INTERNATIONAL MARKETING

This is an INDIVIDUAL examination.

Source: http://businesscasestudies.co.uk/morgan-stanley/

Morgan Stanley: Operating Globally Through Technology

Introduction:

This case study focuses on how information technology enables Morgan Stanley

Dean Witter to operate within the global financial market place and maintain a competitive

advantage. Morgan Stanley Dean Witter is a global financial services company that seeks to

maintain a leading market position in each of its business areas: securities, asset

management, credit and transaction services. It combines global strengths in investment

banking, institutional sales and trading with investment and global asset management

services. It also provides consumer credit products to its customers. Morgan Stanley Dean

Witter is a global organisation, operating from four major trading centres: London, New

York, Hong Kong and Tokyo. Information technology is fundamental to all of its business

areas. This study is concerned with the business of securities. Securities are financial assets

which can be bought and sold by investors in organised markets. The stock exchange is the

market for securities.

The Shrinking World:

The most significant developments in the business environment over recent years

have been the internationalisation and globalisation of businesses. Internationalisation refers

to the process of increasing involvement in international operations. Globalisation is an

approach that actively seeks conformity in products, markets, promotion and branding, based

on the belief that differences in markets around the world are disappearing. Both trends are

reflected in rapid growth in world trade, investment and in joint ventures between companies

in different countries. These allow companies in different countries to gain competitive and

technological advantages and to increase market share.

Information technology has been fundamental, enabling financial services companies

to trade globally and reducing the number of people needed to deal with increasing volumes

of trade. It has also standardised and increased products and services across the world,

allowing organisations to build economies of scale and increase efficiency. However,

Morgan Stanley Dean Witter is aware that subtle differences between regions and cultures

must be considered. The standardisation of systems that increase volume, transcend time

differences and international borders must not compromise the uniqueness of the global

services it offers.

The Changing Environment:

One of Morgan Stanley Dean Witter's most fundamental responses to the developing

global financial market, has been the application of new technology to address the challenges

it faces. Rapid developments in information technology mean that systems soon becomeoutdated. International financial markets change rapidly and organisations must develop

information technology systems that can support businesses effectively and enable them to

maintain a competitive advantage.

Competitive advantage refers to an organisation's unique competencies that are in

demand in its market and which its competitors are unable to provide at that moment.

Morgan Stanley Dean Witter aims to develop an information infrastructure which will meet

its long term strategic plans and enable it to be more proactive. Traditionally, the investment

banking sector has been strategically driven by its product lines. Changes in customer

expectations mean the industry has had to become customer focused, providing up to the

minute information and a more transparent, seamless service.

The Financial Market Place:

Advances in information technology have made the world a smaller place and

enabled organisations to operate globally. In the financial sector, information technology

allowed investment, ie. capital, to enter foreign markets freely and investors to gain the best

returns regardless of national borders. It has also made it possible for capital to exit a country

just as easily. This was demonstrated in 1998 by the virtual collapse of the Asian economies,

which, with links between economies world wide, created volatility and general uncertainty.

The forces of globalisation have increased the complexity of the financial marketplace. They

have also created wider opportunities. The ability to trade across national boarders can bring

higher returns, diverse products and a wider variety of sources of finance. The sheer number

of products and financial strategies has added further complexities to markets.

Information technology has brought its own set of complexities, by increasing the

speed of transactions and creating a broader flow of information. The merger of Morgan

Stanley and Dean Witter consolidated both organisations' strengths, increased their collective

product range and scope of distribution. Morgan Stanley Dean Witter is dependent on

information systems in order to compete globally in financial services. It has a combination

of software applications that allows it to trade on the world's stock markets, giving it access

to market news and data from around the world. Telecommunications in the form of the

Internet, e-mail and the telephone allows exchanges of information between clients and

colleagues. With such a dependence on information systems, support and back up services

must exist to maintain those systems.

Information Technology:

Information technology includes the use of three electronic technologies: computing

hardware, telecommunications and networks and software applications Computers handle

and process data. The data which is provided requires a context and therefore it is only when

data is processed in a particular way, for example added together or viewed as percentages,

that it becomes information. Such information is used by organisations as a basis for decision

making. Operationally which means in the short term, or strategically meaning in the long

term. Information should be:

up to date

accurate

readily available

appropriate

user friendly.

The information technology infrastructure at Morgan Stanley Dean Witter has been

developed over the last 15 years. Most of its information technology solutions have been

implemented strategically, to meet the perceived needs of the organisation's five year

strategic plans. Additionally, because of the complexities of global financial markets, some

of the solutions have been developed re-actively to meet operational needs.

