1.

Given the changes that have occurred in the international capital markets during
the past decade, does Merrill Lynch's strategy of expanding internationally make
sense? Why?
Answer :-In a past decades ,with the help of communications and new upgraded technology
managing and controlling is easier ,country can easily contact with another country than even
before ,therefore they go local to global to expand their business or to sell their Product and
services. Also various country loose down their policies and adopt the global policies. Therefore
Merrill Lynchs expanding their business internationally in investment banking.
2. What factors make Japan a suitable market for Merrill Lynch to enter?
Answer:- This started to change in mid-1990.The fact of Merrill Lynch's leading position in the
States and its acquisition of the leading mutual funds companies of economical giants such as
Britain and Canada have made it possible at least theoretically to enter Japanese market. Japan
embarked wide ranging de-regulation of financial services Industry However the removal of
number of restrictions and allowing Japanese people to purchase foreign bonds and stock in the
mid 1990 had made Japanese market suitable for entrance and establishment of foreign capital.
Four stockbrokerages continued to struggle with serious financial problem .Japan big Moreover
their government understood the necessity of new money in country's economy which would
be donated by foreign companies to enhance competition and bring in more funds.
3. Review Merrill Lynch's 1997 reentry into the Japanese private client market. Pay
close attention to the timing and scale of entry and the nature of the strategic
commitments Merrill Lynch is making in Japan.What are the potential benefits
associated with this strategy? What are the costs and risks? Do you think the
tradeoff between benefits and risks and costs makes sense? Why?
Answer: - The first attempt of Merrill Lynch to enter Japanese market failed as their market was
not regulated to accept international players. In 1997 however the situation changed under the
WTO agreement for the better allowing foreign firms to sell financial services to their national
investors. Regarding their previous experience they were hesitating to enter Japanese market but
it was clear that this time things have changed with open market and huge amount of assets
owned by Japanese households were too attractive to miss such opportunity. It was perfect
timing for Merrill Lynch as there were only few other. The company initially considered joint
ventures with sanwa bank to sell Merrill Lynch mutual fund to Japanese consumers. The
proposed alliance would have allowed Merrill Lynch to leverage Sanwas existing distribution
system, rather than having to build its own distribution system. However, the long-run
disadvantage of such a strategy was that it would not have given Merrill Lynch the presence
that it believed it needed to build a solid financial services business in Japan. The bankruptcy of
Yamaichi Securities in 1997 was a perfect circumstance for American company to start entering
Japanese market. Merrill Lynch definitely won in this situation when establishing their
company's position on the market without reporting and coordinating their moves with another
Japanese company. The risk they took when working on their own paid off very quickly and
significantly to their benefit, regarding enormous value of the assets held by the company.

4. The collapse in stock market values in 2001'02 resulted in Merrill Lynch's Japanese
unit incurring significant losses. In retrospect, was the Japanese expansion a costly
blunder or did the company simply get hit by macroeconomic events that were
difficult to predict and avoid?
Answer: - the collapse in global stock markets in 2001-02 hit Merrills Japanese unit hard. After
losing $500 million in Japan on its investment, in January 2002 the company fired 75 percent of
its Japanese workforce and closed all but eight of its retail locations. Despite this costly
downsizing, the company held onto almost all of the assets under management, continued to
attract new accounts, and by mid-2002 was reportedly making a profit in Japan. This event can
hardly be predicted by anyone as it is caused by the macroeconomic factors that are not
controlled by a single country, and needles to say by a company. Evidently predicting such an
event would soften the crisis for Merrill Lynch however completely avoiding it was impossible
because international business is tightly connected with macroeconomic conditions. Future
showed that this decision was a smart one and led to renewing of company's power because
almost all assets were still controlled by the parent company.
5. Do you think Merrill Lynch should continue in Japan? Why?
Answer:-After experience the Japans market it would not wise to withdraw from market. They
should continue conducting business in Japan although they are not guaranteed to have it stable
and flawless all the time, as 2001 2002 crisis has proved. During this year merill lynch is loyal
company for Japanese people. People have trust on them