SWOT Analysis of American Express | American Express Strengths & Weaknesses, Opportunities and Threats

What is American Express?

American Express is a global financial services company. It is a multinational corporation specialized in payment card services.

It is headquartered in 200 Vesey Street, New York, United States. It was founded in 1850.

It offers credit cards, charge cards, prepaid cards; travel rewards programs and affinity partnerships to its customers.

How is the Business Model of American Express?

American Express provides a range of payment card products and travel related services to consumers and businesses, thereby achieving a wide array of financial objectives.

In 1891, American Express invented the traveler’s cheque. It’s a new business concept based on the Cash Machine paradigm.

It arose from an issue that American Express workers had while traveling overseas and finding it difficult to receive cash in a foreign nation.

American Express has a global network established in many countries and regions to provide financial transactions and other services. Products and services are delivered through this system to its customers.

It also works with other financial service providers to facilitate transactions of clients between them. It provides affiliations with banks, airlines, travel agents, retail outlets and businesses.

American Express has strong brand names in cards used by consumers for their transactions.

American Express promotes transactions between two types of customers: vendors (companies that accept credit card payments) and end users (customers purchasing goods and services with their credit card).

Customers using American Express credit cards can earn reward points for every dollar spent. Customers are encouraged to use the card more by giving cash and in-kind prizes for a set number of collected reward points.

The company leverage on customer data. Customers’ data is used by American Express to tailor advertisements for third-party services.

Because the firm has a lot of data on its clients’ buying patterns and quantities, it can group them according to their income and purchasing power, providing a compelling value offer for its third-party partners.

How does American Express makes money?

Transaction fees: It generates revenue from merchants and consumers by charging transaction fee for every Express also receives a reimbursement for any good or service that it paid to its supported merchants. It gets a percentage of all transactions completed using its cards.

In- Card charges: It charges from the accounts of those who use its credit card for goods and services purchased from merchants directly or through third-party outlets.

Merchandising: It gives discounts on goods and services purchased through its affiliated companies. The discounts are offered to customers based upon a need profile provided by American Express that determines the needs of each customer.

Commission: It charges a commission when it processes services for other companies through its network.

Interest on loans: It charges interest to the borrower when they are in debt.

Revenue and Financials

American Express reported earnings of US$2.634 billion in fiscal year 2017, with yearly sales of US$35.583 billion, up 5.2 percent from the previous fiscal cycle.

In October 2018, its stock was trading at over $83 a share, with a market capitalization of over $86.5 billion. In the 2018 Fortune 500 ranking of the biggest US firms by total revenue, American Express was placed #86.

In 2020 American Express had a total revenue of Decrease US$36.09 billion with an operating income of Decrease US$4.3 billion

It also had a net income of Decrease US$3.14 billion and a total assets of Decrease US$191.37 billion, it also had a total equity of Decrease US$22.98 billion.

It has 63,700 number of employees by December 2020.

5. American Express Partners

a) Hotel Partners: American Express has partnered with hotels like Choice Hotel, Hilton Marriott Hotel, Starwood Hotels etc. to offer co-branded credit card services.

b) Airlines Partners: American Express has partnered with United Airlines and Delta Air Lines. It provides concierge services, lounge access and discounts to its customers.

c) Car Rental Partners: American Express has partnered with Hertz and Thrifty Car Rental to offer co-branded credit card services.

d) Retailers: American Express has signed agreements with retailers like Macy’s, Michaels and Bloomingdale’s etc. It provides discounts on purchases made with its cards at their stores.

e) Other Partners: Ford, Hudson Taylor, Capital One Financials, PNC Bank etc.

f) Points Exchange Partner: It joins hands with companies like Chase for points exchange between its customers and Chase customers.

g) Automotive Partner: It has partnered with AutoNation to offer its cardholders special financing, warranty extensions, and ongoing maintenance discounts on new automobiles purchased from participating dealer.

