FIN-03-050

Strategies in Banking and Financial Services Firms: A Survey

December 2003

Ingo Walter

ABSTRACT
This survey paper reviews the basic parameters of strategic positioning and execution in multi-functional financial services firms. We begin with a model of financial intermediation between end-users of the financial system as a way of locating specific financial intermediation functions. Shifts in intermediation shares are superimposed on this flow-of-funds profile, focusing on their implications for alternative business models available to financial institutions. The next section of the paper links the structural story to a normative strategic positioning matrix, which combines standard structure-conductperformance precepts with the potential realization of scale, scope, x-efficiency, marketpower, transaction- and information-cost dimensions, as well as imbedded risk exposures and conflicts of interest. The final section of the paper considers the value of natural hedges incorporated into multifunctional business platforms against the accompanying potential for a conglomerate discount in the share price.
JEL: G2, F23, L23

Ingo Walter
Institution: Stern School of Business, New York University
Phone: (212) 998-0707
Fax: (212) 995-4221
Email: iwalter@stern.nyu.edu
Home Page: http://www.stern.nyu.edu/~iwalter

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