Business Model

Business Model

Citigroup and its predassesor companies use the "diversified financial services business model" first invented by Prudential in the late seventies. Simply put, this model attempts to conglamerate many types of finance companies, such as stock brokers, banks, insurance companies, and others. This is done because each of those businesses do better or worse at different times of the business cycle, and so owning all of them balances things out and creates in theory less earnings volitility. This is also done because customers usually use many different kinds of financial products and attempting to convince them to use more products from the same company sells more products more cheaply, compared to those seperate companies strictly selling products on their own.

During the era of Sandy Weill, much of Citigroup and predecesor's efforts were focused on aquistisions. Much of the efforts were focused in the stock brokerage and investment banking areas, and most of the aquistions were of companies which had recently had problems and were selling at a low price. After the aquisition, the management team would usually engage in agressive cost cutting to build up cash for the next deal.

The present CEO, Chuck Prince, has said "the day of the transformative deal (meger) is over". This is thought to refer to mega deals like the Citicorp/Travelers merger, as Citigroup continues to aquire. The focus of the company though, is said to have changed to organic revenue growth, that is selling more products instead of focusing on aquisitions and cost cutting alone to increase profit.

Overview Citigroup / Travelers Group

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