Morgan Stanley

 

Company Generic Strategy

Before the 1970’s, Morgan Stanley utilized a focus scope, which saw it concentrate on the ‘bluest of the blue-chip companies.’ It served as an investment to these blue-chip companies. Given that such companies are able to operate profitably even in during economic down times, it ensured that Morgan Stanley also remained profitable at the top. In1971 is when Morgan Stanley adopted a differentiating competitive advantage by launching a sales and trading operation which led it to become highly ranked. The company further tapped into the global market before its competitors had acknowledged the potential this market hence earning it a further competitive advantage (Burton, DeLong, and Lawrence, 1999).

SWOT Analysis

Strengths: Morgan Stanley is a global company with a strong brand name. It is reported that by the early 1990s, the company derived 41% of its net revenues from abroad. The company’s top leadership, such as that of Fisher and John Mack was also a source of strength. The company also had a great number of employees who were the driving force of the company’s success.

Weaknesses: The Company had internal conflicts arising from the unequal distribution of wealth among the pre- and post-IPO partners. There was also a rivalry that existed between the investment banking department and sales and trading. This was evidenced by the enmity between Robert Greenhill who headed Investment banking and Richard Fisher who led sales and trading. Another weakness resulted from Morgan Stanley’s divisional focus which undermined teamwork. The Company was also lacking leadership as the senior executives came to find out. Also, the company lacked formal systems of career development as well as performance appraisal.

Opportunities: Morgan Stanley’s can make further investment in its top employees, improve its technology and expand to new geographic regions

Threats: the major threat to the Company is the ever-rising stiff international competition from other firms. Also given that the company operates in global markets, it is faced with different regulations from different countries (Burton et al., 1999).

 

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Potential and Realized Absorptive Capacity (PAC & RAC)

Zahra and George’s model of absorptive capacity recommends that Companies should invest in Research and development in order to attain both potential and realized absorptive capacity (Zahra & George, 2002). This is not the case for Morgan Stanley. PAC and RAC for the company are therefore low. This is to be expected, however, as Zahra & George (2002) determined that large and aged firms tend to have a low absorptive capacity.

Values, Rare, Inimitable, Non-substitutional (VRIN)

            Morgan Stanley obtained its value from its management, employees, and its organization into divisions which ensured increased earnings. The Company, however, fails in the rare and inimitable competitive power tests. Resources such as effective management also existed in other firms while other resources such as organization structure could be easily imitated by other companies. There are also lots of substitutions such as different organization structures hence the firm only passes the value test.

Sustained competitive advantage

The company has already established itself as a powerful brand globally. Customers are therefore likely to choose Morgan Stanley over competitors due to its reputation. It is also able to continually reinvent itself in the ever-changing global economy which keeps the Company a step ahead of the competitors.

Employee empowerment

Morgan Stanley was lacking in employee empowerment. No systematic efforts were put in place to monitor the performance or the career progress of the employees. The compensation and promotion decisions were also poorly made and determined by the superiors. This ultimately led to subordinate abuse. The junior staff lacked guidance while the middle managers lacked the proper training to take over the helm of leadership.

Uniqueness of resources

            The company did not possess uniqueness of resource. This is evidenced by the constant competition faced from other firms who have similar resources as Morgan Stanley.

Key environmental (external) factors or changes

It is reported that in the early to mid-80s, Morgan Stanley faced external factors such as high market volatility, international competition, and different government regulations in the different geographical areas of operation. Changes in operations, such as the shift from single long-term banking relationships to multiple transaction-based banking relationships also led to the stumbling of the Company. Morgan Stanley was, however, able to rise back to the top through reinventing (Burton et al., 1999).

 

What are the key internal problems affecting the firm’s performance

            One of the internal problems was conflicts within the top management made up of two departments, namely the investment banking and the sales and trading. Another was the lack of leadership for the company since the middle managers were not well trained and mentored by their seniors. The divisional focus of the company also undermined teamwork in the company. There was also a lack of career development for the employees.

One Firm Solution. Actions taken to respond and solve the problem

The one firm strategy was all about integrating the company’s functions. This would act as a solution to various problems faced by the company. This was aimed at improving services to the customers, reducing the costs incurred, and enhancing teamwork by reducing the divisions within the company. Fisher and Mack called for a change in the firm’s values and also came up with a new vision. This vision involved in making investments in technology, new geographic regions and in the top employees. The new firm approach adopted various strategies including performance evaluation, promotions, and compensation for the employees. The performance appraisal system was also revamped.

Suggest roles of Human Resources in solving the problem – cost containment; long-term objectives can work in alignment (S.M.A.R.T goals); and diversification

When it comes to conflicts within the top management and between the junior and senior departments, HR can play a major role by establishing effective communication channels (Shields et al., 2015). When it comes to the issue regarding the lack of leadership in the company, the company can design training programs keeping in mind both the goals of the employee and those of the organization. Development projects should also be put in place by the HR to facilitate the growth of employees.

 

 

Final analysis of consequences and recommendation. Consider improvement opportunities – (what should the company have done differently in your opinion as an HR manager.

For Morgan Stanley, becoming a one-firm firm means a change in the very things that defined the company. It required a change in the company’s style, culture, and values. John Mack had earlier on stated that division in the company was the source of the company’s success. Deviating from this tradition, therefore, meant trending in unknown waters which meant a lot of uncertainties. However, the company was already accustomed to reinventing itself. The results of becoming a one-firm firm also promised positive results such as reduced costs, improved service delivery, and employee empowerment. As an HR manager, other than revamping the appraisal system, I would also establish effective communication channels to ensure smooth operation of the company.

 

References

Burton, M.D., DeLong, T.J., and Lawrence, K. (1999). Morgan Stanley: Becoming a One-Firm Firm. Harvard Business School

Shields, J., Brown, M., Kaine, S., Dolle-Samuel, C., North-Samardzic, A., McLean, P., … & Plimmer, G. (2015). Managing Employee Performance & Reward: Concepts, Practices, Strategies. Cambridge University Press.

Zahra, S. A., & George, G. (2002). Absorptive capacity: A review, reconceptualization, and extension. Academy of management review, 27(2), 185-203.

 

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