6. American Express competitors

American Express has its main Competitors which are

a) Visa: It is a credit card company. It is a global network that provides a range of financial products and services for businesses and consumers. It has transaction fees from its customers to its partners for making purchases.

b) MasterCard: It is a credit card company that operates in more than 200 countries and territories around the world, enabling businesses to accept contactless payments at POS terminals, point-of-sale terminals, and online services. It provides PIN based authorization to online merchants too.

c) Stripe: It is a payment service provider that enables businesses to easily accept payments. It allows business owners to accept payments over the Internet on their own website.

d) PayPal: It is a global online payments system that supports online money transfers.

e) Alipay: It is an online payment system that supports instant transactions.

f) Quidco: It is an online platform that helps consumers save money while shopping online. It was launched in 2007.

6. American Express Business and Market strategies:

a) Product Portfolio: American Express began shipping charge cards in 1980, and began shipping credit cards in 1986. It has a line of co-branded cards. It has a product portfolio includes: Charge Cards, Credit Cards, Business Services to help customers manage their financial needs and provide corporate services to corporate clients.

b) Customer Segments: American Express divided its customers into 3 customer segments: affluent individuals, small businesses and corporate buyers.

c) Customer Relationship: American Express applies a proprietary customer relationship management system called Plenti to its business. The system allows American Express to share data across its business units.

d) Marketing Strategy: American Express uses an integrated marketing strategy to reach out to multiple customer segments in the United States and international markets. The company has credit card co-branding partnerships with 15 airlines, including Delta Air Lines, which feature co-branded cards that offer rewards points that can be redeemed for free air travel. It also has partnerships with multiple hotel chains including Starwood Hotels and Resorts.

7. SWOT Analysis of American Express

    Strengths of American Express:

1. a) Financial Strength: Strong financial position and access to funds.

b) Its products and services: Quality of products and services offered by American Express is appreciated by its customers.

c) Global Presence: Global presence enables American Express to provide better customer service around the globe.

d) Strong Brand Portfolio: American Express has spent a lot of time and money developing a powerful brand portfolio. This point is emphasized by American Express’s SWOT analysis. If the company wishes to branch out into other product categories, this brand portfolio might be highly valuable.

e) Brand Awareness: Strong brand awareness: American Express has the strongest brand name. It is highly recognized globally. American Express is also strongly perceived as an upscale, quality brand.

f) Brand Loyalty: The Company has a good reputation for customer loyalty, especially among the affluent customers.

g) Product innovation: American Express is highly innovative in its product portfolio and is capable of providing improved customer service.

h) Moderate risk: Risk is moderate because American Express has a good relationship with its partners.

i) Financial risk: Financial risk is moderate because American Express has a good credit rating.

j) Competitive Risks: Competitive risks are high, but the company is the best in its business sector. Hence, the company can overcome every competitive threat.

Weaknesses of American Express

a) Customer Service: Lack of customer orientation and high level of staff turnover might be a weakness for American Express.

b) Communication: Lack of communication with its customers (especially about the cards offered) might be another weakness for the company.

c) Fraud Control: American Express has been targeted by fraudsters due to its security concerns about traditional credit card transactions.

d) Its strong brand name and brand equity: The brand name and brand equity might be an issue for the company in case if it decides to expand its product portfolio. Its strong brand equity might deter customers from accepting any non-Amex products, because it will be difficult for them to differentiate between the Amex and its other products

e) Technological weaknesses: American Express has no technological strengths like the other competitor’s like Visa and MasterCard.

f) Organization structure: American Express has an old organization chart. Although its products are of high quality, it does not have the level of expertise to match up with the new retail landscape of the Internet age.

h) Legacy technologies: the Company’s legacy systems are not exactly appropriate for today’s online world.

Opportunities of American Express

a) Mainstreaming its products: American Express would be ideal to market its products globally online. This avenue of opportunity might be complementary with the company’s other strengths.

b) Core business needs: Amex has a lot of needs for expanding its product line, but it might face difficulties in doing so because of brand equity issues. This could be the company’s greatest opportunity for gaining new customers.

c) New avenues to expand its business: American Express can expand into an entity that supplies credit cards to small businesses.

d) New environmental policies: The new opportunities will level the playing field for all industry participants. It’s a fantastic chance for American Express to demonstrate its technological leadership and acquire market share in a new product category.

e) New trends in the consumer behavior can open up new market for the American Express. It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.

f) Online retailing: Online retailing is another opportunity for American Express to expand its business to small businesses.

g) New Products: Together with its partners, American Express has high chances of building new revenue streams source.

i) Global expansion: Amex can improve its product quality and services using the technological support that it will gain by this merger.

j) Opportunity to expand into other sectors like insurance and credit card co-branded credit cards. This could open up new emerging markets for the company.

