Nomura Securities Co., Ltd. (NSC) is a wholly-owned subsidiary of Nomura Holdings,
Inc. (NHI), which forms part of the Nomura Group. NSC plays a central role in the
securities business, the Group's core business. As the leading securities and investment
banking firm in Japan, NSC endeavors to provide individual investors and other
diversified corporate clients with a range of services through the capital markets including
investment advisory services and fund raising. In this paper, we analyze the current
business of NSC using the framework provided in “THE STRATEGY CONCEPT AND
PROCESS” by Arnoldo C. Hax and Nicolas S. Majluf, and “the delta project” by Arnoldo
C. Hax and Dean L. Wilde ll and propose a business strategy for NSC.
The later part of this section, we introduce NSC from three points of view, its history,
business overview, and current business strategy.
1.1 Company History
Nomura was incorporated in Japan on December 25, 1925 under the Commercial Code
of Japan when the securities division of The Osaka Nomura Bank, Ltd. became a
separate entity specializing in the trading and distribution of debt securities in Japan.
Nomura was the first Japanese securities company to develop its business internationally
with the opening in 1927 of a representative office in New York, which actively traded
non-yen-denominated debt securities. In Japan, Nomura broadened the scope of their
business when they began trading in equity securities in 1938 and when they organized
the first investment trust in Japan in 1941.
In recent years, Nomura have sought to take advantage of new opportunities presented
by deregulation of the Japanese financial market and by developments in information
technology. For example, to increase retail customers’ access to their services, they have
taken advantage of the Internet to offer on-line brokerage and related services.
On October 1, 2001, Nomura adopted a holding company structure. In connection with
the reorganization, Nomura changed its name from “The Nomura Securities Co., Ltd.” to
“Nomura Holdings, Inc.” A wholly-owned subsidiary of Nomura assumed Nomura’s
securities businesses and is named “Nomura Securities Co., Ltd.”, the strategic business
unit being analyzed in this paper.
Nomura have also strengthened their mergers and acquisitions and other financial
advisory business by acquiring majority interests in Nomura Corporate Advisors Co., Ltd.,
formerly Nomura Wasserstein Perrella Co., Ltd., in November 1999. Nomura Corporate
Advisors became a wholly-owned subsidiary of Nomura in September 2000 and merged
with Nomura Securities in April 2002.
Nomura have also enhanced their asset management business through the acquisition of
a majority interest in Nomura Asset Management Co., Ltd. in March 2000. Nomura Asset
Management became a wholly-owned subsidiary of Nomura in December 2001.1
1.2 Business Overview
Nomura Securities Co., Ltd. (NSC) is the leading securities and investment banking firm
in Japan and have worldwide operations. As of March 31, 2003, they operated offices in
more than 20 countries and regions including Japan, the United States, the United
Kingdom, Singapore and Hong Kong. As of the same date, they employed 14,385
people, with 11,583 in Japan and 2,802 outside Japan.
NSC’s customers include individuals, corporations, financial institutions, governments
and governmental agencies. Their businesses consist of the following three business
1• Domestic Retail – principally investment consultation services to retail customers
2• Global Wholesale – principally fixed income and equity trading, investment
banking, and merchant banking in and outside Japan
3• Asset Management – principally development and management of investment
trusts, and investment advisory services
NSC is also one of the world's leading securities firms with more than $150 billion assets
and shareholder equity of over $13.5 billion.
1.3 Current Business Strategy
According to their core business fields, NSC defined their current strategy as the
11Reinforcement of channel to customers
22Stimulation of stock market
33Improvement of productivity and efficiency of branch management
44Customers’ attention to asset management by 401K plan
22) Investment banking
11Establishment of complete product line and management for customers’
demand to equity finance
22Entry to merchant banking
13) Trading (bond and equity)
11Global product line
22Readiness to Straight Through Processing (STP) and T+1 [*]
33Adaptation to electronic transaction
24) Asset management
11Expansion of demand to mutual fund
22Stable portfolio management
[*] STP means that information passing seamlessly and electronically among all participants
involved in the transaction process. It goes far beyond the buyer and seller to include all affected
parties: data provider, exchange, service provider, computer operator, regulator and more. T+1
means that market participants have to make settlement on the day following trade date.
2. Corporate Vision
Nomura Group’s vision is to establish its position as a globally competitive Japanese
financial services group. In order to realize this vision, it currently focuses on three areas:
strengthening action to expand the securities market in Japan, enhancing business
origination in Japan, and pursuit of collective strength through greater cooperation among
The Japanese economy has experienced severe recession over more than ten years.
Most recently, the Japanese economy experienced a recession in 2001 primarily due to a
global high technology recession, but started recovering in early 2002 due to inventory
adjustments and economic turnarounds in the United States and Asia. Since mid-2002,
however, the economy has stagnated as the recovery in domestic demand has been
weak and export growth has slowed. In the spring of 2003, growth had yet to show signs
of recovery. In October 2002, the Japanese government announced its Program for
Financial Revival to accelerate the disposal of non-performing loans at major Japanese
banks as a necessary step to revive the economy. At the same time, the government
decided to establish the Industrial Revitalization Corporation of Japan to coordinate the
disposal of bad debt and revitalization of Japanese industries and corporations. This new
organization started operations in May 2003.
