-method is the chosen means of conducting this research so that data collection can be flexible and the topic will be better explained and elaborated.



    Overview of the Dissertation


    The dissertation will be composed of five chapters.


                The first chapter will introduce the problems of the study, aims and objectives, as well as the methodology used.


                Then, the second chapter will deal with providing the details of precise review of literature pointing and reflecting towards branch expansion processes and other relevant data and information for the completion of the study. Here, financial banking industry will be explored as well as the different issues and challenges that CitiFinancial face and apply.


                The third chapter will present the data collected from the interviews and surveys amicably. Each data will be followed by discussions guided by references from related literatures.


                Thus, the fourth chapter will present and discuss the data collected from the selected sectors within the CitiFinancial team. This will include the presentation of qualitative and quantitative data acquired and discussions on each of them.


                Lastly, Chapter 5 will present the conclusion of the study as well as its recommendations.


    Expected Results


                 The research study anticipates discovering such realization and actualization of  branch network expansion of CitiFinancial that will involve its corporate and management ways as to how they can be successful in a lot of ways as there involves management team participation and the determining of branch expansion techniques and methods that the bank can use in their branching expansion. The study also integrates to know and realize imperative and critical points to be reflected in the research analysis and discussion of research findings and be able to meet the guidelines and procedures recommended by the people involved in the branch expansion study of CitiFinancial.




    chapter two



    Review of Related literature


    Traditional supply chains can be problematic. According to Sabath (1995): “…each step back in the supply chain, volatility of demand increases and forecast accuracy decreases”.  The reason in because it relies on at least three discrete inventory buffers to smooth the flow of goods through production and provide a reliable response to volatile consumer demand (Sabath, 1995). Traditional approaches also react very slowly with the demand trends and also treat all items very much the same. This is not the case in the integrated approach (Sabath, 1995). An integrated supply chain is linked organizationally and coordinated with information flows, from raw materials to on-time delivery of finished products to customers (Sabath, 1995). Partnering-oriented business relationships are established between, and among, all supply chain members to facilitate coordination of supply chain activities (Sabath, 1995). Sabath (1995) explained that integrated, coordinated supply chain “superorganizations” are extremely responsive and can react quickly to support a partner company’s rapid growth. 


                According to OSD Comptroller iCenter (2006), the advantages of supply chain management include: quicker customer response and fulfillment rates; greater productivity and lower costs; reduced inventory throughout the chain; improved forecasting precision; fewer suppliers and shorter planning cycles; improved quality and products that are more technologically advanced; enhanced inter-operational communications and cooperation; shortened repair times and enhanced equipment readiness; and more reliable financial information. This study will aim to identify if these characteristics are achieved by CitiFinancial in their expansion in Hong Kong. (CitiFinancial, 2007).


                    Basically, the aim of building a presence is not just for profit motive but also to offer convenient services to customers among all segments and walks in life. According to CitiGroup Inc., 25 branches will be targeted to open by the end of 2007. This paper presents a briefing on the expansion and argues the reason why such an action is needed. It presents the problem to be solved, the main hypothesis, and the methods and procedures by which they can be solved during the pursuit of the project. 



    The following variables will be explored in the study:


    Ø      Location


    Ø      Cost


    Ø      Safety


    The expansion of CitiFinancial is a major breakthrough for CitiGroup in Hong Kong. The key locations where it expanded will offer more versatility to the company’s services. However, there are still several problems that the company should explore first to ensure the positive impact of the expansion project. For instance, because it concerns expansion, there is a need to identify who will lead the engineering department, who will manage the supply chain, etc. The 25 additional expansions that CitiFinancial plan also require sufficient survey of potential areas where the new infrastructures would be developed. Specifically, this study will focus on the supply chain side of the project. The problem with the expansion is identifying the right supplies to use for the project, generally the overall management of supplies needed to be used for building infrastructures.


