Essay Instructions: Read the case study and answer the following questions below. Once again remember that presentation never hurts, this does not mean that you need to use colour printing, it means that you need to think about how to set out your paper to make it easy to read. Please answer questions in business report format and include a table of contents and bibliography on the final page. Please include word count on front page. Very importantly please write up an executive summary as well. Please use Harvard-Business style referencing.
Case Study : Macquarie Bank Online Broking
by Dr Chris Styles, School of Marketing, University of New South Wales
Aidan McDermott had just returned from a week away from the office to finalise
plans for Macquarie Bank''s online broking and investment service. He had two
reports on his desk. The first was by Internet research company, on
the state of the e-broking market, and the second was research released by the
Australian Stock Exchange on investor profiles. The news was both
encouraging- more people were investing in the stock market, and investing online-and
challenging-competition was increasing.
Macquarie Bank
Macquarie began trading in 1969 as Hill Samuel Australia, a wholly owned
subsidiary of the British merchant bank. In February 1985 it was transformed into an
Australian-owned licensed bank and became Macquarie Bank - taking the name of
one of the early governors of the colony, Governor Lachlan Macquarie.
On 29 July 1996, Macquarie Bank listed its fully paid ordinary shares on the
Australian Stock Exchange (ASX) and on 30 October 1996 entered the ASX All
Ordinaries Index. Macquarie now ranks as one of Australia''s top 40 companies by
market capitalisation. Since listing on the Australian Stock Exchange, the Bank''s
growing number of shareholders have benefited from a return on equity consistently
exceeding 20%.
Macquarie Bank and its subsidiaries operate in a range of investment banking,
commercial banking and retail financial services markets in Australia and
internationally. Macquarie has nearly 4000 staff in offices around the world.
Macquarie has more than 40 distinct but closely related business groups, covering
the full range of investment banking. These fall into six operating groups.
? Macquarie Equities is one of the leading traders on the Australian Stock
Exchange and provides a full range of stockbroking services to both
institutional and private investors worldwide.
?The Treasury and Commodities Group is involved in activities ranging from
commodity and futures trading to debt market trading and origination
facilities, to foreign exchange, strategic financial advisory and risk
management services.
?The Corporate Finance Group provides strategic advice to government and
private sector clients on mergers and acquisitions, divestments, privatisations,
corporate restructuring and capital-raising facilities.
Investment Services Group is Macquarie''s funds management arm for
corporations and individuals. The group has in excess of $20 billion in funds
under management and administration.
Banking and Property Group Macquarie is a licensed bank and as such offers
a range of business and private banking services through the Banking and
Property Group.
The Asset and Infrastructure Group is at the forefront of the project finance,
cross-border leasing and structured finance markets and also manages
specialist infrastructure and technology investment funds.
Macquarie Equities
The Equities Group consists of three divisions: Macquarie Equities, Macquarie
Financial Services and Equity Markets. Throughout 1999 the group increased its
commitment to the fast-growing retail market by significantly expanding its private
client stockbroking operations through mergers with regional stockbroking businesses
in three states. These mergers resulted in the formation of Macquarie Nevitts in
Queensland, Macquarie Porter Western in Western Australia and Macquarie Day
Cutten in South Australia. Internationally, the Group''s broking and trading operations
have expanded in Hong Kong, South Africa, Europe and North America.
The current online broking facility sits with Macquarie Equities Limited (MEL).
This division provides a full range of stockbroking services to domestic and
international institutions, corporate clients and domestic private investors. The
Macquarie brand is seen as an upmarket brand, probably as a result of the bank''s full
range of investment activities and well established reputation of success in all areas.
DirecTrade, the online trading facility, was one of the first Internet broking services
in Australia when it was established in 1996. Investors can buy and sell stocks
directly through this website after establishing an account. The broking service is also
linked to Macquarie''s Cash Management Trust account facility. DirecTrade, and
others like it, tend to be used by investors who don''t necessarily want the advice and
guidance of a broker, but prefer to choose their own stocks to buy and sell.
Nonetheless, Macquarie does provide a range of company data via the website to
assist investors in their research, such as:
background information, including a description of company activities,
address and contact details;
historic share price information, including charts with monthly share prices
and relative monthly share prices from 1990; a table showing 12 month high
and low prices and corresponding dates;
historic and forecast earnings and dividend data, including a chart with 5
years of actuals and 3 years of consensus forecasts;
historic dividend data, including ex dates, pay dates and dividend payments;
recent capital changes, such as bonus issues, rights issues and share
placements.