The two key thrusts for Japans Revival are 1) Acceleration of Corporate Restructuring
and 2) the Shift of Individual Financial Assets. Key developments toward economic
revival have begun to surface in the form of quicker corporate restructuring and the shift
of individual financial assets to capital markets. Nomura increasingly expect to see a
where accelerated corporate restructuring helps boost corporate profitability and
individual investors move their money through capital markets to the more profitable
This is Nomura’s fundamental stance regarding the business environment. Its strategy is
for each division to play its own part towards Japan’s revival.2
3. Strategic Positioning by using the Delta Model
Nomura aims to contribute to Japan’s revival by supporting the flow of money between
companies progressing with restructuring and individual investors. Its strategy towards
this end is to promote corporate restructuring by providing solutions via capital markets
and encourage the shift of individual financial assets from cash and deposits into higher
risk-return products by supplying diverse products. (Ref. Fig.1)
Fig.1. Two corporate objectives of Nomura
Investor presentation on May 16, 2003 by Nobuyuki Koga, President & CEO, Nomura Holdings, Inc.
The strategic positioning of Nomura is to provide a competitive capital marketplace,
bringing together complementary groups of buyers and sellers, through Total Customer
Solution based on Horizontal Breadth and Customer Integration, and Systems Lock-In by
establishing a Dominant Exchange. (Ref. Fig.2)
Fig.2. Strategic positioning Movement of Nomura (Delta Model)
Nomura’s business portfolio comprised of Domestic Retail, Global Wholesale and Asset
Management divisions. Division heads are given discretion to execute business within
the management resources allocated.
Business execution is split between the Chief Operating Officer (COO) and Co-COO.
To strengthen cooperation among Nomura Group Business Lines and give full scope to
the Group’s collective strength, and achieve Horizontal Breadth, the COO is responsible
for all three divisions and aims to pursue business that extends beyond Nomura’s
business lines. (Ref. Fig.3)3
To promote integrated Group Management for Customer Integration, the Co-COO will
advance integrated Nomura Group management transcending legal entities. (Ref. Fig.4)
Nomura’s greatest asset is its integrated corporate strength. By taking this approach,
Nomura aims to break the division-legal entity mould and pursue efforts to enhance
Nomura Group’s collective strength.
Investor presentation on May 16, 2003 by Nobuyuki Koga, President & CEO, Nomura Holdings, Inc.
Nomura should aim to achieve a System Lock-In position through Dominant Exchange by
developing diversified customer-focused products and collaborating with other world wide
players to provide broad investment instruments, opportunities and high return on
investments, to attract the targeted investors/buyers. The ready pool of investors/buyers
will further attract companies to approach Nomura to lead manage their capital raising
needs reinforcing the value of the marketplace.
Fig.4. Customer Integration in Nomura Group
4. Customer Segmentation
Thinking about customer segmentation, there are basic measurements such as
geography, demography, psychographics, and behavior. In this section, we define
customer segmentation of NSC. Basically, customers for securities companies are
divided into two categories, 1) individuals, 2) corporate and government. To analyze the
business, we segment customers into the following tiers.
Table 1. Customer Segmentation
First, we subdivide individuals according to the following Fig.5. We adopt 10 million
Japanese Yen as the level to differentiate rich from mass, because the amount will be the
cap on the guarantee of full bank savings deposits when the deposit payoff system is
introduced in Japan in the near future. We also use 30 million Japanese Yen as the level
to differentiate rich from middle-rich. The household expenditure survey conducted by the
Management and Coordination Agency shows that about 15% of households in Japan
has over 30 million Japanese yen saving.
Fig.5. Individual customer segmentation
We characterize Tier 1 as individuals who are wealthy and have already built asset.
These people are relatively few, but they invest much money to utilize their own
familiarity with investment method and investment products. To meet their demand, NSC
has to provide professional know-how to reinforce customer satisfaction by realizing high
performance of investment result. Tier 2 is a group of individuals who are not familiar with
investment but have substantial money to invest. They are diamonds in the rough, but
extremely attractive for NSC. Thus, NSC should place much emphasis on providing
education services to this tier as a coaching staff for investment. Tier 2 customers
currently have much of their asset as cash or deposits. The pie chart in Fig 6 shows the
business potential for this customer tier. This chart shows a breakdown by product of
individual financial assets. As of December 2002, 56% of these assets were still held in
cash and deposits. NSC’s role is to connect these assets with the risk assets. 4
Fig.6. Individual customer asset allocation
Tier 3 is a group of individuals who are low-value customers for NSC. NSC should
provide low price, user-friendly system and reliable information to this tier, and lead them
to use on-line trading, the low cost direct channel.
On the other hand, we also subdivide corporate customers into three tiers. We use the
availability of bond, IPO, and financing issues as a measurement to divide the three tiers.
Tier 1 is a group of companies which can offer bonds to the public or which meet the IPO
standards defined by Tokyo Stock Exchange. NSC provides consultation services for
them to realize a low cost procurement of fund and build a good partnership to lead
manage bond and equity issues. Since government can issue bond, the government is
also included in this tier. Tier 2 is a group of companies which have no large issue, but
they may have the possibility to grow and result in IPO or M&A. Therefore, we cannot
easily conclude that NSC should lead them to low cost service channel. To assign
companies to this tier, NSC has to assess customers’ future growth precisely. It is
essential to provide the necessary face-to-face financial consultation to maintain a good
relationship with them. For Tier 3 with low business potential, low price standardized
service can be provided.
To summarize the description above, the Business Dimension for each of the Customer
Tiers is shown in Table 2, and the Value Proposition for different Customer Tiers is shown
in Table 3.
According to this customer segmentation, each segment is located in the delta model as
Fig.7. Strategic positioning based on our customer segmentation
Table 2. Business Dimension of the Customer Tier
Table 2. Business Dimension of the Customer Tier (Cont.)
Table 3. Value Proposition