Sustainable Competitive Advantage
Within the Resource based view format Merrill Lynch’s sustainable competitive advantage could be built on their existing framework of unique resources.
- Transferable/Replicable: The assets that are replicable have already been copies by competitors. During the market boom of the 90s high volumes of transactions by day traders were done on interfaces that allowed cheap and quick transactions. These services provided little in the realm of strategy, planning or information and banking.
- Customer Value: Customers value one thing in the securities market, making money. During the market expansion in the 1990s the entire market was moving positively, it was hard to pick a losing stock. Day trading became more popular and long term sustained constant growth investing was not aggressive enough.
- Tangible Assets: Merrill Lynch offices added to their marketing strategy and penetration strategy. The offices helped investment bankers work with clients on a face to face basis. Locations where Merrill Lynch offices presided had more client concentration from that region. Online trading allowed customers to interact with Merrill Lynch services without being near an office.
- Intangible Assets: The intangible assets which Merrill Lynch has developed are hard to copy and must be maintained. Research and industry evaluation is a skill that requires training and experience. This requires investment in human resources. Customer lists are largely controlled by Merrill Lynch, they control a high percentage of the affluent customer base. They need to diversify into other markets, middle class and blue collar populations all have money to spend and some would rather trade online.
- Deterrence and Preemption: Deterring competition through presence in the market, brand name recognition and offering better services and products than anyone in the industry is the strategy which will force new entrants to reconsider the investment of entering the market.
- Resource acquisition: Recent mergers of investment banks and brick and mortar banks have been strategies by the competition to increase their client base to their investment products. JP Morgan Chase merger is an example of companies trying to offer investment services to a greater range of customers. Merrill Lynch needs to focus of the greater population of investors not only the affluent.