Morgan Stanley

Morgan Stanley’s Return on System Noninvestment

Introduction

Morgan Stanley was established in 1935, and in 1997 merged with retail brokerage firm Dean Witter Discover and Co to become a global financial services organisation that employed more than 53,000 people in over 600 countries including Australia. Institutional Securities, Asset Management, Retail Brokerage and Discover were the four segments of Morgan Stanley. The merger altered the working environment of Morgan Stanley and created a divide in employee acceptance of the Retail Brokerage segment. It did not integrate well with the firm partly due to the information systems being different to the rest of the company.

Under CEO Philip Purcell’s management, Morgan Stanley’s infrastructure and systems did not grow with the needs of employees and customers, nor did it apply future technologies to their current systems, it’s focus was reducing overheads to maximize profits in the short term. Many brokers resigned, taking with them valuable portfolios and profits. In June 2005 Purcell resigned, and John Mack provided new leadership. The firm then began to change its information systems and provide better services for clients, which saw stronger ethos and integrity within the employees.

The new leadership at Morgan Stanley instigated change, and the realization that the Company must grow to keep up with the competition in the financial services industry. Not only did technology need overhauling within all the segments, but management and organisational changes were also required. Some of these changes were the renaming the Retail Brokerage division to Global Wealth Management Group and hiring James Gorman with a budget in 2006 to invest over $500 million. It was also forced to make a significant upgrade to its website.

Prior to 2005 Morgan Stanley had no economical advantage, now with changes implemented in a competitive industry such as this Morgan Stanley's strength of employees, global product range and leading market share for Institutional Securities, Global Wealth Management and Asset Management has the firm making strong profits.

Question 1 - Evaluate Morgan Stanley’s business using the Competitive Forces Model.

By using Porter’s Competitive forces model (Laudon & Laudon, 2007, pg. 96) to analyze Morgan Stanley’s business environment a general position of the company can be provided. Through evaluating the five competitive forces of Morgan Stanley’s traditional competitors, new market entrants, substitute products and services, customers and suppliers we can give a general view of the business to provide a competitive advantage which results in a positive affect in the future.

In Financial Markets there are many traditional competitors for Morgan Stanley. They offer the same type of services, similar products and investments for clients in the same industry. Morgan Stanley had to spend money on new information systems to compete with these other companies and continue to develop new and more efficient products and systems to have data at hand. Clients could see the problems of the company through the website with the sparsely detailed year-end tax reports, information and top brokers resigning. For example, Merrill Lynch was spending $1 billion on new systems for its brokers (Laudon & Laudon, 2007, pg. 35) and this would give them a competitive advantage as their systems easily obtained accurate and quick figures and details for brokers and clients.

New Market Entrants were also a threat to Morgan Stanley as other companies could establish themselves and easily head hunt dissatisfied employees who in turn bring with them experience, portfolios and profits. Though new companies start up costs would be high for new technologies, product and services, the