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JEssie, Miko, Bernard, Adie, Tinton, ANdrew
1. Case Sumarry

Founded in 1987, China Merchants Bank (CMB) is a pioneer in the use of technical innovation and IT as a
competitive tool in the rapidly evolving Chinese banking sector. With a relatively small branch network when
compared to its larger competitors, CMB uses an IT-driven strategy to introduce an "all-in-one" card, which
integrates a suite of financial products to drive its personal banking business enabling CMB to be ranked 6th
among China's commercial banks and 2nd among the other national commercial banks in terms of total assets
as of June 2006.
Underlying its excellence in personal banking is CMB's leadership in developing its credit card business.
By April 2006, CMB had issued a total of over 5 million credit cards, capturing one-third of the Chinese credit
card market. In September 2006, CMB's IPO in Hong Kong fetched about $2.4 billion and, given deregulation in
the banking sector in China, CMB's President was presented with new challenges and opportunities concerning
how such funds should be productively allocated to ensure CMB's competitiveness.
China Merchants Bank Co., Ltd provides various banking products and services in the People's Republic
of China. The company offers demand, time, personal call deposits, agreement and notice deposits, and
education savings, as well as personal, Renminbi, and foreign currency accounts; and personal commercial real
estate, consumption, housing, micro-business, car, syndicated, commissioned, liquid capital, fixed asset, combo,
equipment mortgage, joint and specialist guarantee, and housing mortgage loans, as well as loans for study
abroad and vessels.
It also provides private banking solutions; wealth management products; fixed-term life, annuity, health,
accidental injury, participating, universal life, and investment-linked insurance products; individual forex option
trading and gold trading services, as well as open ended funds; and electronic banking services. In addition, the
company offers cash management services that include treasury management and cross-bank solutions, and
electronic financial supply chain services; investment banking services comprising collective fund trust plans for
debt financing instruments and commercial papers, financial consulting, underwriting debt financing, M&A
financing, and equity financing and enterprise listing services.
Further, it provides financial institution, offshore banking services, custody, pension, credit card, and
Internet banking services; discount, guarantee, and redemption for commercial bills; settlement; and trade
chain financing services, as well as international business services. As of December 31, 2013, the company had
113 branches, 934 sub-branches, 1 exclusive branch-level operation center, 1 representative office, 2,330 self-
service centers, and 9,492 cash self-service machines in approximately 110 cities in Mainland of China. China
Merchants Bank Co., Ltd was founded in 1987 and is headquartered in Shenzhen, the People's Republic of China.

JEssie, Miko, Bernard, Adie, Tinton, ANdrew
A. Segmenting, Targeting & Positioning
Segment Institutional and individual clients
Target Group
Small, medium, large clients and individuals seeking varied financial services in the areas of
wealth management,trade,international business, fund management and custodian banking
Positioning A Chinese bank with high emphasis on service, innovation and stability
SWOT Analysis
1. A bank pioneer in providing online banking services
2. Highly innovative in terms of new financial products, services and usage of information technology
for banking
3. First Chinese bank to introduce a new financial product exclusively for high-end customers, which
provided services to 750,000 high-end customers
4. Bank leads in asset custody, corporate annuity and offshore financial business
5.Dividend yield and Dividend 5 Year growth rate are greater than the industry and sector scores
1. Increase in bad loans affecting the performance of the bank
2.Lags in terms of number of branches when compared to Big 4 Chinese banks (ICBC,CCB,ABC,BOC)
3.Not much dominance in agricultural and retail financing
1. High opportunity to expand in Mainland China and other Asian economies to compete with other
Chinese banks
2.High opportunity to focus on agricultural, retail and personal banking to compete with other major
Chinese banks
3.High opportunity to expand its presence in developing economies like India, Brazil etc to compete
with major banks of the world through acquisitions
JEssie, Miko, Bernard, Adie, Tinton, ANdrew
1. Change in Chinese regulatory policies like reserve ratios affecting the bank
2.Decreasing investments in China affecting the bank
3.Slowing Chinese economy has a major impact on the bank

2. Discuss/show key success points of credit card business in China and that of CMB!
The credit card market in China has been growing at double-digit rates since the early 1990s and has
boomed since 2003. China became the worlds second largest credit card market (after the U.S.) in 2012 in terms
of number of cards issued and transaction volume, and is expected to become the world's largest credit card
market by the year 2020.
Being highly policy-driven, the Chinese credit card market is largely directed by political calculation,
policy mission and administrative intervention. Even though economic and social factors play a vital role,
government regulations and policies control or strongly influence the competitive landscape, the credit card
ecosystem and the industry income structure. Foreign companies must recognize that government regulators
are working on a course of regulation that is oriented toward supporting state-owned and domestic Chinese
Even so, the Chinese credit card market will continue to be the most promising market worldwide due
to the size of the national economy and population. And the relative slow-down of the Chinese economy will
have a limited impact on the market given the huge scale of business opportunity and the tight control of credit
risks by the central bank. Packaged Facts predicts that market growth in 2012 and 2013 will notch
downward due to card migration and risk control concerns, but will pick up again from 2014 onward due to the
growing customer base and developing mobile and internet payment business.
Differentiation of positioning based on brand image, promotional strategy and strategic vision is critical
to success in this market. Big name foreign firms are attractive to middle- and upper-class Chinese customers,
whom foreign companies can target through high-quality and exclusive services. In addition, younger adults
are forming a new generation of consumers who are more technologically- and innovation-driven when it comes
to choosing credit cards, such that the most technologically advanced companies will be best positioned
to perform in this market.
At the same time, the payment processing market is going through a revolution in China with the
introduction of third-party payments. New competitors are entering into the market and sharing profits from
card payment companies and banks. Alliances and the competitive landscape have been transformed, and
payment companies will need to reconsider their positioning and partnership strategy in this market.]
China Merchants Bank has been adhering to the "Technology Oriented" development strategy all the
time. The Bank is also fully aware of the market and customer's demands. By enacting the substantial
advantages of the unified electronic platform, the Bank has launched a series of industry leading financial
products and services, and also successfully built up some well-known brand names such as 'All-in-one card',
'All-in-one net', 'Sunflower', 'Go Fortune', 'China Merchants Bank Credit Card', and 'Wealth Management
Account' etc. which has been widely accepted by the society as an IT-driven commercial bank.
JEssie, Miko, Bernard, Adie, Tinton, ANdrew
Acting upon the principle of Market Segmentation, China Merchants Bank, expect for its efforts to
provide quality services to the general public, it goes ahead further to develop 'one-to-one' tailor made services
to its affluent clients with its ever-improving professional and individualized service quality. In the course of
high-speed developing era, China Merchants Bank persistently adhered to its strategic guideline of balanced
development with profitability, quality and scale.
The bank fostered daringly the management culture with the main focus on risk management, hence
gained recognition among the piers. At the early stage, CMB has applied the guidelines on Asset-liability
management, separation of assessment and loan granting, and 5-tier loan classification. Therefore, CMB has
constructed a sound internal control system; meanwhile, it has also received quality management certification
in deposit and accounting arena. Specifically, the ISO9001 quality assurance certificate was granted jointly by
the Brutish BSI Pacific LTD and China Classification Society Quality Assurance Ltd. (CSQA).

2. What risks CMB faces with the credit card business? Explain why!

3. Note that the opportunities for this emerging market are tremendous for CMB, hence
the overwhelming recommendations to Chairman Ma are grow, grow, grow! But
your group advise could be risk, risk, risk! Analyze whether such propositions are
corrector wrong! Why?