Value Chain Paper on Merrill Lynch

Introduction
Since the emergence of electronic commerce, business practices gained a competitive advantage in the 21st century. Charles Merrill founded the financial services company, Merrill Lynch. The purpose of the business opened monetary opportunities accessible to everyone, with the aim of bringing Wall Street to Main Street (Trompenaars & Hampden-Turner, 2002). According to Trompenaars and Hampden-Turner, Merrill Lynch revamped its efforts on reconciling new technology with customer service. The new technology allowed Merrill Lynch to reduce rates and personalize services offered to the consumer. This research project will investigate the companies’ ability to redirect mission, apply electronic commerce to customer service, online systems, and analyze Porter’s (1985) value chain, to include inbound logistics, operations, service, technology, and development. The outcome of the analysis will evaluate the impact and effects of Porter’s value chain concept combined with financial services. Both primary and secondary activities prove effective in gaining a competitive advantage within the industry (QuickMBA.com, 2004).

Background
Value Chains. The inbound logistics activities comprise of material handling, receiving, storing, and distributing inputs for merchandise (Porter, 1985). For example, Merrill Lynch employs commissioned brokers to work exclusively with electronic commerce. A commissioned broker completes customer orders to buy and sell stocks, with a primary responsibility to gain the best possible price for their orders (Ross, Westerfield & Jordan, 2001). Currently the company plans to institute worldwide networks of trading desks to process orders from regional exchanges versus local connections (O’Brien, 2004). Although the company does not use a central data warehouse, facts from a range of sources are combined into a single feed, choosing information based on the type of account (Peppers, 2003). Merrill Lynch’s inbound logistics include near real time electronic business, allowing clients to interact on line at their convenience (O’Brien, 2004; Trompenaars & Hampden-Turner, 2002). The electronic business provides the company with ease of communicating with suppliers and other business stakeholders to include the New York Stock Exchange Commission (Ross, Westerfield & Jordan, 2001; Trompenaars & Hampden-Turner, 2002).

Operations. Next, the value chain explores the operational functions within the investment company. Porter (1985) defines operations as activities connected with renovating inputs into the finished product. The processes may include machining, packaging, assembly, equipment maintenance, testing, printing, and facility operations. To improve efficiency the company streamlined courses of action to focus on quality of customer’s communications (Peppers, 2003). The company began to fine tune marketing, product management, production, compliance, and legal procedures. The firm’s financial advisors captured and analyzed data to reflect information flow and sought new ways to modernize all communications, in order to meet the demands of the customer. The company refurbished a rules-based content engine to position new methods in place when printing collateral. The purpose of the system, provided customer based satisfaction to suit the need of the consumer.

Online Service. Likewise, Merrill Lynch incorporates Porter’s (1985) service activities into customer support and satisfaction services. Merrill Lynch initiated an online website for clients to converse about investment concerns (Trompenaars & Hampden-Turner, 2002) Information passed from clients to Merrill Lynch improved customer relations, provides confidence and empowerment. In comparison with Porter’s value chain, Merrill Lynch provides clientele with the exclusive Global Investor Network. This network allows clients to connect and participate in conversation through video or audio channels. The purpose of the connection facilitates the investment process on line to the client.

Electronic services. In addition, the company invented a system called the Merrill Lynch Direct (Trompenaars & Hampden-Turner, 2002). The Merrill Lynch Direct personalized service allows customers to transfer funds between accounts, view statements, review portfolios, shop direct, and buy and sale stock on line. The service allows investors to purchase and sell stocks at $29.95 a trade, after-hours and in-hours directly. Online activities produce another important addition to customer service and the electronic commerce, adding to the product. Merrill Lynch launched a company system named “Mr. OnLine”, a product created for the Trusted Global Advisory (TGA) system. The TGA amalgamates more than fifty data resources and matches the requirements of the customers with the latest prospects. TGA provides solid information at Merrill Lynch’s fingertips for client satisfaction.

Customer Service. Additionally if a problem arises, a client can immediately connect with a consultant. This technique develops a tight bond between the company and the client. Merrill Lynch Online subscribers may also use a program named Virtual Vineyard. The purpose of the program is to allow members the opportunity to make wine and specialty food purchases in a secure environment (Internetnews.com, 1998). In return, members that choose to pay for electronic commerce purchase with their Merrill Lynch Visa Signature card receive perquisites such as, Signature bonus points.

