| 1. Given the changes that have occurred in the | | | | private client market made it even more suitable. |
| international capital markets during the past | | | | The bankruptcy of Yamaichi Securities in 1997 |
| decade, does Merrill Lynch's strategy of expanding | | | | was a perfect circumstance for American |
| internationally make sense? Why? | | | | company to start entering Japanese market. |
| In a couple past decades the world has become a | | | | They first considered a joint venture that would |
| smaller place especially in the sense of | | | | allow minimum spending as they had a chance to |
| communication and ability to conduct business | | | | use already existing distribution system of a |
| internationally. With the emergence of new | | | | known Japanese bank. On the other side they |
| technologies managing and controlling has become | | | | didn't see their presence on the market due to |
| easier than ever before, thus allowing companies | | | | this venture in the long run thus they |
| to go global introducing their services and | | | | reconsidered this deal and were lucky to hire |
| products in various countries. Not only technical | | | | workers and buy Yamaichi's branch offices in |
| assistance gave such a rise to multinational | | | | 1997. Merrill Lynch definitely won in this situation |
| businesses but also international policies of | | | | when establishing their company's position on the |
| countries that were closed before for foreign | | | | market without reporting and coordinating their |
| investment. For instance countries such as Japan | | | | moves with another Japanese company. The risk |
| and former Soviet Union have opened their | | | | they took when working on their own paid off |
| markets for big companies from the United | | | | very quickly and significantly to their benefit, |
| States and other economically developed | | | | regarding enormous value of the assets held by |
| countries. | | | | the company. |
| 2. What factors make Japan a suitable market for | | | | 4. The collapse in stock market values in 2001-02 |
| Merrill Lynch to enter? | | | | resulted in Merrill Lynch's Japanese unit incurring |
| The fact of Merrill Lynch's leading position in the | | | | significant losses. In retrospect, was the Japanese |
| States and its acquisition of the leading mutual | | | | expansion a costly blunder or did the company |
| funds companies of economical giants such as | | | | simply get hit by macroeconomic events that |
| Britain and Canada have made it possible at least | | | | were difficult to predict and avoid? |
| theoretically to enter Japanese market. On the | | | | The years 2001-2002 were significant for all big |
| other hand it didn't consider national buying | | | | businesses worldwide as global collapse of the |
| characteristics and regulations over financial | | | | stock markets occurred. This event can hardly be |
| service industry. However the removal of number | | | | predicted by anyone as it is caused by the |
| of restrictions and allowing Japanese people to | | | | macroeconomic factors that are not controlled by |
| purchase foreign bonds and stock in the mid 1990 | | | | a single country, and needles to say by a |
| had made Japanese market suitable for entrance | | | | company. Evidently predicting such an event |
| and establishment of foreign capital. Moreover | | | | would soften the crisis for Merrill Lynch however |
| their government understood the necessity of | | | | completely avoiding it was impossible because |
| new "blood" in country's economy which would be | | | | international business is tightly connected with |
| donated by foreign companies to enhance | | | | macroeconomic conditions as it was in this case. |
| competition and bring in more funds. | | | | Lay offs and closing of most of their retail |
| 3. Review Merrill Lynch's 1997 reentry into the | | | | locations was the only way company could |
| Japanese private client market. Pay close attention | | | | manage to survive and continue operating on the |
| to the timing and scale of entry and the nature of | | | | Japanese market. Future showed that this decision |
| the strategic commitments Merrill Lynch is making | | | | was a smart one and led to renewing of |
| in Japan. What are the potential benefits | | | | company's power because almost all assets were |
| associated with this strategy? What are the costs | | | | still controlled by the parent company. |
| and risks? Do you think the tradeoff between | | | | 5. Do you think Merrill Lynch should continue in |
| benefits and risks and costs makes sense? Why? | | | | Japan? Why? |
| The first attempt of Merrill Lynch to enter | | | | After years of experience and success on the |
| Japanese market failed as their market was not | | | | Japanese market it would be not wise to |
| regulated to accept international players. In 1997 | | | | withdraw now. Practice shows that this company |
| however the situation changed under the WTO | | | | was able to withstand such tribulations as loss of |
| agreement for the better allowing foreign firms to | | | | half of their profit and huge lay off of workforce |
| sell financial services to their national investors. | | | | and still in less than six months they were up and |
| Regarding their previous experience they were | | | | running. Having loyal customers and knowledge of |
| hesitating to enter Japanese market but it was | | | | specifics of Japanese market structure are core |
| clear that this time things have changed with open | | | | competencies of Merrill Lynch as compared to |
| market and huge amount of assets owned by | | | | other players in this field. They definitely should |
| Japanese households were too attractive to miss | | | | continue conducting business in Japan although |
| such opportunity. It was perfect timing for Merrill | | | | they are not guaranteed to have it stable and |
| Lynch as there were only few other foreign | | | | flawless all the time, as 2001-2002 crisis has |
| competing companies and their prior experience in | | | | proved. |