A Morgan Stanley Case Study

Operating Globally Through Technology

Course: MGMT420 STRATEGIC MODELING

Crn: 29022

Group Members:

Nicole Blenman

Mark Hamel-Smith

Allison Joseph

Cynthia Kennedy

Kelly Singh

Lecturer: Ms. Kinda McGowan

April 18, 2015

Introduction

Morgan Stanley was founded as an investment bank in New York in 1935, it has evolved into one of the world’s foremost financial institutions, with more than 45,000 employees on six continents. Though headquartered in the U.S., they are a leader in the integration of financial services around the world. As technology links them closer together the firm is in a unique position to address the increasingly global needs of their clients.

Morgan Stanley mobilizes capital to help governments, corporations, institutions and individuals around the world achieve their financial goals. ▪ As a global bank it provides: Investment banking advice on mergers and acquisitions, financial restructuring and privatisation. ▪ Major underwriter of stocks and bonds and provides research, sales and trading services in almost every type of financial instrument. ▪ Manages private partnerships that invest in venture capital, property and other private equity opportunities. ▪ Provides other related products and financial services, including credit cards.

At its foundation are four core values — putting clients first, doing the right thing, leading with exceptional ideas and giving back — that guide approximately 57,000 employees in 1,200 offices across 43 countries.

The convergence of technologies has helped to make organisations more efficient and has reduced their costs, it has also raised customer expectations and created a new scenario for competitive activity. However, in recent years, the new technologies have become the central driver of many large organisations as they seek to develop competitive advantages in global markets. The challenge to these organisations has been to use the new technologies to: create new ways of working better suited to a global market and capture new customers.

This case study seek to examine the work undertaken by Morgan Stanley to ensure that it is making the best possible use of the opportunities offered by new technology and the benefits to itself and its customers resulting from its success.

Analysis of Case

Morgan Stanley seeks to meet and satisfy the expectations of their customers, they have developed their technological systems to reach and incorporate their global customers as a substantial part of their business outside the US. Although they addressed this issue others came up, as consumers are always looking for more “accessories” for their primary purpose. As such Morgan Stanley organised different strategies to meet and capture these challenges. Despite the business area, focus is placed upon creating customer-tailored solutions that help clients to convert new business and financial opportunities into reality.

Morgan Stanley believes that intelligent and creative use of new technologies is the key to providing the organisation with its strategic advantages. Therefore they have placed new technology strategically at the core of their business operations. With their intention to generate business success they desire to develop technologies that span products and services while providing clients with technological products and services that help them to meet their objectives.

To ensure better performance and delivery Morgan Stanley has done a risk analysis to determine the risks and the severity of them to create measures to reduce and in due time eliminate those risks.

With this new approach greater efficiency would be met as Morgan Stanley attempts to move from using technology functionally into using it strategically. The aspects he looked at covered the whole organization: his employees (development), possible failures (risk management), success/growth (efficiency), their clients and new innovative ideas. With these factors they were able to identify their short comings, list their goals and objectives and map out the road to attain their listed desires.

Issues & Recommendations

Issue 1

Within user organizations, the traditional way new technologies are developed is that a selected few would work on it separately in the organization. These few are considered as the tactical or functional part of the company and not regarded as the center of the organization’s business strategy. However, Morgan Stanley’s approach is different; they have placed their new technology strategically at the core of its business operations in order to generate business success. This move has numerous issues associated with it; firstly, Morgan Stanley has implemented automated machines that are capable of absorbing and interpreting vast quantities of data and activating decisions on behalf of clients, replacing the work that was previously carried out by traders. Financial traders are responsible for buying and selling shares, bonds and assets for investors, including individuals and banks. They make prices and execute trades, seeking to maximize assets or minimize financial risk. It is evident that decision making is integral to trading, in Morgan Stanley’s case the lack of stock trader’s forecasting increases the possibility of less accurate forecasts for the client.

