American Express Company Info

American Express Company, headquartered in New York City, is divided into four business segments: worldwide commercial services, card services, global network security, and international card services. These services are available to a variety of clients, including small enterprises, major corporations, consumers, and SMEs. There are 2.1 million registered SMEs in Australia, with only roughly 44% of them having credit and charge cards. According to statistics, the net increase of the registered industry in the country is 4.4%, with 1.9% growth in business loan applications. Due to the high number of competitors, a slight reduction in the rates will increase the market reach, thereby having more of the 1.155 million businesses utilizing AMEX services. Evidently, one out of every two registered enterprises uses their cash to pay for domestic supplies. It is, therefore, imperative to develop a lending product to venture into the Australian market. In light of the above information, this report focuses on developing a suggesting a lending product for American Express targeting the SME market in Australia.

Consumption Patterns

Blue Ocean Strategy

The Blue Ocean strategy is an approach employed towards having an uncontested marketplace by businesses engaging in operations to define higher profits (Haggerty et al. 2014). AMEX, despite having developed the Traveler’s Check, has had other products that have assisted the company gaining Blue Ocean in their operations. However, while working with the Australian SME markets, it is imperative to define new strategies for increased customer reach.

In the process of defining Blue Ocean for AMEX, it is imperative to slightly reduce the rates charged in the market for the SMEs. Due to the high number of competitors, a slight reduction in the rates will increase the market reach, thereby having more of the 1.155 million businesses utilizing the AMEX services. According to Haggerty et al. (2014), most AMEX competitors have high rates on their credits and a deep longing to target consumers. Therefore, a slight reduction would position AMEX in a defined market with the majority of the businesses subscribing to the same.

Consumption by Type, Trend, and Fluctuations

How, when and where do consumers buy?

The Australian SMEs are many and majority of them have not yet used the lending products. Consumption of these services is primarily based on the average funds required by a company. The higher the amount required, the more the companies will seek from the lending products.

What Is the Purchasing Behavior Process?

The purchasing behavior of the consumers is based on the requirements of their businesses. The SMEs have various needs that have to be met in the course of operation, hence requiring additional funds. The purchasing behavior process is inclusive of the decision-making unit, where the consumers consider the availability of the funds, the needs of the business, payout time and interest rate values.

Decision Making Unit

The decision-making unit within the Australian SMEs is based on the decision makers, gatekeepers, initiators, users, influencers, and buyers. These elements are in involved in the course of developing the buying decision for specific lending products that would have most benefits for them.

Buying Process

The buying process for the SMEs primarily considers the alternative sources and examines the differences in pricing and interest rates offered by these competitive products. Upon deciding on which is best suited for the company, the SME then contact the vendors to proceed with obtaining the lending products.

Alternatives Considered

For the companies using the credit and debit cards, the most preferred provider for the same is AMEX, with competition from PayPal, prospa, moula, get capital, Fifo Capital, Kikk Capital, First Class Capital, Spotcap capital, Speedy, Thin Cats Australia, and Springboard Capital. These are the alternatives which the SMEs in Australia consider before selecting the lending product to work with.

Information Sources

The sources of information about the lending products is business magazines, the internet and the television. Advertisements are used by the lending firms. Therefore, the SMEs in Australia have a wide variety of adverts to choose from.

Decision Criteria

Fluctuations in interest rates and periods for repayment of debts by these lending products differ, hence creating a difference in consumer preferences. With the different alternatives to choose from, the SMEs in Australia. Therefore, the decision criteria focuses on low interest rates for loaned funds while borrowing funds for business expansion and operations.

Existing Knowledge and beliefs

There is a total of 2.1 million registered businesses. Notably, 66% of the same do not use credit or charge card in their operations. The market, therefore, is comprised of 1.155 million businesses that are potential customers for AMEX and other competitors offering similar services. It is the belief of the SMEs that the most of the lending products in the country do not offer fast services and lower rates of interests.

Porter’s Five Forces

Based on market’s Porter’s five forces, it is evident that, despite the nature and size of the businesses in Australia, there is a need for a convenient financial management approach to companies. The economic plan must have low interest rates, which can be met when repaying the loans by SMEs without infringing on their overall profit margins. According to Alismaili et al. (2016), it is evident from statistics that the lending practices of the Australian SMEs are significantly lower as compared to the United States SMEs. Evidently, the rate of payment on the same is higher for the former than for the latter.