    Hong Kong‘s banking industry has been an increasingly competitive business environment. With concerns over rising bad debts and shrinking interest margins, many commercial banks have introduced new product initiatives, ranging from credit cards, investment management and insurance to e-banking. These have all been major sources of revenue for banks in adjusting to the new economic setting. For organisations that move into new product areas, there is also likely to be greater uncertainty surrounding customer preferences (Von Hippel, 1988) and a corresponding need for customer accounting information. For example, Davila (2000, p. 387) found that medical equipment manufacturers who moved into new markets had a greater need for customer information, and noted that, “management control systems in new product development are viewed as sources of information that are used to close the gap between the information required to perform a task and the amount of information already possessed.”. The need for customer accounting information in banks is also likely to increase as market competition increases. Market competition places pressure on revenue streams and forces banks to consider new product development initiatives and a corresponding need for information concerning customer preferences. Cobb et al. (1995) studied the management accounting system (MAS) in a division of a multinational bank from 1989 to 1993, and found that the introduction of new products, among other factors such as new competitors, place pressure on firms to initiate changes in the management accounting system. The management accounting practices that were adopted included new cost allocation methodology, value for money exercises, new cost reports, competitive benchmarking and more participative budgeting processes, all of which increased the levels of discussion and produced greater communication between managers and management accountants.


    When a bank begins to serve new customers, their needs and requirements are less well understood and uncertainty is high. In this case, information about customers obtained from a customer accounting system is expected to be beneficial in tailoring products to customer needs as well as helping the bank to allocate resources to support the promotion and sale of such products. Community banks faced with the need for a major expansion wrestle with a common dilemma: whether to increase their investment downtown or build a new facility in high-growth corridors. In towns across America, banks have traditionally played a highly visible role in downtown commerce. For many, the headquarters office is recognized as a downtown landmark, an enduring symbol of the bank itself. So, despite the possible advantages of relocating, bank executives also recognize the need to maintain a strong downtown presence. The question then becomes what is the best strategic facility to not only meet current customer needs, but also to support future growth? One option may be to build a new branch in the path of retail development and relocate some of the bank’s operations to the new facility, freeing up needed space at the downtown main office. That may solve the immediate space problem, but splitting operations between two locations may not be an optimal solution. Another option is to convert the main office to a branch, and build a new headquarters in an outlying area to keep pace with residential and shopping patterns. The downtown location can continue to serve key commercial accounts, since banks want their executives to be highly visible and accessible to this important customer base. Maintaining a downtown main office may also be seen as a priority in towns that serve as county seats and are home to state and county government offices. In many cases, the best solution is to expand and renovate the main office. A remodel/addition project often presents greater challenges than building an entirely new facility, requiring a carefully integrated approach to design, engineering and construction. Many downtown banks are landlocked, with limited space for building additions, drive-up facilities or expanded parking. Aging facilities may pose limitations from a design or structural standpoint. And, keeping the bank operational and secure during the phasing of construction is critical.


    A design vision is as important as structural considerations. More than just alleviating space problems, how will the facility design create or maintain a strong identity for the bank? Will the finished project provide a unified look? Having employees or the community compliment the bank on its “new addition” is not as flattering as receiving rave reviews about the “new bank.” The interior design must not only be aesthetically pleasing, but also must enhance customer service and convenience, and provide a productive, efficient work environment for employees. Expansion plans must also take into account a bank’s need to upgrade its technology infrastructure or provide additional space for marketing activities, such as interactive kiosks or video displays. There is no single formula for an effective expansion and remodeling program. But all successful projects should have the common goal of better meeting customer needs and maximizing the bank’s opportunities for future growth.


    Few banking executives would consider launching a major new product or service initiative without first conducting an in-depth marketing analysis to determine customer needs. Strategic planning is just as important when it comes to building or relocating bank facilities.


    A comprehensive Facilities Planning Study should be the foundation for any building initiative to help bank management make the right decision about where facilities should be located to best serve the customer base, and how much space will be needed to meet current and future needs.


    No two banks are exactly alike. Therefore, every planning study is different. But a sound strategic plan should include the following steps:


    -          Analyze the local market from an economic and demographic standpoint in order to assess growth opportunities


    -          Review the bank’s financial history as well as any other significant trends that can be used as a base for projecting future activity.