Threats of American Express

a) Declining share of cards in the United States: Amex faces the threat of declining share of credit cards in the U.S.

b) Competition: Stronger competitors like Visa and MasterCard, and lesser known players like Diners Club and Discover.

c) Emerging market: Emerging market involves customers who use cards for purchasing goods are far less loyal to the credit card companies than are customers in established markets. They are more likely to switch among different companies when rewards offered by them are comparable or better than that offered by others.

d) Lawsuits: American Express has a higher risk of being sued. Lawsuits from customers might be a threat to the company.

e) Environmental concerns: The Company might face environmental concerns, especially if it becomes more popular in Africa and developing countries.

f) Technology: Amex’s technological weakness can be a challenge faced by the company as well as its customers because it may not have the necessary expertise to stay up-to-date with online retailing.

g) Limitation of the counterfeit and low quality product is also a threat to American Express’s product especially in the emerging markets and low income markets.

h) High risk of fraud, especially when customers are not present during electronic transactions.

8. FAQS of American Express

a) Why use my American Express® Card to pay my bills?

Using your American Express Card to pay your bill is easy and convenient. It’s a simple way to pay all your eligible bills — even when you’re not at home. The best part is, you’ll earn reward points on all eligible purchases and enjoy other Card benefits and offers, too

b) Why do I earn double points when I make purchases using the American Express® Card?

When they use their Card, you’ll earn double points on qualifying purchases for merchants who accept American Express Cards

c) How will I pay my bill?

You can pay by Credit Card, Debit Card, or any American Express Card

d) What if I lose my card?

If you lose your Card, call the number on the back of your card immediately. If you report a lost or stolen Card within 3 days of the loss, we’ll credit your account for any unauthorized purchases and give you a new Card immediately.

e) What services does American Express provide?

American Express provides various services to the customers. Some of the most popular are bill payments, credit cards, auto loans, business services and so on.

f) I have my account number with me, what do I need to do?

You can pay your bills online using your registered account by using our secure payment gateway. Please choose Pay Bill button for making a charge online.

g) How can I protect my American Express Card?

American Express recommends that you keep your Card as safe as possible by keeping it in a safe deposit box as well as securely locked up when not in your possession.

h) What is the mission of American Express?

American Express is a global services company focused on helping people spend and invest money.

i) what is the vision of American Express?

To serve the world’s largest, most affluent market with an unmatched combination of service, convenience and expertise.

j) Who are the competitors of American Express?

The competitors of Amex include VISA Inc. MasterCard Inc., Capital One Financial Corp, Stripe, HSBC Holdings Plc., JPMorgan Chase & Co., Citigroup Inc., and Wells Fargo & Co.

k) What are the products which are being sold by Amex?

The products which are being sold by Amex are credit cards, charge cards, traveler’s checks, prepaid products, and services.

l) Can I use my American Express Card to make purchases from physical stores?

You can use the card to make purchases from thousands of national retailers.

m) Why do you want to work for American Express?

The company’s mission is to be the world’s largest service brand which is focused on helping people spend, and invest money.

n) How can I apply for a job with American Express?

You can apply for a job with American Express by visiting their website at www.americanexpress.com. The jobs are available in the careers section of the website.

o) What are the benefits of working for American Express?

American Express offers a wide range of benefits to its employees. Some of them are medical, life insurance, time off, pay discrimination, stock options, etc.

p) What is American Express culture?

The culture of Amex is based around its core values which include trust, individuality, service and excellence.

q) What is the name of the CEO of American Express?

The name of the CEO is Stephen Squeri who was born on 1959.