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The strategy of Monex, Inc. and IT
Monex, Inc.CIO
Yukio Namba
2003/8/9 The 3rd. Asian eBusiness Workshop p.2
Contentsn Company Profile1. Strategy and Business Model2. Realization of Business Model3. Current status of Monex system4. Monex, Inc as e-business
2003/8/9 The 3rd. Asian eBusiness Workshop p.3
Company Profilen Corporate Name: Monex, Inc.nHead Office: PCP Marunouchi 19F
1-11-1, Marunouchi,Chiyoda-ku, Tokyo
n Established: April 5, 1999n CEO: Oki Matsumoton Capital: ¥6,198 million
(as of April 30, 2003)n Listed Market TSE Mothers
2003/8/9 The 3rd. Asian eBusiness Workshop p.4
Historyn May ’99 Established “Monex Co., Ltd”. with the capital of
¥50 millionn Jun. ’99 Changed the business name to “Monex, Inc.”n Oct. ’99 Started agency business of stock and funds
trading through the internet and telephonen Apr. ’00 Started underwriting stocks and bonds businessn Aug. ’00 Listed on Tokyo Stock Exchange Mothersn Jan. ’01 Started “Monex Niter”, a after hour PTS servicen Jun. ’01 Acquired Saison Securitiesn Oct. ’01 Tied-up with Post office saving ATMn Dec. ’02 Started margin trading servicen Jan. ’03 Started stock lending servicen Jan. ’03 Started selling JGB with floating coupons and
foreign bonds for individualsn Apr. ’03 Started Monex FX
(foreign exchange margin trading)
2003/8/9 The 3rd. Asian eBusiness Workshop p.5
Strategy of Monex, Inc. and ITn Strategy :Ø The basic plan to achieve business goal
n Business model:Ø The system to make profits as a business
organizationn IT at e-business organizationØ IT is an enabler for business and business is a
driver of IT.Ø IT at e-business is not just a business
information system but it is equivalent to a factory or a sales department in the real world, that is, business process itself.
Ø Cyber and real world
2003/8/9 The 3rd. Asian eBusiness Workshop p.6
Business Goal《Goal》
Build the financial infrastructure for
individuals
《For Shareholder》
Increase shareholder value
《For Customers》
Satisfy the customers
《For Employees》Stoke employees’
appetite for achievement
《For Commonweal》
Contribute to the commonweal
《IT Goal》
-Provide Stable trading infrastructure-Provide new features with EOU -Meet Social Responsi-bilities-Seek scale profit-Lower running cost
《Revenue》
-Restore profit-ability- Adjust policies for high returns
《Customer Satisfaction》
-EOU interface-Evolute consoli-dated account
《Competitive Advantage》
-Provide stable trade environment-Better infor-mation service
《Compliance》
- Compliance with the laws
Goals forStakeholders
OperationalGoals
Goal
※ The modification of business model , which is a system to make profits , is required in order to get out of the red.
2003/8/9 The 3rd. Asian eBusiness Workshop p.7
Target Client
Monex client baseA perfect fit of target client, and
current conditions with overlapping
use of post office saving accounts,
bank and credit cards.
Clients of competitive online brokers
Conv
enti
onal
bro
ker
clie
nts
base
Competitors target
client base
Transaction frequencyHigh
Low
Assets
LargeSmall
2003/8/9 The 3rd. Asian eBusiness Workshop p.8
Target Client(2)
Monex client baseA perfect fit of target client, and
current conditions with overlapping
use of post office saving accounts,
bank and credit cards.
Clients of competitive online brokers
Conv
enti
onal
bro
ker
clie
nts
base
Competitors target
client base
Transaction frequencyHigh
Low
Assets
LargeSmall
2003/8/9 The 3rd. Asian eBusiness Workshop p.9
Financial assets of households
¥ 1,400 trillion :Amount of Japanese’s financial assets of households
USA
JAPAN
DirectFinance
IndirectFinance
50 % 50 %
10 % 90 %
2003/8/9 The 3rd. Asian eBusiness Workshop p.10
Business Model and Strategy
-Re = P x E1 + P x E2 – Exp.
