The two major groups of business are Global Consumer Group comprising of credit and charge card services, travel services, travelers cheques and secondly Global Business to Business Group comprising of merchant services and commercial services. All these products are sold to retail consumers, small and medium enterprises, large corporations, banking and financial institutions.
The different channels of product distribution are internet, direct mail distribution, employee and third party distribution teams and direct response advertising. The values of the company are "trust, security, integrity, and quality and customer service." The brand of the company has been awarded as one of most valuable brand in most of the published studies. The company is the third largest general-purpose charge and credit card network based on charge volume, behind Visa and MasterCard.
"American Express operates in over 130 countries around the globe." (Website www.americanexpess.com) The company’s various products are sold globally to all the consumers. The company issues both general charge and credit card internationally. These cards are issued either as proprietary cards or under licensing agreements together with another company. Merchant servicing i.e. signing of new merchants, processing and settling card transaction is also done globally. Two major businesses are Global Network Service(GNS)and Global Merchant Service(GMS).
GNS business ensures cards bearing American Express are issued by international subsidiaries, affiliates, third party institutions. Some of the examples of international cards are British Airways American Express card, Westpac in New Zealand, GE Money American Express Card in Japan, Iberia Sendo American Express Card in Spain and many others. GMS business signs new merchants across the globe and processing and payment of transactions. The company’s main aim is to ensure acceptance of American Express cards in all the locations of the world. Some of major merchants are RBS Insurance Group of the United Kingdom, McDonald’s restaurants across Australia, Unicoop Firenze SC hypermarkets in Italy, Christie’s auctions in Hong Kong.
The company also sells it proprietary cards internationally and aims at selling co branded cards in global market. Some of the co-branded cards are David Jones (Department Stores) in Australia, Cathay Pacific in Hong Kong and Taiwan, and Centurion Charge Cards in Argentina and Canada. The Global Travel Network provides travel and foreign exchange services to consumers in various locations. "American Express operates one of the world’s largest travel networks, which caters to both consumer and corporate customers’ travel needs with $25.4 billion of travel spend globally in 2008 (through proprietary operations and consolidated joint ventures)."
Global Commercial Service provides expense management service to more than 100,000 companies across the globe. Some of American Express Business Travel clients internationally are Ford, Sun Microsystems, Unisys, Fluor, Commonwealth Bank and Tyco International. The company chooses from any of the market entry mode like exporting, licensing, joint venture and direct investment depending on the kind of product. Like for example all the charge and credit card products are sold through subsidiaries and affiliates. In some countries there are licenses granted to partially-owned affiliates and unaffiliated entities to offer some of the products and services.
The company focuses on partnering with qualified third-party banks and other financial institutions that choose to issue Cards accepted on global network. Cards are sold internationally under distribution agreements with banks. Example of distribution partnerships is affinity cards in Australia. Under Global Network Service international arrangements fall into the following three main categories: Independent Operator Arrangements, Network Card License Arrangements and Joint Venture Arrangements.
The company’s major international strategy is to encourage and invite all international banks to issue cards on the American Express network. This is done by leveraging on huge global infrastructure that the company has and the brand of American Express. These deals are customized according to market type and the requirements of the partners. The Global Network Service (GNS) arrangements with the international partners ensure that products are developed to encourage highest spending on the card by the consumers and also ensure acceptance of cards by the merchants. The structure and details of each GNS deals are different. In most of the deals the partners have to bear most of the operating costs and credit risk. Due to such strategy the company’s total cost of international business on partnering is lower than its own proprietary business. This business strategy requires lowest capital support thus making the company’s return on equity on GNS business higher than proprietary card issuing business. The company chooses its GNS partners who have same values as the company, can deliver highest level of services, and have strong market knowledge and experience. Also read: American Express Organizational Chart
These partners form one of most important model for the company’s business. GNS partners benefit from the brand, attractive revenue, and scope to expand and differentiate their products offerings with innovative marketing programs. The company has 930 different card products deals with different international partners. Three types of GNS deals are Independent Operator Arrangements (IO), Network Card License Arrangements (NCL) and Joint Venture Arrangements (JV).