These profiles will be generated for all companies listed on the ASX, and are updated
daily and available free of charge.
In addition, Macquarie offers premium stockbroking services to high-end, so-called
''Inner Circle'' clients. It includes a choice of full service retail stockbroking, Internet
trading plus equities lending. Benefits offered to Macquarie Inner Circle members
include:
research, widely regarded as the best available;
monthly Chess portfolio valuation statement and transaction statements;
financial advice from your own adviser;
access to Macquarie''s Internet pages.
Sharemarket investors in Australia
Over the past decade the number of Australians turning to the sharemarket has
soared, doubling from 1997 to 1999. As we started the new century, more than half
the nation''s adults - 7.6million people - own shares directly or in managed funds
(Figure A). A recent survey by the Australian Stock Exchange showed that this
increase has, been across age groups and income groups, men and women see Figure
B). Share ownership is no longer something for the rich, with evidence that the
smaller investor is now increasingly becoming involved (the average dollar value
directly invested in shares was $28,000 in 1999 compared with $33,000 in 1998).
Figure A Share ownership in Australia
Direct Indirect
May 97 20% 11%
Oct 98 31% 10%
Nov 99 40% 10%
The greater popularity of share ownership can be attributed to a number of factors,
including:
the flotation of government-owned assets such as the Commonwealth Bank
and Telstra;
one of the longest bull runs in the history of the ASX;
increased. awareness of share investment and its benefits via the mass media;
the attractiveness of new technology stocks;
lower costs; and more options now available for trading, such as telephone
and Internet channels.
The ASX survey also revealed that Australia had the highest level of direct share
ownership in the world-41% compared with 39% in the UK and 32% in the US. This,
when combined with the relatively high Internet usage (see Figure C), suggests the
online broking market should experience considerable growth over the coming years.
Figure B Share ownership by age, income and gender
Age Oct 98 Nov 99
18-24 11% 20%
25-34 30% 39%
35-44 30% 47%
45-54 41% 42%
55 30% 40%
Income Oct 98 Nov 99
<30K 11% 20%
30<50K 30% 39%
50K+ 50% 51%
Gender Oct 98 Nov 99
Males 35% 43%
Females 25% 34%
Figure C International Internet use
Millions of Internet users, 1999 %
Finland (1.57) 31%
Norway (1.34) 31%
Sweden (2.58) 29%
US (74.50) 27%
Australia (4.36) 23%
Canada (6.49) 21%
Denmark (0.95) 18%
UK (8.10) 14%
Switzerland (1.00) 14%
Netherlands (1.96) 13%
Germany (7.14) 9%
Japan (9.75) 8%
Online broking
The latest predictions from research are that there will be dramatic growth in the
number of regular e -traders over the next two years, with the total expected to reach
about 200,000. A survey by AMR Research in December 1999 showed that the
market tripled in size between the second half of 1998 and the last half of 1999.
that by 2005 online broking will account for 30% t e total number of
trades on the Australian Stock Exchange, up from about 20% at the start of 2000.
There are now an estimated 65,000 users who trade online once month or more.
However, the value of these trades is likely to remain low as they are being made by
retail investors. For example, ComSec believes its market share of all ASX trades is
around 9%, but the value of those trades is'' about 2%.
Competition for this growing market is also increasing, the new entrants likely to
come from the large retail banks and international competitors (in December 1999, the
major US broker Charles Swabb announced its intention to enter the market). And a
great deal of money is likely to be spent to attract new customers. Advertising
spending is set to increase and online brokers will be willing to spend $300-$500 to
acquire each new customer.
The main players as at January 1999 were Commonwealth Securities (known as
ComSec), a subsidiary of the Commonwealth Bank, and E*Trade, the subsidiary of a
US-based online brokerage firm of the same name and KM% owned by the ANZ
Bank (Figure D). ComSec claims have 350,000 clients and be the most visited
financial website in Australia. It began in 1997 and is positioned as a low-cost broker
that requires no deposit to start trading (both E*Trade and Macquarie''s DirecTrade
require a $1000 deposit). Online broking fees vary only slightly, with the cheapest
being Webstock - Online Trader at $21 (after payment of a $35 subscription fee) and
the highest around $28-$29 (including DirecTrade). This is about half the cost of
telephone trading.