    -          Recommend a long-term facility strategy that prioritizes branch and main office alternatives from a geographic, staffing, competitive and affordability standpoint.


    Local Market Profile


    The performance of the financial services market is generally tied very closely to the strength or weakness of the local economy, including changes in population, income, home construction and the local job market. A Facilities Planning Study, therefore, should begin with an examination of the local market economy. Local competitive activity is another key consideration. Facility design can be an important factor in helping a financial institution differentiate itself in terms of service delivery and branding.


    Bank Operations


    Customer growth, staffing trends and account activity are important criteria for assessing future needs. Management growth strategies will also have a direct bearing on future facility requirements. Does the bank want to retain its current positioning in the market or expand its customer base through geographic expansion?


    Staffing


    Space needs generally can be calculated based on a ratio of square footage per employee, but total space requirements under one roof will vary according to the specific needs of each institution. Future staffing levels can be impacted by a number of factors, such as technology changes and local market conditions, so specific guidelines will vary for different banks.


    Location Selection 


    Location selection is one of the most critical factors in the decision-making process, and one that should be determined through a comprehensive and logical approach. Key criteria include:


    -          Serving customers – How will the needs of current customers best be served from a facility standpoint, taking into account current customer residences and their community and shopping patterns?


    -          Positioning for future operations – What will be an effective location 5, 10 or even 15 years from now, considering economic and demographic trends?


    -          Preserving and, if possible, enhancing the value of the real estate investment – What location represents the best investment for the bank’s dollar?


    Regardless of specific circumstances, a strategic planning study can be an invaluable tool to help bank management ensure that their facilities will successfully meet customer needs and maximize the organization’s opportunities for future growth.


    New Direction Needed


    With the dynamics of the future so unclear, it only makes it more apparent that banks will need:


    -          Greater focus on what differentiates them from the competition, less attention — and spending — on commodity-like functions


    -          Heightened responsiveness to ongoing changes in the marketplace, more empowered customers and increasingly complex demands from regulators and stakeholders


    -          Variable cost structures that allow banks to accommodate fluctuations in market demand and product preferences while improving financial position through lower cost structures


    -          Improved resilience to counteract increased internal and external uncertainty and marketplace volatility — whether protecting your business from shocks such as natural disasters, privacy and security threats and geopolitical events or addressing everyday challenges like business expansion and credit risk



    • Banks are cobbling together an integrated view of the customer; however, channels are still predominately product-centric and management control remains within business units. With interdependent processes across competencies and business units, banks are struggling with overwhelming operational complexity. Connections between different areas of the enterprise tend to be static, inflexible and sometimes manual. Without adequate integration, the cost associated with the resulting organizational complexity can sometimes rise to the point where it offsets any benefits gained from shared processes. Moving into the future, banks will get relief. Technology advances will ease the friction of enterprise reconfiguration, and financial institutions will become more comfortable operating across product lines. As collaborative capabilities expand, companies will be able to push the concept of shared processes past their initial competency-based structures to a much more granular business composition.


    To a large extent, technology advances are the key enablers that are making it possible for firms to operate in an on demand fashion. As IT becomes more open, integrated, virtualized and autonomic, it provides new ways of collaborating, eases business integration and reconfiguration and helps firms better manage the rising complexity of managing IT itself. To achieve this state of flexibility, a bank’s IT infrastructure needs to be:


    -          Based on open standards — to simplify systems integration and adapt to technology changes rapidly


    -          Integrated — to facilitate transaction and process integration across the enterprise; allow real-time connectivity among partners, suppliers and customers; enable active data mining and decision support


    -          Virtualized — so that distributed computing resources are shared and managed as a single, virtual data center to increase the utilization of existing assets and lower IT costs


    -          Autonomic — with systems that can be managed remotely, have embedded privacy protection and security features and are capable of self-optimization, self-diagnosis and self-healing