Considering the threat of substitute lending products, a variety of them exist and directly influence the AMEX provision of services in the industry. Firms such as PayPal, Kikk, and Prospal are among many competitive companies engaging in the provision of funds to SMEs in Australia. Moreover, some of these distributors form crucial interest collaborations while targeting Australian SMEs. The collaborated firms, therefore, pose a wide threat to AMEX since they have more financial capabilities and market reach.

The threat of new errant in the market is significantly low, owing to the high capital, to start and run a business. Most companies wishing to join the industry may also face adverse regulations to meet customer needs. Therefore, threats to new entrants is limited. Notably, concerning supplier’s power, it is almost not applicable since AMEX has a vast pool of funds. The buyers, however, have the power to bargain since other facilities can still provide loans to them. The SMEs have a variety of lending products from competing firms to AMEX. They can negotiate for the prices and interest rates they have to pay.

Segmentation

Demographic

Within Australia, a total of 2.1 million SMEs are registered, with only about 44% of the companies having credit and charge cards. Statistics provides that net growth of registered industries within the country is 4.4%, with 1.9% of business loan applications growth. Evidently, one out of every two registered enterprises uses earned cash to pay for domestic supplies. It is, therefore, imperative to develop a lending product to venture into the Australian market.

Geographic

The Australian market is fourth in the overall lending opportunities available to AMEX. The total lending opportunity for AMEX in Australia is about 300 billion. However, other significant lending opportunities such as in the United Kingdom, Japan, and Canada exceed that of Australia. The opportunity is attractive for AMEX to venture and provide lending products to the wide market, with the primary aim of gaining revenue from the same.

Psychographic

The market is comprised of different nature businesses, ranging from consultancy, photography, baking jobs, banking, and other large corporations. Quality of these facilities revolve around improving their profits (Beedles 2012). It is the belief of the business owners that with more finances, it would be possible to develop better products and meet consumer needs. Thus, this is an opportunity for AMEX to assist these SMEs financially and regain profits while the debtors pay back profit.

Lifestyle

In general, the people’s lifestyle and business practices are based on meeting consumer needs with high-quality products and services. It is paramount that, while achieving these objectives, companies would need access to finance lending facilities.

Buyer Power of Porter’s Five Forces/ what is learnt about buyer power

Evidently, the buyer forces in Australia for the credit and debit cards is high. Buyers have the choice to select lending products from different companies offering lower interest rates than that of AMEX. It is also important to note that these buyers may forego different lending products to obtain the ones best suiting their needs due to the enormous nature of competition.

Consumer Demands, Purchasing Behavior, and Alternatives

The consumers obtain their cards based on financial needs. The financial requirements constrain SMEs to receive financial support to improve their financial capabilities and expand their businesses. The SMEs purchasing behavior entail receiving finances when needed. Most of the firms do not choose to get loans if they are financially stable. The decisions on which lending product to choose are made based on interest rates offered, a period of loan repayment and the accessibility of the funds. The access to credit for SMEs in Australia is affected by the hustle involved in documentation process and the entrance to the loans. Majority of the SMEs claim that the documentation process is long, while others argue that access to the funds is not rapid.

Environmental Impacts on Demand

Socio-Cultural

It is evident a third of the total markets in Australia agree to use credit in running businesses. Moreover, a similar number share an opinion on the need to have access to credit efficiently. Additionally, the same amount also acknowledges that access to credit for SMEs in Australia is affected by the hustle involved in documentation process and the access to the loans. As such, due to the ease of access to loans from AMEX and high support in managing and maintaining the same, the market is available for AMEX to utilize and serve investments within the SMEs. Moreover, company loans are easily accessible with less documentation but with a high level of security for the funds.

Economic

Economically, there is high demand for loans to suffice businesses. For the SMEs in the country, stable businesses need more financial help to support their overall operations and meet their needs. On average, the total income of SMEs in Australia rages from $200,000 to $5 million, which is significantly lower compared to the overall number of SMEs in the country. The access to supportive funds from other substitute products is considerably easy. However, there is a higher chance for AMEX to improve their reach in this aspect.

Material Environment

Majority of materials for production in Australia are sourced from outside countries. The sourcing results in higher expenses for companies. The high costs limit majority of group operations. Therefore, the firms either source poor quality resources for lower prices to meet organizational financial requirements, or source for high quality materials while reducing the needs. Trimming implies inability to meet company needs entirely. However, AMEX has an opportunity to provide a solution to the problem noticed. AMEX can provide loans to these firms to purchase high quality products and otherwise meet organizational demands while providing high-quality products. As such, there is an opportunity to engage AMEX in Australian SMEs.