As competition increases, so will the range of services offered by each online
broker. For example, ComSec now has a service that allows investors to trade US
securities using real-time market information and to settle in Australian dollars.
E*Trade is also planning to offer a range of services such as margin lending,
managed funds and cross-border trading in the United States and other markets.
A range of new opportunities is being made possible by emerging technologies.
Wireless Application Protocol, or WAP, is a technology standard for transmitting
Internet content over the airwaves to devices similar to mobile phones and personal
digital assistants. Unlike Web viewing on a personal computer, WAP is designed to
take information from sites and reform it for transmission over the limited bandwidth
of digital mobile networks and display it on devices with small screens. Access to
Internet services will thus no longer be restricted to the desktop or notebook
computer.
Aidan and his team had a lot to think about. Where would competitors be coming
from over the next three years? How should Macquarie position itself? Who should
be their primary target market? What services should it offer? What would be the
impact of changing technologies? Clearly, the opportunities were substantial. But
success would require hard thinking, creativity and speed.
Figure D Market share of online trading
Market Share %
Comsec 54%
E*Trade 19%
Quicken 8%
Macquarie Bank (incl. Direc Trade) 7%
TD Waterhouse 6%
Sanford Securities 5%
Share Trade 4%
Dicksons 2%
HSBC 1%
Source: (as reported in the Australian Financial Review, 21 January 2000)
Sources: Australian Financial Review, 21 January, 2000; Weekend Australian, 12-13
February, 2000; Sunday Telegraph, 27 February, 2000; ;
The assistance of Aidan McDermott and Macquarie Bank is gratefully acknowledged.
Source: Kotler, P., Brown, L., Adam, S., & Armstrong, G. 2001, Marketing 5 th edn,
Pearson Education Australia, pp.109-112.
Please answer the following questions after reading the above case study with tips given to help in answering each question. Please write up in business report format and an executive summary included. Very important to following the tips to answer the questions properly.
Question One: What are the major opportunities and threats presented by the online broking market?
Tips to Question One:
Once again you have been asked to find major opportunities and threats in the market. This will require you to once again undertake an environmental analysis and then find the things that are external to the company and will affect every player in the industry either positively or negatively. Undertaking a quick SWOT will not hurt. If you are going to put the environmental analysis in an appendix, please summarise the major points in the body of the assignment.
Another point to be considered for question one is what is being offered, define the service/ product that is being offered here, it will help the rest of the assignment.
Question Two: Conduct a competitor analysis for Macquarie bank''s online broking arm.
Tips for Question Two:
Look at Porter''s Five Forces but mainly at existing rivalry, new entrants and substitute products. The case study also gives information on competitors that should be useful. Once again with this assignment the questions are sequential. The answer to this question should be linked back to question one, it will help the quality of the answer.
Question Three: What customer issues would you like to research further? How would you conduct this research?
Tips to Question Three:
Research and consumer behaviour but again requires you to think of your previous two answers.
Firstly, put yourself in the position of the marketing manager at Macquarie, what information would you like to know, what would you like to know about your customers. A big hint here is think about consumer behaviour and the decision making process, then apply it.
The second part of the question asks you to talk about how you would research this. You should think about which methods would be most appropriate to find out this information and then discuss which methods would be best to find out the types of information that you are interested in.
Question Four: What are some of the alternatives for positioning Macquarie''s online service? Who could be its primary target market?
Tips for Question Four:
Once again a positioning and segmentation question. Look at how the companies are differentiating themselves, and put this in a perceptual map. Then think about where Macquarie could go with their product and how they could differentiate themselves from competitors. Positioning is not so much about specific features of a product but about the benefits that are offered. Finally think about which segments have unmet needs and talk about targeting them.
Remember the flow of the assignment and think about what theory is appropriate. It may be useful to read topic 11 (instead of topic 10) for this paper. Also think about the four P''s and how they apply to the product / service being offered and also with regard to the positioning.
The analysis of cases is best undertaken using a logical approach as opposed to hit and miss efforts. The emphasis in case studies is on problem solving and analysis, not on writing an academic essay. A business report format is also encouraged; that is, a practioner-focussed report dealing with case specific issues.
