Given the changes that have occurred in the international capital markets during the past decade, Merrill Lynch's strategy of expanding internationally makes sense. According to Merrill Lynch's 2003 annual report published online, the financial services industry in the United States is extremely competitive and highly regulated. Merrill Lynch's private client business, which offers banking, financial advice, and stock-brokerage services to individuals, had historically been concentrated in the United States (2004). For this reason, Merrill Lynch (ML) wanted to find opportunities to diversify and the Japanese market represents a substantial business opportunity given the propensity of Japanese citizens to save and to invest. ML wanted a portion of what was the world's largest asset pool, an estimated U.S. $11 trillion dollars of Japanese savings.
Another reason to expand internationally is that many of ML's non U.S.ßcompetitors may have competitive advantages in their home markets. For this reason, the decision to establish a foreign subsidiary in Japan dealing directly with Japanese clients would be the best way to enter the Japanese market and to be seen by potential clients as an important participant in the Japanese domestic financial services market. The problem of how best to enter the Japanese market was solved by the bankruptcy of Yamaichi Securities.
The collapse of Yamaichi seemed to present ML with an
opportunity to enter the Japanese market on a large scale and at a limited cost. ML was able to acquire a large number of branches and have it choice of the best talent available from among Yamaichi's seven thousand former employees. ML's management believed a new entrant unencumbered by the scandals, poor performance and questionable management of investors' funds would bode well for ML's return to Japan.
This acquisition of Yamaichi Securities accelerated the process of entering the Japanese market for ML. Unfo...