American Express 2002 Annual Report Download - page 12

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Foundations for Growth
Financial results for the year are an important measure
of the company’s progress, but as I mentioned earlier,
we are managing the business for the long term. With
that in mind, I would like to tell you about three major
initiatives that are enabling us to build a sustainable
platform for moderate to long-term growth:
❙Improving our business models
❙Lowering our risk profile
❙Investing in business-building activities
IMPROVING OUR BUSINESS MODELS
We took a number of steps this year to strengthen our
economics. Foremost among them was our continued
focus on reengineering our business and improving our
margins.
Margin Improvement
Our emphasis on margin improvement and reengineering
produced continued reduction in operating expenses.
Staff reductions associated with reengineering charges
announced in 2001 played a significant role in lowering
our expense base. However, our reengineering efforts
extend far beyond cost reduction, encompassing a
broad range of efforts to increase revenues, improve
infrastructure and enhance processes. By emphasizing
this approach to reengineering, we are better positioned
to deliver sustainable improvements.
Reengineering yielded more than $1 billion in benefits
in 2002. In total, over the past two years, we have
realized well over $2 billion in reengineering benefits,
exceeding our original targets. Based on further oppor-
tunities already identified or underway, we aim to
deliver another $1 billion in benefits again in 2003.
As part of our reengineering efforts, we have signifi-
cantly expanded our Six Sigma program across the
company. We are using Six Sigma to enhance quality
and productivity in key business processes and to
eliminate costly errors. In 2002, our Six Sigma activities
produced nearly $200 million in financial benefits
and delivered important quality enhancements. Since
launching Six Sigma at American Express in 1999, we
I10 AXPI
U.S. CARD SPENDING_ Cardmembers are increasingly using their American Express cards to purchase
“everyday” products and services such as groceries, gasoline, office supplies, telecommunications and a
wide variety of retail merchandise, further diversifying our card-spending base. Retail and other non-T&E
spending now accounts for 63 percent of U.S. billings, up from only 35 percent in 1990.
❙ Retail and Other ❙ T&E Related
19 90 2001 2002
65%
35% 40%
60%
37 %
63 %