Responding to Change:

Morgan Stanley Dean Witter must continue to seek more accurate predictions of

trends and respond to changes in order to maintain a competitive advantage. The information

on which it bases its strategic decisions needs to be as up to date, accurate and as transparent

as possible to meet its clients' needs because customers now want advice, products and

liquidity across all geographic markets.

A number of software applications capture information during trading hours in each

of the four major world financial centres. While many of the trading applications process

data in real time, core transactions such as processing and bookkeeping are processed

overnight on the mainframe computer.

This system, known as a batch system, processes 300,000 transactions every evening.

A batch system collects and processes data at the end of the trading day in London, New

York, Hong Kong and Tokyo. This means that when a transaction is completed, the data is

not processed, turning it into useable information, until the following day. Although this

system has been very efficient it now faces a number of challenges to which it must respond.

Increased trading hours: Electronic Crossing Networks are systems that allow

trading to continue after a stock exchange has closed. For example, the New York

stock exchange may be able to continue to trade for a number of hours after the

market has closed. Therefore, the batch of data processed from that particular

market may begin to overlap with the data being processed from another which is

just opening.

Reduced cycle times: If a trader buys a stock on the New York stock exchange

he/she currently has three days to settle the account. The New York stock

exchange will soon be introducing a new system which allows one day to

complete a transaction. This does not allow time for making or rectifying any

mistakes. Operating on a batch system means that by the time the data has been

processed, the information on which decisions are based is not available until it is

time to settle the account.

Volume: There has been a significant increase in the volume of the transactions

per day. Currently, Morgan Stanley Dean Witter makes 300,000 transactions per

day. Trends suggest that within five years it could be completing one million

transactions per day.

Product focus to client focus: There has been a shift towards focusing on the

customers who now require a much more transparent, seamless, service. This

gives them appropriately presented information which they can interpret and act

upon quickly, rather than data which may mean little to them until it has been

processed.

These challenges represent the need to develop systems that will process data in real time,

rather than relying on an overnight system which provides access to information too late.

The Goals of Straight Through Process:

gh Processing. This will be put into place over a multi year period, with the aim of

producing a seamless customer service. This represents a shift not only in the information

technology infrastructure, but also in organisational structure as it moves from procedure to

event driven. The aims of Straight Through Processing are to:

Meet changing time restrictions - the new system should be able to respond to

the compression of settlement time within the New York market and the

extension of trading hours brought about by Electronic Crossing Networks by

working on-line in real time.

Manage enterprise-wide risk - Straight Through Processing will provide an

enterprise-wide view of key exposures credit, market and operational risk. It will

reduce the time to provide global risk exposure for some types of complex risks

from weeks to days. It will also reduce operating errors and improve the quality

of reference data, such as accounts and product literature.

Meet growth and expansion - the volume of business is growing rapidly and the

new system is currently designed to handle one million transactions per day.

Decrease time to market - the business requires a system which can respond to

new business opportunities more quickly, as well as integrate local suppliers'

packages rapidly and at low cost.

Improve cost/productivity - the system aims to improve operational productivity

for standard products and increase the number of markets and products that can

be processed straight through, without the need for manual intervention.

Straight Through Processing should enable Morgan Stanley Dean to:

provide single customer view

improve and extend client connectivity

meet customer demands, e.g. confirming trade within a set number of minutes

and the ability to service any global business from any location at any time of

day.

Conclusion:

Information technology is the key to Morgan Stanley Dean Witter's ability to operate

globally. The global financial services industry is an exciting, fast moving environment

which requires dynamic, innovative responses both from its people and its systems. Straight

Through Processing aims to meet the challenges faced by the global financial services

industry. It also enables Morgan Stanley Dean Witter to maintain its competitive advantage

and increase its market share within a complex business environment.

Source: http://businesscasestudies.co.uk/morgan-stanley/

Questions

1. What changes brought by information technology to the financial industry? (5 marks)

2. What are the customer's expectations related a good financial institution? (4 marks)

3. According to Morgan Stanley Dean Witter, a good support and back up services must

exist to maintain its company's information system. Why? (4 marks)

4. Why information is important for a company? What criteria should be fulfilled to be

considered as a good piece of information? (6 marks)

5. There are two main types of applications (real time and non real time systems) used in

Morgan Stanley Dean Witter. Explain what is real time and non real time application

systems. (4 marks)

6. "There has been a significant increase in the volume of the transactions per day." What

are the implications if Morgan Stanley Dean Witter failed to respond to this situation?

(6 marks)

7. What is "seamless" customer service? (3 marks)

8. With Straight Through Processing, quality risk information can be provided in a shorter

period (reducing from weeks to days). Why it is important from the company

perspective?(2 marks)

9. What are the benefits/capabilities provided by Straight Through Processing to Morgan

Stanley Dean Witter? (3 marks)

10. What benefits provided through the merger of Morgan Stanley and Dean Witter?

(3 marks)