ExpectedReturn
(Firm Value)
Probability ofshift to direct
finance(%)
Probability ofno shift to
Direct finance(%)
Our earningsunder thescenario
Our earningsunder thescenario
FundamentalStrategy
AdditionalStrategy
2003/8/9 The 3rd. Asian eBusiness Workshop p.11
2003/8/9 The 3rd. Asian eBusiness Workshop p.12
Service Concept: schedule
2003/8/9 The 3rd. Asian eBusiness Workshop p.13
Strategy E1 vs. Strategy E2 (1)n Strategy E1Ø Pursue Scale Economyè Offer user-friendly general servicesØ Maintain stable financial information infrastructures
n Strategy E2Ø Pursue Scope EconomyüOffer most suitable services to each client segmentè Offer services that even professional investors find useful to a specific customer segment
Ø Effective tool that can provide real-time information and smooth trading environment, which differentiate ourselves from our competitors
2003/8/9 The 3rd. Asian eBusiness Workshop p.14
Strategy E1 vs. Strategy E2 (2)n Customers of Strategy E1ØOrdinary workersèWork at the office during the day and invest through their PC at home after workØInvest based on the stock price trend
n Customers of Strategy E2ØDaytime investors è Trade aggressively during trading hours through their PCØTrade in narrow ranges and earn the spread
2003/8/9 The 3rd. Asian eBusiness Workshop p.15
Cost structure (1)n E-business is similar to process industry such as
chemical industry and steel industry.Ø Large initial investmentØ Small running costØ It is important to operate machines in full production and
recoup the initial investment in order to make profitsn Hardware and softwareØ Rapid technological changeè Moor’s Law: PC capability is twice as much as in 18 months
Ø If you cannot meet the demands, you will lose the competition.è It is not acceptable to offer services according to our own capacity.è Low capacity = Low system performance = Fewer customers
2003/8/9 The 3rd. Asian eBusiness Workshop p.16
Cost structure (2)n IT costØ Outsource the business that has no merit for our
companyüDevelopment, monitoring/operation, maintenanceü Back-office systemü Information serviceü Connection to financial institutions
n Advertisement costØ Press release rather than advertisement è Expose to
mass communicationn Clerical work costØ Avoid increasing the number of employees by outsourcing
clerical work to a surrogate company
2003/8/9 The 3rd. Asian eBusiness Workshop p.17
Monex IT Requirements
IT as e-business
IT to implement Scenario A
IT to implement Scenario B
Minimum cost
2003/8/9 The 3rd. Asian eBusiness Workshop p.18
Divisification
0
100
200
300
400
500
600
Apr-02
May-02
Jun-02
Jul-02
Aug-02
Sep-02
Oct-02
Nov-02
Dec-02
Jan-03
Feb-03
Mar-03
Apr-03
May-03
Jun-03
Rev
enue
(Mil.
Yen
)
その他
Monex FX
金融収支
株式委託(信用)
株式引受業務(IPO)
投信
株式委託(現物) Stock Lending
Mergin Trade
MonexFX
2003/8/9 The 3rd. Asian eBusiness Workshop p.19
Front System
Internet
Trade Stock Exchange
Back-officeSystem
情報ベンダー
Japan Securities Depository Center, Inc.
Settlement
Customers
Report
InformationVendor
Monex Internet Trading System (1)
2003/8/9 The 3rd. Asian eBusiness Workshop p.20
Monex Internet Trading System (2)Internet
Firewall FirewallIntrusion
Detect SystemLoad Balancer
WebServer
Firewall Firewall
NFSServer
ApplicationServer
DatabaseServer
DatabaseServer
Storage Back-officeSystem
StockExchange
Gateway
ManagementServer
OperationCenter
InformationVendor
WebServer
ApplicationServer
BankingSystemSensor
ProxyServer
Account
Aggregation
SystemStorage
InformationVendorInternet
Trading
System
2003/8/9 The 3rd. Asian eBusiness Workshop p.21
Requirements for online securities system
n Requirements for e-business system Øreliability/accuracyØavailability, security, scalabilityØMaintain high performance
n Requirements especially for securities business ØCritical missions as a financial business ØFluctuations of system loadØEAI, B2B integrationØLaws , regulations, and systematic reform
2003/8/9 The 3rd. Asian eBusiness Workshop p.22
Requirements for IT as e-businessn AvailabilityØ Information infrastructure to enable 24hr x 365day availability
n ScalabilityØ Architecture to enable Incremental Scale-Up
n SecurityØ Hacking: Block breaking into the system and unauthorized
accessØ Tapping: Secure communication pathwayØ Tampering: Secure data reliability
n PerformanceØ 8 second rule: maintain high service levelØ Thorough-put and Response
n Application IntegrationØ Intra-enterprise IntegrationØ Inter-enterprise Integration
n EOU(Ease Of Use)Ø User-friendly system
2003/8/9 The 3rd. Asian eBusiness Workshop p.23
Performancen The “Eight Second” Rule
Taylor, L.W., “Don’t Let Your Website Crash”http://www.envive.com/solutions/assets/images/
dontletyourwebsitecrash.pptØMost users click away after second delay
Boston Consulting Group Survey of 12,000 U.S. Online Shoppers (March 2000)
Reasons for Lost/Failed TransactionsØ 48% “Pages took so long to load that I gave up”Ø 45% “Site was so confusing that I couldn't find product”Ø 26% “System crashed (got logged off) before completion”
2003/8/9 The 3rd. Asian eBusiness Workshop p.24
The “Eight Second” Rule
Most users click away after
8 second delay
UserExperience
Time
Page Size
Min BWTurns *Delay
ProcessingTime= + +
2003/8/9 The 3rd. Asian eBusiness Workshop p.25
Monex as e-businessn B2C: core businessØ Stock tradingØ Investment trust tradingØ Bond tradingØ UnderwritingØ PTS operation
n B2B: Ø PTS agency businessØ Information system operation (iDC, MSP)
n B2B2C: Ø Stock informationØ NewsØ Stock-related tools
2003/8/9 The 3rd. Asian eBusiness Workshop p.26
Unbundling ProcessHagel, et. al., (DHB 2000, 05)
Scale:Infrastructure
Management
Speed:Innovation
Scope:Customer relationship management
Direction of business model vector is crucial.B=Bscl+Bspd+Bscp
|B| < Const.B
Bscp
Bscl
Bspd
2003/8/9 The 3rd. Asian eBusiness Workshop p.27
Future Direction
Cyber
Real
Brick&
Mortar
Click
Click&
Mortar
Click&
???
Time
2003/8/9 The 3rd. Asian eBusiness Workshop p.28
Please feel free to contact me,if you have any questions or comments.
Thank you for your audience.