Alpen Bank Case Study Essay Example
1. Should Alpen Bank launch a credit card? And how would the credit card opportunity compare to focusing on core business of banking service?
Considering the economic and market conditions explained in the case as well as the cost revenue analysis, Alpen should launch a credit card. * The rapid economic growth has led to higher incomes which have increased the proportion of middle class and upper-middle class in the society. This growth has also led to an increase in disable incomes, means that people have more money to spend. * The country has 10% households who have 24% of the wealth. These people have sufficient income and are conscious about their social image and less sensitive to prices. * Although it is still underpenetrated relative to other central and Eastern Europe, the Romanian credit card market is growing at a good pace of 35% in the prior year and has a lot more room to grow. Moreover, by 2006, Romania already had 8000 ATMs and 150,000 point-of-sale terminals for card transactions. * According to cost revenue analysis (Exhibit …), based on Net revenue impact and customer acquisition estimates, the company will be able to make about €5.8 million which is more than €5 million required from the head quarter to go for this project. However, all the numbers used in calculation were estimated. I assumed that it is likely to be true but I still provide some sensitivity analysis. The agency estimated that 85% of prospects who qualified for the credit card would convert into customers. If the rate change to 75%, the profit over 2 years would slightly lower than €5 million and if the worst case, 60%, the profit would be about €2 million. (Exhibit….)
On the other hand, there are some obstacles for launching a credit card as well. * The majority of cards in circulation were debit cards and many cardholders used their cards for cash withdrawals, rather than purchases. Moreover, the actual usage rate of credit card is till low (Exhibit
Considering the economic and market conditions explained in the case as well as the cost revenue analysis, Alpen should launch a credit card. * The rapid economic growth has led to higher incomes which have increased the proportion of middle class and upper-middle class in the society. This growth has also led to an increase in disable incomes, means that people have more money to spend. * The country has 10% households who have 24% of the wealth. These people have sufficient income and are conscious about their social image and less sensitive to prices. * Although it is still underpenetrated relative to other central and Eastern Europe, the Romanian credit card market is growing at a good pace of 35% in the prior year and has a lot more room to grow. Moreover, by 2006, Romania already had 8000 ATMs and 150,000 point-of-sale terminals for card transactions. * According to cost revenue analysis (Exhibit …), based on Net revenue impact and customer acquisition estimates, the company will be able to make about €5.8 million which is more than €5 million required from the head quarter to go for this project. However, all the numbers used in calculation were estimated. I assumed that it is likely to be true but I still provide some sensitivity analysis. The agency estimated that 85% of prospects who qualified for the credit card would convert into customers. If the rate change to 75%, the profit over 2 years would slightly lower than €5 million and if the worst case, 60%, the profit would be about €2 million. (Exhibit….)
On the other hand, there are some obstacles for launching a credit card as well. * The majority of cards in circulation were debit cards and many cardholders used their cards for cash withdrawals, rather than purchases. Moreover, the actual usage rate of credit card is till low (Exhibit