Under the IO arrangements, partners issue cards on local currency in their market as Classic, Green, Gold and Platinum American Express Cards. These partners are also merchant processor for the local merchants in their country. With multinational merchants relationship is maintained by American Express. The company generates revenue from card licensing fee, royalties, foreign exchange conversions, royalties on merchant charge and others. "Examples of countries where we have entered into IO arrangements include Brazil, Russia, China, Ecuador, Greece, South Korea, Pakistan, Croatia, Peru, Portugal and Vietnam." (Form 10K, 2008)
Under NCL arrangement, third party financial institutions are allowed to issue American Express branded card. These deals ensure increase in brand presence and market share. The issuer owns the customer relationships, manages billing, services customers, bears credit risk, markets and designs the product." Examples of NCL arrangements include our relationships with Citibank (South Dakota), N.A. and Bank of America in the United States, Lloyds TSB Bank in the United Kingdom and Westpac Banking Corporation in Australia. "(Form 10K, 2008) Under JV deals, a third party is asked to establish a separate business in which the company has significant ownership stake. The JV signs new merchants, issues local currency cards carrying American Express logo. The management of the JV is done by the company. Currently this arrangement is in Switzerland, Belgium and in other countries.
Global Merchant service strategy is to ensure maximum merchants are signed across the globe to enable acceptance of card wherever consumers reach. An IO and JV arrangement helps in acquiring such merchants. The company’s adds new merchants to through a number of sales channels: a proprietary sales force, third-party sales and service agents, strategic alliances with banks and processors, the Internet, telemarketing and inbound “Want to Honor” calls (i.e., merchants desiring to accept the Card contacting us directly).
To attract the merchants different strategies are used for example ‘American Express One point’ for small and medium merchants. The company focuses on acquiring merchants in retail and everyday spending categories that accept the Card, such as quick-serve restaurants, mass transit, healthcare and recurring billing merchants. American Express tries to sign up the merchants for acceptance of cards in industries where cash and credit are major payment modes for example are pharmaceuticals, whole sale foods, construction, industry supply. Fees from merchants form major part of the business.
The website www.americanexpress.com provides brief description of the human resource strategies applicable to employees in international subsidiaries of the company. "American Express is an equal opportunity employer."(Website www.americanexpess.com). The company has a vast geographical presence and employees are from various cultures, strong educational background, and wide range of skills. Some of the key features of human resource management are as follows:
Candidates can apply for the positions either online, directly, through employee referral program or through recruitment agency. Each of the department or business unit head decides whether the candidate is eligible for the position.
Employees are given feedback in number of ways. Firstly, the employees have to establish the business and personal development goals for the year with their supervisor. At the end of year, employees are provided feedback through Performance Management System called ‘annual review’. On successful evaluation employees are eligible for pay rise and bonus. Secondly employees participate in annual leadership feedback process. Leaders receive anonymous feedback from direct reports, colleagues and customers. Lastly all leader need to acknowledge and participate in development of their employee through on the job feedback, coaching, and information support.
The Company has a total compensation program that includes cash pay, long-term incentives (if eligible), benefits, retirement security, and work/life support. At the time of joining compensation is based on experience and qualification of the job. After that the compensation is based on ‘annual review’. In each of the geographies, to keep the pay competitive, the company regularly evaluates the pay package of the competitors in similar jobs through confidential surveys.
The employees are rewarded through merit increase, lump sum salary award and other salary adjustments like promotional increase, Lateral Move Increase, Within-Band Growth in Current Position Increase, and Internal Equity Adjustment. The employees also have opportunities to avail discounts and promotions through travel store. Eligible employees can participate in Legal Assistance Plan, Adoption Assistance Program, Educational Assistance and the Employee Assistance Program.
Reward and Recognition
In addition to pay, employees are recognized through a variety of company and business unit recognition programs. The various awards are ‘The Chairman's Award for Quality’, ‘The Great Performers Program’, Long-term incentive awards for Manager-level and above employees ,Incentives and Special Awards for Associates and Professionals, Annual Incentive Award (AIA) for Manager-level and Above Employees.
The Company does not have any routine career paths. Regularly jobs are posted for open position called ‘job posting’ and eligible employees are encouraged to apply for opportunities in same or other business or locations. Open posting process encourages employees to work in different department and locations during their career.
Time Off and Parental Leave
Depending on job, each employee is entitled to take time off from work as holidays or vacations with pay. Employees are entitled to take paid leave following birth or adoption of child after completing one year of continuous service
The Company promotes on the job learning. Employees are expected to deliver from day one. At the beginning of the year, employees together with their supervisor set out personal development goals. Some of the training programs that are regularly conducted are Leadership Training, Management 101, Diversity Training, Change Management, and other types of business and skills training available to employees as classroom activities or self-paced courses.
American Express Company, Form 10-K for fiscal year ended Dec 31, 2008, filed with U.S Security Exchange Commission