    About CitiFinancial


    CitiFinancial provides community-based lending through more than 1900 branches in the United States and distributes a wide variety of consumer loan products and services including real estate, personal loans and loans to finance consumer goods. CitiFinancial is part of Citigroup (NYSE: C), the preeminent global financial services company has some 200 million customer accounts and does business in more than 100 countries, providing consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, insurance, securities brokerage, and asset management. Major brand names under Citigroup’s trademark red umbrella include Citibank, CitiFinancial, Primerica, Smith Barney, Banamex, and Travelers Life and Annuity. Additional information may be found at www.citigroup.com


    U.S.: CitiFinancial and NTIC Announce Expansion of Partnership 


    New York and Chicago — CitiFinancial and the National Training and Information Center (NTIC) today announced the expansion of their partnership, designed to promote stable home ownership in communities around the country. Nearly a year after striking a groundbreaking agreement, CitiFinancial and NTIC have broadened their commitment to not only meet the lending needs of individuals and communities but to promote financial education, a fundamental building block to financial stability in neighborhoods across the country. CitiFinancial and NTIC and its network of grassroots organizations in Chicago, Central Illinois, Cincinnati, Cleveland, Des Moines, Indianapolis and Syracuse are pleased to announce that a specialized program will be developed to promote financial literacy for individuals. CitiFinancial will provide its financial education curriculum, as well as 0,000 over two years to support the program. NTIC and its local community groups and CitiFinancial will work together to blend their resources for the common goal of developing individuals’ personal finance skills, enabling them to make sound financial decisions. “CitiFinancial is pleased its relationship with NTIC and its community-based organizations continues to strengthen and expand,” said Harry Goff, President and CEO, CitiFinancial. “Our dialogue began more than three years ago and, since then, we have made significant progress towards raising the lending standards in the industry and promoting home ownership. We’re excited to embark on this new phase of our relationship because CitiFinancial believes that financial literacy can lead to home ownership which is instrumental to neighborhood stability.”


    “NTIC is pleased that CitiFinancial is committed to increasing homeownership in our neighborhoods,” said Inez Killingsworth, an NTIC board member. “Over the past year, CitiFinancial has demonstrated their willingness to combat predatory lending. They are sending a clear message to other financial institutions that it is good business to invest in our communities.”



    CitiFinancial and NTIC will continue to work together to:



    • Review the progress of CitiFinancial’s Real Estate Lending Initiatives and encourage the adoption of similar practices by other lenders;

    • Focus on a multi-stage foreclosure review process for borrowers in NTIC and local-affiliate cities;

    • Develop and promote affordable mortgage product solutions for customers, especially in the communities served by NTIC and its affiliates;

    • Implement a review and repair process for loans submitted by borrowers from cities served by NTIC and its affiliates.


    CitiFinancial continues to make enhancements to its industry-leading changes to its lending and sales practices. Most recently, CitiFinancial introduced a new mortgage product that provides a near-prime rate loan to qualified applicants through its branch network. This is in addition to the elimination of single premium credit insurance for real estate secured loans; a reduction of the maximum number of points charged on real estate secured loans originated via CitiFinancial’s branch network to three from five; the implementation of “Customer First” a redesign of credit insurance sales practices across its branch network; and a complete revamping of its broker-based operations.



