The strategy of Monex, Inc. and IT - 東京工業大学 · Strategy of Monex, Inc. and IT nStrategy...

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


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


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)


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


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.


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


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


Financial assets of households

¥ 1,400 trillion ：Amount of Japanese’s financial assets of households

USA

JAPAN

DirectFinance

IndirectFinance

50 % 50 %

10 % 90 %


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


Service Concept: schedule


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


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


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


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


Monex IT Requirements

IT as e-business

IT to implement Scenario A

IT to implement Scenario B

Minimum cost


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


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)


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


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


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


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”


The “Eight Second” Rule

Most users click away after

8 second delay

UserExperience

Time

Page Size

Min BWTurns *Delay

ProcessingTime= + +


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


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


Future Direction

Cyber

Real

Brick&

Mortar

Click

Click&

Mortar

Click&

???

Time


Please feel free to contact me,if you have any questions or comments.

[email protected]

Thank you for your audience.

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