Sunday, June 19, 2011

“Can You Say What Your Strategy Is?”

Today, I would like to go through the strategy of Mitsubishi UFJ Financial group (MUFG) in Japan. Almost 1 year has passed since I left for the United States. During my study in Carnegie Mellon University, I felt significant environmental changes such as demographic of the world and rise of nations. By reviewing current strategy of MUFG, I would seek a way for traditional Japanese company to survive in the drastic changing world.

MUFG consists of financial companies such as commercial banks, trust banks, securities companies, credit card companies, leasing companies, consumer finance companies, investment trust companies, and a U.S. bank (Union Bank). Its customer base is approximately 40 million retail accounts and 400,000 corporate clients with over 500 locations in more than 40 countries. MUFG earned 29% of profit from retail business in Japan, 31% from corporate business in Japan and 36% from global markets and others. The Bank of Tokyo Mitsubishi UFJ is the core of MUFG group. It earned 66% of MUFG’s profit in FY 2009. Its headquarters is located in Tokyo. According to Bankersalmanac.com, the ranking of the bank in the world is 8th in terms of asset in US dollar.

There are three business goals in MUFG. First goal is to become “No. 1 in Service”. MUFG group will provide high-quality services using comprehensive financial functions. Second goal is to become “No.1 in Reliability”. MUFG group aims to be a financial group with financial strength using internal controls and other compliances. And MUFG contributes to the society through enhancing customer satisfaction and CSR activities. Final goal is to become “No. 1 in Global Coverage”. MUFG group aims to utilize the global network to meet the requirements of customers globally.

MUFG has short-, medium-, and long-term strategies. The short term strategy is developed as one year plan; medium term is designed as three years plan. The medium-term plan indicates that FY 2011 would be the period to actualize sustainable growth. To execute this plan, there are short-term strategies for each core business unit.

First is Retail business strategy that offer diverse product in accordance with customers needs and life stages such as asset management, inheritance, real estate and loans and so on. Second is corporate business strategy that facilitates corporate investment banking using strategic alliance with Morgan Stanley and securities companies. And MUFG expands business area in Asia, Europe, and the United States where high growth potential is expected. Final is Trust Assets business strategy that increases the balance of entrusted assets through using group’s synergy effect, developing products and improving global management institution.

In addition, as a whole group, MUFG focus on the promotion of corporate social responsibility that address of global environmental issues and nurturing society’s next generation. The bank increases the supply of money for companies and individuals that would deal with aforementioned problems. These strategies are aimed to strengthen MUFG brand.

In my opinion, the strategy of MUFG seems to be conservative at glance. However, the strategy and decision making of upper management were consistent and reasonable. For example, the bank acquired the project finance assets from the Royal Bank of Scotland Group (RBS). MUFG developed strategic alliance partnership with Morgan Stanley to provide financial products for its customers.

In addition, MUFG already took into consideration of the changes of demographic in Japan and the world. In general, the profit obtained from traditional commercial banking businesses is in accordance with the market scale in case that the risk is managed. The population of Japan is decreasing due to aging population combined with the diminishing number of children. Therefore, MUFG tries to expand business area across the globe.

The next mid-term strategy of MUFG would be released within 6 months from now. I wish that MUFG would recognize the importance of the business operation in North America as well as emerging market such as BRICs. People moves toward the major city all over the world. The United States would be the center of the world for a decade. It would create a business opportunities. Moreover, it is reasonable to build global organization and recruitment of diverse workforces at the center of the world. Human Resource Management section should start periodic and large scale recruitment of local staff and international officers at North America and major cities in the world. It would be a stepping stone to be a global corporation.

[1] http://www.bankersalmanac.com/addcon/infobank/bank-rankings.aspx

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