American Express Case

Company Overview

The American Express Company was a leading global payments and travel company with revenue net of interest expense of $27.7 billion in 2007 (The American Express Card 1). American Express was the world’s largest issuer of charge and credit cards, while maintaining ‘best in class’ credit quality. Their roots date back to 1800s when Henry Wells, William Fargo, and John Butterfield founded an express delivery company. Handling and transporting customers’ assets depended on trust and security, which had remained at the core of the company and brand. In 1958, they launched their first card that targeting the business traveler. This brought about issues with senior leaders as they saw it as a threat. They had thought it would hurt the Diners Club Card that was launched just 8 years earlier since customers were using this card as a substitute for traveler’s checks. The economy also being in a recession, many argued this was a risky time to launch a new card. Ralph Reed, the president of American Express decided to launch the charge card regardless as he stated that “all we have to sell is service.” This charge card required customers to pay off their balance each month, they did not have the option of paying interest on the balance as if it were a cash loan like many credit cards nowadays. The Gold and Corporate cards were launched in 1966, the Platinum was then launched in 1984 despite concerns over taking away from existing sales of existing American Express cards. Shortly after the Platinum card was released, they launched their first ever credit card in 1987, that allowed customers to carry a balance and pay interest. It was marked as a ‘companion’ card to already existing American Express members. 1991 marked a downturn in the economy making it difficult for customers to pay off their credit cards, which then deferred American Express’ plans to expand their credit card business. 1993 brought some change for American Express and Harvey Golub was appointed CEO and Chairman, which set the stage for restoring health to the company and brand. Golub established long term goals for the company, which established earnings per share growth of 12-15% per year and revenue growth of at least 8% per year. Golub made many efforts to the success of American Express Company.

Key Issues

American Express is a successful company today, but they had their share of issues and still have some today, just like any company. Always looking for innovation opportunities and ways to increase their revenue. American Express faced some strategic failure. The financial supermarket created a holding company with little clear direction. The company lost half of its stock between 1987-1991 due to overexpansion and poor deal making. This led to billion dollar writes offs in the 90s. Along with strategic failure, there was competitions in cards.

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