Merrill Lynch

Research Report
Collaborative Research Project and Proposal


To:           Allen Richards, CEO
From:         SWOT Team
Date:         April, 22, 2008
Subject:      Merrill Lynch...
One of Merrill Lynch’s strengths was retaining customer loyalty. Merrill Lynch was able
to transfer all of their client in...
Many of the weaknesses Merrill Lynch has encountered are caused by external economic
factors and lack of technological imp...
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Merrill Lynch Research Report


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Merrill Lynch Research Report

  1. 1. Merrill Lynch Research Report Collaborative Research Project and Proposal SWOT Team 08
  2. 2. Memo To: Allen Richards, CEO From: SWOT Team Date: April, 22, 2008 Subject: Merrill Lynch Merrill Lynch is one of the world’s leading wealth management, capital markets, and advisory companies. Merrill Lynch has offices in 40 countries with more than $1.6 trillion dollars in assets. Merrill Lynch was founded in 1914 by Charles E. Merrill and Co. In 1971, Merrill Lynch went public offering a broad range of services to private clients, small businesses, and institutions and corporations. Today, Merrill Lynch employees over 63,100 people and is ranked number twenty-two on the Fortune 500 list. Merrill Lynch’s business is divided into two interrelated segments: Global Markets & Investment Banking and Global Wealth Management. Merrill Lynch is one of the world’s leading providers of institutional sales and trading, investment banking advisory and capital raising services to corporations, and governments and institutions in the Global Markets & Investment Banking worldwide. Merrill Lynch is also one of the leading providers in wealth management products and services to individuals, along with small to mid-size businesses and employee benefit plans. One of Merrill Lynch’s greatest competitive assets is their client relationships. They look to grow and enrich their relationships through disciplined growth, innovation, and seamless execution. Merrill Lynch has a commitment to its clients and shareholders with the firm’s excellence, integrity, and ethical behavior. All members of their board are independent except the CEO. Merrill Lynch is committed to corporate social responsibility by implementing various activities to help our communities. Using a SWOT analysis, we are able to point out ways to improve our company and gain an edge over the competition. Strengths Merrill Lynch is the market leader in many of the product line and offers a large diverse range of investment vehicles for clients. Merrill Lynch has been able to create a more localized business environment by adapting their services to certain geographical areas. Merrill Lynch created 20 regional areas in which it does business-these segments are also global. Finally, with the help of strong global markets, Merrill Lynch saw strong revenue growth since 2003. Since December 2004, Merrill Lynch reported a 17% revenue gain.
  3. 3. One of Merrill Lynch’s strengths was retaining customer loyalty. Merrill Lynch was able to transfer all of their client information onto the web to keep up with the new online demand. To help distinguish them from the competition, Merrill Lynch incorporated intranet enterprise portal challenges which allow clients a guaranteed secure online connection, consistent exchange of information, organization of data, and easy access for all users. A second strength is that they have chosen to expand globally. This has resulted in increased profits from cutting costs. These innovative growth strategies look to keep Merrill Lynch competitive in key investment decisions. As soon as Merrill Lynch sees a problem, they look to fix it as soon as possible. When Merrill recognized they were behind in the E-commerce market, they quickly caught up to the competition. After observing their potential customers, Merrill Lynch decided to focus on institutional investors rather than individual investors to reach more clients and achieve maximum profits. About 75% of the NYSE is made up of institutional investors. This way Merrill Lynch could focus on the majority of the market rather than only a small portion. Weaknesses Merrill Lynch currently has two major weaknesses. As an investment banking company, poor performance of equities has really made Merrill Lynch take a hit. The fluctuations of the equity market have really played a role in their poor performance. In addition to the equity market, Merrill Lynch has had to layoff over 10,000 workers after September 11 which has negative effects on the economy. When the technology age came, Merrill Lynch was faced with a very important decision whether to choose outsourcing IT technology or keep it within their company. Many of Merrill Lynch’s competitors had already benefitted from outsourcing since technology has been rapidly increasing. Merrill Lynch made a good decision in recognizing that they were not experts in the field of IT technology. Instead of improving their technology they decided that they could never compare to their competitors who had invested in outsourcing and that outsourcing would be able to provide a reliable e-commerce sector that would sustain a competitive edge. If Merrill Lynch were to create IT systems in- house, it would result in a loss of profit due to the extra time and money spent in the short run. If they outsourced to an expert, it would be much more time and cost efficient. For Merrill Lynch, even though outsourcing is proven to be successful, it does have its disadvantages. Many companies have invested in outsourcing, which means IT experts are providing systems to a wide range of competitors. This in turn makes it hard for companies to differentiate from the competition when all of the systems and applications are similar to one another. Merrill Lynch has specific customer needs which outsourcing does not effectively satisfy. If Merrill Lynch had chosen to create IT in-house they would not have the problem of not being able to satisfy specific customer needs. Instead, they would have the advantage of working with the customers before implementing the systems, which would allow Merrill Lynch to accommodate to the needs of each customer and pay off for the initial high cost in the long run. Opportunities
  4. 4. Many of the weaknesses Merrill Lynch has encountered are caused by external economic factors and lack of technological implementation. One of the best opportunities for Merrill Lynch is further diversification through global markets. Currently, Merrill Lynch operates in a small portion of foreign markets: 16% Europe, 6% Japan, and 7% other 7%. This leaves 71% left in the U.S. economy. More diversification, expansion, product offerings, and international securities would provide Merrill Lynch with many more opportunities. Merrill Lynch has plans of increasing business in Germany, France, Japan, and China. Also, Merrill Lynch has created a joint venture with BOC International China Limited that would provide them with a solid advantage in the world’s fastest growing economy. There are also many opportunities for expansion of the Private Client Group and introducing a Global Private Client Group which will allow for combinations of U.S. and International groups. All of these opportunities and plans of expansion would allow for Merrill Lynch to enter the growing wealth management market in both the U.S. and abroad. Threats Merrill Lynch biggest threats come from its competition. Some of Merrill Lynch’s biggest competition is with Morgan Stanley Dean Witter, Charles Schwab, and E-Trade. Morgan Stanley and Dean Witter offer similar products to Merrill Lynch. One upside of their competition is that because Merrill Lynch once held the dominate position in this market, there will some direct competition between the firms which will ultimately be a positive for investors because of creating new investment products and innovation. A downfall of all investment companies is that they are very sensitive to economic activities and downturns. These are always a concern of an investment company. This risk can be reduced through diversification of business in different markets. Charles Schwab and E- Trade have really taken over the E-commerce industry. With the possible implementation of more customized systems, Merrill Lynch could attempt to revolutionize and help regain some of the market share. Conclusion