    CitiFinancial Opens 200 Branches in North America in 2006 


    Baltimore, MD – CitiFinancial today announced that it opened its 200th branch of 2006 on December 22, located at 9251 Baltimore National Pike in Ellicott City, Maryland. The branch is one of three new CitiFinancial offices opened in Maryland in 2006 as part of the company’s North American expansion plan. CitiFinancial now has more than 2,000 branches in the United States. “Opening 200 branches in one year is a significant accomplishment,” said Harry D. Goff, Chairman and Chief Executive Officer of CitiFinancial. “By expanding our distribution into more markets, we’re able to serve more consumers in more communities than ever before, continuing to lead the industry as the premier community-based lender.”  With the addition of Ellicott City, CitiFinancial now has 36 branches in Maryland and more than 300 in the Northeast. By early 2007, CitiFinancial expects its total North American branches to reach more than 2,500.
    “We are also thrilled to open a branch so close to our downtown Baltimore headquarters,” Mr. Goff continued. “Our 1,000 Baltimore-area employees are already active in this area, volunteering their time to serve many local organizations. I am confident the new Ellicott City branch team will help us make a difference in our community.” “I am proud to help the consumers in the Ellicott City area reach their financial goals and dreams,” said Althea Moore, manager of the new Ellicott City branch. “My branch team and I are committed to helping our customers take control of their financial futures.” CitiFinancial, a financial services company specializing in personal and home equity loans, has been in business in the United States since 1912, with more than 3.5 million customers and more than billion in receivables. In addition to its core products, CitiFinancial also offers affiliate products including auto loans, insurance, and Citi credit cards. 



    CONTINUING OPERATIONS 


    Consumer volumes and net interest margins. U.S. consumer loans grew 7%, reflecting loan growth in consumer lending and retail distribution of 17% and 7%, respectively, which was partially offset by a decline in cards average receivables. Commercial business core loans increased 20%. The benefit of higher loan volumes in U.S. consumer was partially offset by a flatter yield curve and a competitive pricing environment. In the international consumer franchise, cards average loans grew 15% and branch expansion drove a 7% increase in consumer finance loans outside of Japan. International retail banking deposits increased 5% and investment products sales and AUMs grew 28% and 19%, respectively. Net interest margins in international consumer expanded due to pricing actions and marketing initiatives.


    Continued momentum in capital markets driven businesses. In capital markets and banking, continued franchise momentum resulted in a 39% increase in equity markets revenues and a #1 rank in global equity and equity-linked underwriting for 2005. Increased merger and acquisition activity drove record advisory revenues, up 25%, and reflected a #2 rank in completed global M&A for 2005. An expanding customer base in transaction services contributed to growth in liability balances and assets under custody of 12% and 9%, respectively. Smith Barney continued to focus on advisory-based relationships, which was reflected in 19% growth in fee-based and net interest revenues.


    Expanding distribution. During the fourth quarter and the full year, continued investment spending led to significant expansion of our physical branch distribution network. Citibank international branch openings or acquisitions for the full year included 68 in Mexico, 36 in the Philippines, 16 in Brazil, and 15 in Russia. CitiFinancial international branch openings included 78 in Mexico, 73 in India, 28 in Korea, and 23 in both Brazil and Poland.



    CHAPTER THREE



    Methodology – the approach



    The study generally aims to identify the supply issues in the expansion of CitiFinancial. The following are the specific aims of the study:



    To be able to:


    1.      identify the supply chain needs of CitiFinancial in their expansion of 25 more branches in Hong Kong.


    2.      determine problems in terms of costs and time duration.


    3.      identify the obstacles in terms of land in expansion in Hong Kong.


    4.      identify problems in human resource in the expansion of CitiFinancial in Hong Kong.


    5.      identify key safety issues that the engineering department should handle.


    6.      identify if integrated supply chain approach would help to make the expansion faster and less costly.



    To recommend key strategies for expanding in Hong Kong, the study will explore the problems presented by means of qualitative research.



    Data Collection


    Interviews will be conducted to the management of CitiFinancial, specifically the department that handles the expansion project. Questions will be asked regarding plans of purchase (e.g. supplies, equipments), how many people to be hired, the planning cycles for the expansion, and the forecasting plan and how precise it is. The interviews will be conducted personally. A tape recorder will be used during the interviews so that the recorded responses will be transcribed later for analysis and documentation.



    Questions for the interviewee :



    (1)               What are the major challenges for CitiFinancial’s branch expansion?


    (2)               What happened in the old state?


    (3)               How to determine the branch expansion network and its process?


    (4)               How to implement the branch expansion measures?


    (5)               What’s happened in the new state?


    (6)               Any improvement after branch expansion realization?


    (7)               How to monitor or control the process?


    (8)               Any feedback from the staffs after the expansion?


    (9)               What’s the main duty that affected the process?



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