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3. What challenges does Mistri face, and what options are available to him?
Citibanks manager at corporate raised the Southeast Asia divisions
after-tax profit goal by $4 million, and Indonesias share of this raise
should be between $500,000 and $1,000,000. Since the budget Mr. Mistri
Based on the understanding above, Mr. Mistri has some available options
to increase profit.
a. First, he can increase its revenue by expanding the operation in
Indonesia. Among its three activities - institutional banking, individual
banking and capital market group, the capital market group seems to
be the most profitable activity because the group can generate
revenue with less costs and risks. Since the capital market group
serves as an intermediary in flows of funds from providers and users,
Citibank does not need to bear risks by lending their money in
Indonesia whose economy is on the downside and to increase costs
by hiring more staff to serve the customers. It can also adopt slightly
higher customer service fees to increase its revenue causing little
resistance from customers.
b. Second, he can achieve the profit goal raise by decreasing its costs.
As mentioned above, Citibank is suffered from the loss from high
turnover and the higher employee retention would save lots of costs
for them. I believe that high quality training will be a valuable asset
for the group in the long term.
6. How should Gibson allocate the $4 million increase in profit that he has
committed to?
The Indonesian economy is dependent on oil and gas industry sector,
was pessimistic to joining Indonesia into the increasing of Citibank profit
in South East Asia. The other reason is the governments regulation
(Suharto allowed eight foreign banks to set up operations only in Jakarta)
made the Citibank has limited expansion possibilities to make the higher
revenue and profit. If the profit of South East Asia has to increased $4
million, Gibson has to not joining Indonesia in the calculation. He should
divide the $4 million just for Australia, Malaysia, India, and Thailand.