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American Express Annual Report Analysis

One of America's oldest corporations, American Express has changed its mission, vision and corporate strategy many times over its 150 year history. Formed originally as a freight forwarder by Wells and Fargo (along with other partners), the company has since become notable for its participation in the "stored value" marketplace. Examples of this are traveler's checks, which the consumer pays for at the time of purchase and which "store" the value of purchase until they are used. American Express is now recognized as a charge card company as well as a travel services company. During the 1980s and 1990s the company went through a series of changes in strategy which were eventually completely undone, and the company is now refocusing its operations on its core business units. This research considers the company's performance, the industry, and the company's management, and whether this company would make an attractive investment option.

History and Nature of American Express' Business

American Express was begun in 1850; the traveler's check was invented in 1891. The first American Express card was issued in 1958. The traveler's check and the American Express card formed the staple of American Express business for the period leading up to 1980. Travel Related Services (TRS), as the two came to be known, were the core business of the company. The American Express card was not a credit card in that the balance had to be paid each month. Also, unlike bank credit cards, there was no pre-set spending limit on the card, and it was marketed as an "exclusive" card which was difficult to obtain. The company did not charge interest on outstanding balances, but did have a high annual fee to cardholders which outpaced the fees of traditional credit cards. The card was also not widely accepted; the company positioned it to be exclusive among retailers as well as consumers (Donaton and Levin, 1992, p. 1).

Howard Clark became chair...

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