Recommendation: The typical work activities of a trader may include; liaising with sales traders/clients on market movements, predicting how markets will move and buying and selling accordingly, informing all relevant parties of the most relevant trades for the day, gathering information - critically about mispriced assets, detailed data analysis and valuation, proving in-depth market reports, and identifying issues affecting clients. To replace the work of a trader with automated machines increases the possibility of less accurate forecasts for the clients, in order to mitigate this issue there should be traders to review the decisions made by the automated machines, however, since Morgan Stanley’s aim is to carry out millions of transaction each week; reviewing each transaction is impossible, therefore in order to ensure informed decisions are made for the clients, there should be traders reviewing these decisions via random selection. This method of sampling ensures that all items within a population stand an equal chance of selection.

Issue 2

Different types of businesses operate in environments that carry different levels and types of risk, for instance an oil company compared to a hospital. Financial services carry a high level of risk, so it is vital that techniques of risk management are applied to all key aspects, including the use of technology. In the case, three main risk elements were identified with the use of technology: equipment breakdown or malfunction, software failure or malfunction, or equipment/programme abuse or misuse. However, another issue that should be identified is that any business that is computer centric is exposed to cyber-attacks, thus leaving the company venerable. An example of this scenario is the incident involving Sony Pictures Entertainment; on November 25th 2014 a new event was added to the records of data theft activity. A group calling itself The Guardians of Peace (GOP) hacked their way into Sony Pictures, leaving the network crippled for days. The hijackers threw the entire studio into disarray; they infiltrated the computer network of Sony Pictures and took terabytes of private data, deleted the original copies from Sony computers, and left messages threatening to release the information if Sony didn't comply with the attackers' demands. This type of incident can happen to any computer centric organization, since Morgan Stanley have placed their new technology strategically at the core of its business operations, this is a serious issue they face.

Recommendation: In order to mitigate this issue, Morgan Stanley need to invest in complex security for ensuring that their data cannot be read, or their software cannot be compromised by any individuals without authorization. Morgan Stanley has built relationships with development companies such as Microsoft and Cisco with a view to influencing engineering and development decisions so as to ensure that products developed for capital markets have the appropriate focus and use the right technologies. Morgan Stanley should also further this relationship with Microsoft and Cisco to ensure they have complex, top class security for their organization, to guarantee that the integrity and privacy of their company is secured.

Issue 3

Morgan Stanley has 1200 offices in 43 countries and a workforce of 57,000 people, however, by implementing machines that are capable of absorbing and interpreting vast quantities of data and activating decisions on behalf of clients, these machines have replaced the work that was previously carried out by traders. Since the organization has become more technology based, Morgan Stanley had to lay off employees.

Recommendation: Morgan Stanley is a global bank that provides a number of services. In order to mitigate the issue, Morgan Stanley should re-absorb employees that would have been replaced by automated machines, and re-train them into other departments within the organization; such as mergers & acquisitions, and financial restructuring & privatizations services.

Issue 4

Morgan Stanley's business strategy encompasses the use of technology to aid in achieving their desired goals/targets. A critical issue when an organization becomes dependent or reliant upon technology can simply be summarized in three words: machines require power. In today's world the reliability of electric power can be easily taken for granted, but in so doing the consequences can be catastrophic. Morgan Stanley as a financial institution must have electricity at all times to ensure that its automated machines are able to conduct business effectively and efficiently. If the power were to fail during a crucial stock trade, for instance, the company could stand to suffer losses that may not be repayable.

Recommendation: Morgan Stanley could employ the use of standby generators to ensure that there is always a backup supply of power in case the main power source fails. These generators are somewhat costly but they are a guarantee against the cost the firm would run into without them. A standby generator is a staple of many technology oriented businesses in the world today and Morgan Stanley would do well to follow suit.

Issue 5

One of the many well acknowledged benefits resulting from the use of technology in business solutions is the accuracy rate and efficiency of a machine opposed to a human being. Humans do in fact make mistakes, however, what guarantee is there that a machine will always make the best decision for the firm? Morgan Stanley employs the use of automated machines to process complex trades, stocks, bonds and other financial transactions based on a set of fixed criteria and algorithms. Can a machine offer some flexibility or take a risk to improve the outcome of one of these transactions? The issue in question here is the human instinct that comes with the job at hand, something a machine can never replicate.

