Improved Customer Service
Merrill Lynch realized they had to expand its strategy by introducing a new vision that would re-define the definition of full-service investment bank. Introducing Integrated Choice Merrill accomplished this; which would serve as a one-stop source for financial services. This new strategy would allow customers to determine the level of advice they required by offering various products and transacting methods.
The Integrated Choice offered clients a menu of direct investment options such as, the Merrill Lynch Direct account and Investor Services. Financial Consultants assisted investment options were also available through Traditional accounts, the Unlimited Advantage account, and Merrill’s discretionary services. Merrill’s product offering expanded with the addition of products and services such as, the Visa Signature credit card, check writing and electronic bill payment capabilities, and an internet shopping website.
Value Creation Potential
To determine of Merrill Lynch created shareholder value by implementing its strategy of diversification across product lines, we must first apply Michael Porter’s three essential tests. The essential tests include: the attractiveness test, the cost –of-entry test, and the better-off test.
- The Attractiveness Test: Since the investment banking industry offers above average profitability, Merrill Lynch sought the benefits of economies of scope by increasing their product offering. This was achieved by enhancing its existing product lines and adding complementary products and services. These services included products offered through Merrill Lynch Credit Corporation (MLCC) such as mortgage loans, home equity, and securities-based lines of credit and commercial real estate financing. The Insurance Group offered both fixed and variable annuities and variable life insurance products designed for retirement and estate planning. The Merrill Lynch Trust Company offered clients trust and estate planning services.
- The Cost-Of-Entry Test
- The Better-Off Test