Merrill Lynch in Japan Case Study Merrill Lynch is an investment banking business and the world’s largest underwriter of debt and equity. Merrill Lynch’s investment banking operations has had a long global reach and is looking to reside in Japan. In this paper I will describe the legal, cultural, and ethical challenges that may confront Merrill Lynch in this case study as well as the various roles that the Japanese government will play and examine some of the strategic and operational challenges that faced the global managers (Hill, 2009).
Japan’s efforts to regulate its economy failed. Japan’s restraining regulations made it almost impossible for Merrill Lunch to offer its Japanese private clients the range of services that they could offer in the United States. Due to Japan’s four stockbrokerages, who customarily monopolized the Japanese market, made it complicated to attract employee talent and clients away from the local businesses.
The Japanese government controlled what services could be purchased from private international firms and would not permit Japanese citizens to invest in financial services outside the Japanese country. In 1993, Merrill Lynch admitted defeat and pulled out of Japan. Due to its legal and cultural regulations, Merrill Lynch knew they could not beat Japan’s government regulations. Merrill Lynch looked at the private client business from an ethical viewpoint and did not want to go against the Japanese government in anticipation of expanding globally in Japan in the future.
The role of the Japanese government was primarily to protect themselves from private foreign financial firms from controlling the Japanese market, and to build their economy from within the country. This in turn caused Japan’s economy to rapidly fail. By mid 1990’s Japan embarked on a wide-ranging deregulation of all its financial service industry (Hill, 2009). In 1997 the conditions changed under the WTO agreement permitting foreign firms to sell financial services to their national investors.
Merrill Lynch was hesitating to enter Japanese market because of their previous experience within the Japanese economy, but it was apparent that this time things had changed with the open market and the vast amount of assets owned by Japanese households were too striking not take this opening. It was great timing for Merrill Lynch as there were only a small amount of other foreign contending companies and their prior experience in private client market made it even more fitting.
The bankruptcy of Yamaichi Securities in 1997 was a great event for Merrill Lynch to start entering the Japanese market. The head managers at Merrill Lynch first considered a joint venture that would allow minimum spending as they had a chance to use already existing distribution system of a known Japanese bank. On the other hand they did not see their presence in the long run in the Japanese market due to this venture as a result Merrill Lynch reassessed the deal and were fortunate to take on new employees and buy out the Yamaichi’s branch offices in 1997.
Merrill Lynch certainly won in this situation when launching the company’s position on the market without reporting and coordinating their moves with another Japanese company. The risk that Merrill Lynch took when functioning on their own paid off rapidly and considerably to their advantage, regarding a huge value of the assets held by the company (Hill, 2009). REFERENCES Hill, Charles W. L. (2009). Merrill Lynch in Japan. In International Business. Competing in the Global Market (7th ed. , pp. 701-702). New York, NY: McGraw –Hill.