Ibe: Analysis of American Express

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Extent of professionalization of management: The senior management, headed by Chairman and CEO Kenneth I Chenault have extensive leadership experience across sectors and companies. Directors have an added responsibility to effectively evaluate the capabilities and performances of each senior management official periodically and provide feedback for their improvement. The same is carried to the bottom of the pyramid where each senior manager reviews the employees’ performance and enhance their ability to achieve the company’s objective.

Shareholding Pattern: Each Director is expected to have a personal holding of shares with a value of at least $1000000, and should attain their threshold within 5 years of joining.

Other Shareholders:

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Source: http://www.nasdaq.com/symbol/axp/ownership-summary

Knowledge Based Capital

Intellectual Property: Amex has created an IP Zone (Intellectual Property Zone) to safeguard and promote patents, trademarks and related products. It cultivates open innovation and collaboration, promoting a legal platform for transaction IP products globally.

Patents, Trademarks and Service Marks: Trademarks and Service Marks include proprietary designs and in-house initiatives consisting of AMERICAN EXPRESS Box Logo, AMERICAN EXPRESS Card Design, AMERICAN EXPRESS Travelers Cheque Design, MEMBERS PROJECT, SIMPLY CASH, etc. Patents include Credit Assistant which is a knowledge-based system to support credit operations of the company’s travel related services. It also has “consumer trackers” technology which facilitates shopping experience by tracking consumers’ purchase behavior through RFID technique.

Research & Development: Amex is researching ways in-house to encourage people to save wealth by partnering with Consumer Financial Protection Bureau (CFPB). It studies consumer saving behavior using its Amex Serve platform. Its aim is responsible business targeting at financial inclusion and growing the economy.

Human Resource

HR is seen as an important driver of business performance. For developing future HR leaders, an executive has been specifically assigned. Five components of the competency model for developing HR leadership centers at Amex are:

- Applying knowledge of the Amex business

- Demonstrating professional values to partners and employees

- Driving change and creativity

- Leveraging HR expertise

- Transforming ideas into outcomes that are measurable and tangible

Skill and Quality: Recruitment of HR candidates is done from top graduate schools

Training and Development Program: 2-year program with three 8-month rotations to start with:

- HR generalist with a business unit

- HR functional stint

- Role outside HR field

After the program gets completed, they are offered suitable HR position in the company.

Other employees, seen as future leaders, undergo a training program called Project Endeavor to build their business acumen with the help of various case studies.

Morale, Attitude and Commitment: People are inspired to do their best through the environment created by the HR Team at Amex. Part of this is attributed to the initiatives undertaken by company including flexible work models/arrangements, inclusive benefit program and robust compensation policy.

Enterprise’s image and brand equity

“A subset of images which gives the brand its ability to positively or negatively shift the demand curve of a given product or service” --- Amex’s definition of its Brand Equity

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Source: http://reviews.greatplacetowork.com/american-express

Employee Ratings:

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Source: http://reviews.greatplacetowork.com/american-express

It also figures in Forbes list among top companies. The below table shows its ranks.

List

Rank

World’s most valuable brands

22

Global 2000

105

America’s Best Employers

351

Market Value

105

Amex, through a brand equity survey, has plotted a product demand curve with the brand equity curve. It then identifies assets as those elements which shift the demand curve in a favorable direction and liabilities as those which do otherwise.

As of 2015 October, it has a brand equity of $18.9 billion, seeing a decline of nearly 3% from the 2014 figure of $19.5 billion. This has been attributed to the cancellation of the Costco Wholesale exclusive arrangement which also led to decline of stock prices.

Performance of the enterprise

Amex was a raring enterprise with its stocks and earnings per share (EPS) growing steadily over the years until last year when its deal with Costco got halted. It was one of the worst performing Dow Jones Industrial Average Stock of 2016. As of Feb 29, 2016, shares were down by 20.5%

Financial Indicators

Values

Interpretation

Market Capitalization

$56.19 billion

This value declined since 2015 and is again on the rise since few weeks.

Beta

1.13

Healthy indicator of market risk; Stock can go up when market index goes up