Non-Investment At Morgan Stanley

Case Study of Morgan Stanley’s Return on Non-Investment (2)

John Mack is the still the CEO at Morgan Stanley. In 2005, he focused on management and organization changes to restore revenue and profit growth within the company. Describe the strategy he outlined to the organization and discuss its effects to date (including cultural effects if any)

Morgan Stanley is one of the world’s top investment banks which operates in three major divisions;

Ð'* Institutional services.

Ð'* Global Wealth Management Group

Ð'* Asset Management

Morgan Stanley operates in a environment that results in mergers, acquisitions, and public financing. Its profitability depends on its ability to accurately asses the readiness of the market and the value of business transactions.

When John J Mack took was appointed CEO of the company in 2005, he took on the daunting task of turning around a company that was underperforming in its retail brokerage and asset management areas. Morgan Stanley acquired the retail brokerage business when it merged with Dean Witter in 1997. From the outset, the two firms operated in different markets and eight years down the track, the two businesses still hadn’t fully integrated. They operated on different information and human resources platforms and were legally still two different firms which made it difficult for brokers to sell products across divisions of the company.

Many of the shareholders of Morgan Stanley wanted the retail brokerage division sold, but John Mack saw it as an asset that enabled Morgan Stanley to operate as a broad based financial services company. Instead he set about making changes to the way the company operated.

Under the previous CEO, Philip Purcell, there was a serious underinvestment in information technology. While Morgan Stanley’s main competitors such as Merrill Lynch, was investing over the billion dollars in information technology, Morgan Stanley with its culture of risk aversion appeared to be frozen. This resulted in many top brokers leaving the firm and taking major clients with them.

John Mack announced that he was going to make changes to the culture of the organization and address the issue of lack of technology. “We want to ensure that all our people have the best possible tools to serve our clients, so we are going to upgrade our technology platforms and provide our financial advisors and representatives with a tool kit that is as competitive as that of our leading peer”. (Morgan Stanley, 2005)

Laudon and Laudon says that an information system represents a combination of management, organization and technology and part of a series of value-adding activities for acquiring, transforming and distributing information to improve management decision making, enhance organizational performance and ultimately increase firm profitability. Laudon and Laudon also go on to say that information systems need to be accompanied by supportive changes in organization and management called complementary assets.

These include:

Ð'* New business models

Ð'* A supportive organizational culture

Ð'* Incentives for management support

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