Merrill Lynch achieved another goal by instituting personalized 401(k) statements in-house (1to1 Magazine, 2002). The company previously worked with a third party vendor to personalize 401 (k) statements. According to Richard Hopkins, director of the Retirement Group Regulatory department, producing statements within the company allowed Merrill Lynch a stronger control over the procedures. In addition, by keeping service within the company integrity and customization of the statements serve as an asset to the business. With the new process in place, the company customized charts, tables and targeted messages. Through new software, the company cut down on price and gained control of merchandise.

Threats. Perhaps, the technology development component of the support value chain creates the strongest impact for Merrill Lynch. Porter (1985) describes technology development as a variety of actions assembled together to improve the product and the method. The company’s technology and development department tirelessly continues to improve efficiency with electronic commerce, due to the competitors such as Charles Schwab. In order to improve technology communications and customer relations, a new approach must be implemented (Peppers, 2003). In addition, the company updates technology by improving efficiency in electronic commerce through improved online techniques.

Change. One problem Merrill Lynch faced was poor marketing strategies in technology. The company fell behind, and several problems surfaced within the marketing process. Customers often received multiple mailings, to include separate waivers, disclosures and authorizations, costing the company money and providing members with tedious, irrelevant information (Peppers, 2003). The company experienced other problems such as sending out too much information. Often security and compliance risk fell into jeopardy caused by inaccurate data sent to the customer, due to the inefficient mail method. Merrill Lynch changed the way of doing business by creating a strategy to combine documentation into an “owner’s manual” and include information significant to the customer.

Through careful scrutiny, Merrill Lynch revamped the communication processes by sending out limited information, instead of multiple products. Today Merrill Lynch provides new customer’s an owner’s manual and a personalized welcome letter to include handpicked information of value. Moreover, the company provides pertinent information to build share to the customer for cross-selling and up-selling messages (Peppers, 2003). The firm also created an online strategy to provide self-service options to furnish online billing, access account details and receive email confirmations. The business cut-rates and saved on postage processes by carefully executing the new procedures within the company resolving problems to minimize the risk of compliance failure within the company.

Another dilemma faced for the company is the profit-maximizing model compared to the client-mentoring model (Trompenaar & Hampden-Turner, 2002). Merrill Lynch encounters competition with Charles Schwab, a discount broker. One important fact Charles Schwab holds over Merrill Lynch is professional expertise. According to Trompenaar and Hampden-Tuner advising on investments is composed of two tests. The profit-maximizing model compares the performance of stocks. Moreover, the client mentoring model which purposes to turn clients into experts. Clients may be attracted to the client mentoring models independence and skill to put them in control of their own wealth. This provides the client with money that works for them.

Conclusion
Financial investing companies, like Merrill Lynch changed business rules and processes. It is necessary for companies to stay up to date with advanced computer technology, to avoid failure. Merrill Lynch is an example of a company that redirected the mission and incorporated modern electronic commerce into the business. The current system used by Merrill Lynch provides important steps for success. Companies in the financial sector must constantly focus on improvement of Porter's value chain. Merrill Lynch combines the value chain into the electronic commerce to include Mr. Online, Merrill Lynch direct, and customer satisfaction. Financial companies will capitalize the market by focusing on inbound logistics, operations, service, technology, and development to the customers. Merrill Lynch continues to institute Porter’s value chain into daily activities. Companies that succeed include every aspect of Porter’s value chain into their company in efforts to build a strong foundation and gain a competitive advantage. Overall, the company must continue to direct its mission by advancement through electronic commerce. Without proper focus on the primary and secondary activities, the company’s mission and vision will fail.

References

Merrill Lynch raises the bar on its personalized 401 (k). (2002, April).
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Peppers, D. (2003, July 7). Merrill Lynch invests in one-to-one customer
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http://www.1to1.com

Porter, M.E. (1985). Competitive advantage: Creating and sustaining superior performance. New York: Free Press.

Quick MBA. (2004). Strategic Management. The Value Chain. Retrieved November 5,
2004, from http://www.quickmba.com/strategy/value-chain/

Ross, S.A., Westerfied, R.W., & Bradford, J. D. (2001). Essentials of
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Trompenaars, F., & Hampden-Turner, C (2004). 21 leaders for the 21st Century:
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McGraw Hill.