Friday, September 26, 2008

SWOT - Morgan Stanley

Objective: “To serve as the preeminent financial advisor to companies, governments and investors from around the world.”

SWOT Analysis


Market leader: Morgan Stanley also operates in 33 countries around the world with 600 offices, with an approximate employee workforce of 45,000.The company reports US$779 billion as assets under its management.

Good reputation in market: Morgan Stanley has been associated with some of the biggest corporate financings and public offerings in history, most notably the U.S. rail financing of 1939, Shell Union debenture of 1946, Jersey Standard's transaction of 1949, Apple common stock IPO of 1980, Conoco IPO of 1998 and the Google IPO in 2004.

Ability to continuously reinvent itself: Since its founding in 1935, Morgan Stanley and its people have helped redefine the meaning of financial services. The firm has continually broken new ground in advising its clients on strategic transactions, in pioneering the global expansion of finance and capital markets, and in providing new opportunities for individual and institutional investors. Morgan Stanley's growth, which parallels the history of modern finance. The firm credits itself with the first ever computer model for financial analysis.


Uncertainty about management: The company found itself in the midst of a management crisis in the late 90s that saw it lose a lot of talent and competence and ultimately saw the firing of its then CEO Philip Purcell in 2005. Since then Morgan Stanley has been undergoing a massive restructuring which also involved job cuts across several of its businesses.

Cyclical nature of business: Performance of Morgan Stanley is cyclical and dependent upon economy. As the economy is cyclical, the firm goes into a bad phase when the economy goes form peak to trough.

Controversies and Lawsuits: In 2003, Morgan Stanley agreed to pay billions of dollars in order to settle its portion of various legal actions and investigations brought by Eliott Spitzer, the Attorney General of New York, the National Association of Securities Dealers (Now FINRA), the United States Securities and Exchange Commission, (SEC) and a number of state securities regulators, relating to fraud that was allegedly perpetrated upon retail investors by a dozen of the largest investment banking securities brokerage firms.


Emerging markets: Morgan Stanley is enhancing its presence in South Korea and Russia by obtaining licenses. It can use its reputation to expand rapidly in emerging markets to boost its growth.

Rise in global savings: Global saving has risen steadily over the past several decades, but contrary to widespread belief, the rise in recent years has been no faster than the expansion of world GDP. In fact, the overall global saving rate stood at 22.8% of world GDP in 2006 – basically unchanged from the 23.0% reading in 1990. At the same time, there has been an important shift in the mix of global saving – away from the rich countries of the developed world toward the poor countries of the developing world. This development, rather than overall trends in global saving, is likely to remain a critical issue for the world economy and financial markets in the years ahead.

Utilization of equity capital: Employment of Morgan Stanley’s equity capital in investment ideas would increase returns to the firm


Competition from big players: The investment banking business is flooded with high competition from big players like Citigroup Global, Goldman Sachs, Lehman Brothers, etc.

Subprime Crisis: The subprime mortgage problem has now yielded a full-blown credit squeeze on Wall Street with securities firms' stock prices at fire-sale levels. The new fire-sale buyers are the so-called sovereign wealth funds, and China's are the most prominent.

High human capital turnover: Investment banking business is highly dependent on individuals. Human Resource management is very critical in investment banking.

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