Recommendation: The best solution to the issue of human intuition being absent in technology and the use of automation is to utilize the technology not as a replacement for human employees across the board, but rather to develop a system whereby man and machine can compliment one another in the most productive way possible. Experienced traders should be given access to the machines database and daily activities to review and correct trades where necessary. In this way the organization would benefit from greater accuracy while not having to sacrifice their human business intelligence, which would be not only cost effective but highly motivational as well, resulting in the most profitable outcome for the firm.

Conclusion

Below is the McKinsey 7s model applied to Morgan Stanley

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Strategy is a plan developed by a firm to achieve sustained competitive advantage and successfully compete in the market. Morgan Stanley has done this through it diverse financial services such as investment banking advice on mergers and acquisitions, financial restructuring and privatizations globally.

Structure represents the way business divisions and units are organized and include the information of who is accountable to whom. In other words, structure is the organizational chart of the firm. It is also one of the most visible and easy to change elements of the framework. To meet this Morgan Stanley's clients have increasingly looked for more than just financial products and services, and their needs are becoming more diverse and demanding. To meet this challenge, Morgan Stanley has over 700 offices in 28 countries and a workforce of 57,000 people who between them represent 120 nationalities and speak 90 different languages. Whatever their business area, these people focus upon creating customer-tailored solutions that help Morgan Stanley's clients to convert new business and financial opportunities into reality.

Systems are the processes and procedures of the company, which reveal business’ daily activities and how decisions are made. Systems are the area of the firm that determines how business is done and it should be the main focus for managers during organizational change. Such systems used by Morgan Stanley are the Electronic Trading Laboratories which trade stocks in large quantities, Passport a windows web application that allows users to buy and sell stocks on the stock exchanges worldwide.

Skills are the abilities that firm’s employees perform very well. They also include capabilities and competences. During organizational change, the question often arises of what skills the company will really need to reinforce its new strategy or new structure. Employees are creative, technologically savvy, business knowledgeable, problem solving, good soft skills and language skills adaptable.

Staff element is concerned with what type and how many employees an organization will need and how they will be recruited, trained, motivated and rewarded. Developing people. Morgan Stanley sees its workforce as a key resource. The new way of working offers Morgan Stanley's employees an opportunity to be innovative, creative and closely involved in problem-solving. It is helping to enrich jobs and enhance job satisfaction.

Style represents the way the company is managed by top-level managers, how they interact, what actions do they take and their symbolic value. In other words, it is the management style of company’s leaders. The AUTHORITATIVE (Visionary) leader sets the vision for the team, clearly and compellingly, then steps back and allows the team to work. The leader steps in from time to time to reiterate the vision if required, but that is all he / she does. The leader reports that the style was “easy – I didn’t have to do much and I could see how the style would free me up to operate strategically”. The team report enjoying the activity, and feel enormously proud of the work they have done, often getting out their smart phones to take pictures posing with their creation.

Shared Values are at the core of McKinsey 7s model. They are the norms and standards that guide employee behavior and company actions and thus, are the foundation of every organization. Why do clients choose Morgan Stanley? They can depend on Morgan Stanley to put their clients first, to focus the efforts and talents of the entire firm on each assignment. Clients recognize that they build enduring relationships and consistently take the long-term view in an industry in which change is the only constant.

Thus the financial industry is very compelling and heavily dependent on technology and as such Morgan Stanley have to keep abreast with upgrades any exchange and technology if they are to remain leaders in their industry.

References

Financial trader: Job description. (n.d.). Retrieved April 1, 2015, from http://www.prospects.ac.uk/financial_trader_job_description.htm

Matching people with technology to create a global strategyA Morgan Stanley case study. (n.d.). Retrieved April 2, 2015, from http://businesscasestudies.co.uk/morgan-stanley/matching-people-with-technology-to-create-a-global-strategy/introduction.html#axzz3WCA0eicb

The Sony hack: How it happened, who is responsible, and what we've learned. (2014, December 17). Retrieved April 1, 2015, from http://www.vox.com/2014/12/14/7387945/sony-hack-explained

"Wealth Management, Investment and Financial Services | Morgan Stanley." Morgan Stanley. N.p., 02 Apr. 2015. Web. 04 Apr. 2015. .

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