American Express 2007 Annual Report Download - page 19

LETTER TO SHAREHOLDERS
Having spent 27 years at American Express, I know the value of keeping a long-term perspective. Of
course, we are not immune from further deterioration in the economy, and we will manage the business
appropriately in a slower-growth environment. But our organization is more flexible, our payments
businesses are more diverse and our customer relationships are stronger than at any time in recent
memory. In short, I believe we are prepared to manage through the near-term challenges and capitalize
on the substantial long-term growth opportunities in payments.
Periods of uncertainty often present opportunities to extend market leadership. Consider our experience
during the last U.S. economic downturn in 2001. Our position was much different, and weaker, at that
time. We had to deal not only with a deteriorating economy, but also with the effects of September 11,
which further reduced cardmember spending and brought travel to a virtual standstill. Faced with these
severe challenges, we made the decision to invest in the business while others retrenched. This marked
the start of a multi-year investment strategy that led to one of the strongest periods of growth in the
company’s history.
Since the end of 2001, the company’s earnings per share have grown 23 percent annually, return on equity
has more than tripled and spending by American Express cardmembers has more than doubled. In the
U.S., our card business has gained share faster than any competitor, and we have increased share in many
international markets as well.
In the prior downturn of the early 1990s, we began the process of broadening our range of card products,
introduced rewards programs, expanded merchant coverage in the retail and everyday spending categories,
and reengineered the business to free up resources to invest in growth opportunities.
Our practice has been not just to manage through periods of economic weakness but to exploit them for
competitive gain, to build and invest so that we come out of a cycle stronger than we went in.
It’s also instructive to look a bit further back in our history. This year will mark the 50th anniversary of the
American Express Card. Back in 1958, charge and credit cards were a novel idea. Given our experience in
travel and overseas payments, it now seems natural that American Express would enter this new business.
But the choice wasn’t so clear-cut at the time. The decision faced strong opposition inside the company,
with senior leaders evenly divided on the issue. Among the main concerns: Many thought it was foolish to
launch a charge card when the U.S. economy was in a recession. Fortunately, those with the longer-term
perspective, who could see the opportunities ahead, prevailed.
American Express has thrived over the years because of our belief in providing outstanding service and new
solutions to meet the needs of our customers. These qualities serve our company and our customers well
through all business cycles. Following is a more in-depth discussion of our recent results, the core strengths
that continue to fuel our growth, and our outlook for the future.
DRIVING CHANGE, GETTING RESULTS
American Express has always been a service company, first and foremost. Two factors, probably more than
any others, are responsible for our success over 158 years—the tradition of trust and security we have
established, and our ability to evolve with the changing needs of our customers.
In 2007, we determined the time was right to fine-tune our organizational structure so that we could
more fully leverage our capabilities to serve customers, share knowledge and expertise across geographies,
bring products and services to market more rapidly, and position our company for growth.
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