Regulations

Legal regulations might restrict or support access to funds and loans. Fan (2016) claims that while the government in Australia is supportive enough to provide proper tax rates and subsidies, it is imperative that these SMEs, especially the startups, obtain financial assistance in their operations. Meeting customer needs for the SMEs requires substantial capital, which is reflected by the overall profit margins gained. According to Cowling et al. (2016), access to the funds can be provided by AMEX at lower rates, which would result in proper generation of profits for companies. Provision would support meeting of required standards by the regulating authorities. In light of the above information, there is a potential market for AMEX in the SME landscape within Australia.

Technology

Technology is an essential component in the business industry. Most of the advanced and stable businesses have utilized techniques that can be considered obsolete. However, the same have aided in fostering proper sustainability in the market. On the other hand, the new businesses in the SME market have more advanced technologies at their disposal, implying that they have an added advantage compared to other firms. The challenge, however, to both sectors is the insufficiency of funds to implement integration with proper technologies. According to Fan (2016), technology demand is a pulling factor for AMEX need to supply lending products to SMEs.

Relevant Infrastructure

Despite the high infrastructure development within the country, there is a need for improvement. Transport nature is efficient, both air and land. Goods arrive in due time. However, Al-Isma’ili et al. (2016) note that communication element in infrastructure is subject to improvement specifically with the advanced technology systems. Improvements in communication aspect would anchor faster decision making within companies and quicker transactions involving financial elements.

Conclusion

The discussion has unraveled that within Australia, a total of 2.1 million SMEs are registered. However, only about 44% of the companies have credit and charge cards. Statistics provides that the net growth of the registered industry within the country is 4.4%, with 1.9% of the growth of business loan applications. It is evident that a third of the markets in Australia agree to use credit in running businesses. Moreover, a similar number agree that there is need to have access to credit. Based on the market’s Porter’s five forces, it is evident that, despite the nature and size of the businesses in Australia, there is a need for a sound financial management approach that is convenient to corporations. The economic plan must have low interest rates, which can be met when repaying loans by SMEs without infringing on their overall profit margins. It is noted that the threat of new entrants in the market is significantly low, owing to the high capital needed start and run a business.

Bibliography

Alismaili, S., Li, M., Shen, J. and He, Q., 2016. A multi perspective approach for understanding the determinants of cloud computing adoption among Australian SMEs. arXiv preprint arXiv:1606.00745.

Al-Isma’ili, S., Li, M., Shen, J., and He, Q. 2016. Clearing the ‘cloud’hanging over the adoption of cloud computing in Australian SMEs. [online] Clearing, 12. Available at: https://pdfs.semanticscholar.org/4ae3/55009bd780f502caa5c7d3a0cb6ba4b5f5cc.pdf [Accessed Oct. 18, 2017]

Beedles, L., 2012. Small firm equity cost: Evidence from Australia. Journal of Small Business Management, 30(3), p.57.

Carter, S., Ram, M., Trehan, K., and Jones, T. 2013. Diversity and SMEs. Enterprise Research Center White Paper, 3, p.13. Available at: http://core.ac.uk/download/pdf/16429669.pdf [Accessed Oct. 18, 2017]

Cowling, M., Cowling, M., Liu, W., Liu, W., Zhang, N. and Zhang, N., 2016. Access to bank finance for UK SMEs in the wake of the recent financial crisis. International Journal of Entrepreneurial Behavior and Research, 22(6), pp.903-932. Available at: http://eprints.brighton.ac.uk/15995/1/Cowling%20Small%20Business%20Financing.pdf [Accessed Oct. 18, 2017]

Cox, B., Paterson, I., Hodge, N., Forrest, K., Jackson-Maynes, K., Boynton, J., Eagleton, J. and Robinson, M., 2015. Australia’s Financial System Inquiry: Recommendations to watch. Governance Directions, 67(1), p.33.

Fan, Q., 2016. Factors affecting adoption of digital business: evidence from Australia. Global Journal of Business Research, 10(3), pp.79-84.

Haggerty, K., Lyon, C.C., Okoh, B.O., Phelan, R.E., Ruterman, J.K., Turner, G.A., Yuan, C.M. and Biswas, A., American Express Travel Related Services Company, Inc., 2014. Using commercial share of wallet to make lending decisions. U.S. Patent 8,630,929.