How TD Waterhouse Has Gone International?

TD Waterhouse would be, according to Dunning, a market seeker: it invests in particular countries to supply services to markets in those countries. Its online strategy has greatly assisted TD to pursue its aim of growth, and it provides the firm with a competitive advantage. In the three years to 2000, TD had successfully completed eight acquisitions in the US, Canada, the UK, Hong Kong and Australia. For example, it purchased three UK brokers: Dealwise, YORKshare, and Gall & Eke between 1998 and 2000, making it the number one broker in the UK.

By purchasing existing companies, TDW can capitalize on existing customer bases, acquire knowledge about the market more easily, and with its online strategy, can provide these clients with a broad set of products quite literally at the push of a button. However, there are problems with an acquisition strategy: sometimes the different cultures within organizations fail to blend together, and there may be animosity between the companies, especially if the acquisition involves layoffs and large-scale change.

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Another part of Dunning's eclectic paradigm that is relevant to TD Waterhouse is the notion of Ownership advantage. TDW brings its core competences in online services and technological know-how to any joint venture - it is extremely successful when it comes to using the internet as a consumer portal. Due to the non-geographic nature of the internet, there is no Localization advantage, and this is what TDW gains from its joint venture partners as they have a local reputation, experience of the market, and an existing consumer base.

TDW ended it's acquisition strategy after becoming the number one broker in the UK and has more recently undertaken a joint venture approach to expansion. In 2000, TDW in conjunction with The Bank of Tokyo-Mitsubishi (part of the largest financial group in the world) formed a joint venture company, called BTM-TD Waterhouse Securities which offers discount brokerage, equity trading and online financial services to the Japanese market.

The joint venture apparently mixed TD Waterhouse's knowledge of the online trading industry with the Bank of Tokyo-Mitsubishi's knowledge of the Japanese consumer, as it was identified that Japanese investors are becoming more sophisticated, and prefer a broad range of financial services available through a variety of entry points, taking advantage of the speed and accessibility of the internet.

Further opportunities exploited by this joint venture included the deregulation of the retail broking business in Japan, and the rapid growth of internet usage in the country. TD Waterhouse also partnered with the Indian company Tata Finance, by taking a 49% equity stake in the broker/dealer, and forming a new company called Tata TD Waterhouse Securities which offers equity and debt-broking services in the Indian marketplace.

Again, the rationale behind such a movement is to tap into larger markets, and with the Indian nation home to almost one billion people (although the target market is much smaller due to the fact that the average GDP per capita of India is only $1,720), TD has ownership advantage (according to Dunning) in terms of its technological know-how and core competences in online broking systems for consumers is bringing capital and technological know-how to the joint venture.

The joint venture is competing against other joint ventures in India involving US firms such as Merrill Lynch, and Goldman Sachs, but TD Waterhouse's advantage is their discount broker status. In 2001, TD Waterhouse announced its intention to form a joint venture with DBS Group Holdings (the largest bank in South East Asia) to provide investors in that region with a multi-market, multi-product platform of global investment services, and TDW has also formed a joint venture with the Banque Gi??

ni?? rale de Luxembourg to create a multi-channel self-directed investment service for high net-worth Europeans. In summary, TD has changed its strategy from one of acquisition in the late 90's to a joint-venture strategy in 2000-2001. International Activities TD Waterhouse has tried to develop a hybrid strategy of full-service and discount brokerage predominantly in Canada and the US.

They provide a wide array of financial products in these markets, and example of which is the company electronically linking its brokerage unit to its US-based Waterhouse National Bank in that country. This allows TD Waterhouse to become a 'one-stop shop' for clients, providing deeper market penetration in the US and enabling them to market other services to their clients through the bank. A typical example of TDW's hybrid full-service and discount broking strategy, as well as the 'bricks and clicks' model is evident in Australia.

TDW entered the Australian market in 1997 by purchasing Pont Securities, a pioneer of discount brokerage in that country. Prior to that, Waterhouse had been involved in the Australian market since 1984. The company confesses to pursuing the self-directed investor, and employs various technologies to allow investors to trade via different channels (for example on the internet, through wireless connectivity on mobile phones, and via an automated telephone service).

However Waterhouse does not merely have an online presence in Australia. It has branch offices in all capital cities of mainland Australia, and offices a variety of services within those branches. The company does not offer many of the products marketed by dedicated full-service brokers, yet its strategy is a hybrid one, and its online strategy has certainly been successful over a number of years, with various awards being bestowed upon the firm.

In India, the joint venture TDW is involved in operates in a similar manner, with both an online and a "bricks and mortar" presence, yet there are more products available to Indian investors through the advantages that Tata Finance has brought to the partnership. First of all, in January 2001, Paul Martin accepted the proposed merger between TD and Canada Trust, but before the two companies could actually combine, they had to respond to the demands of Competition Bureau (CB).

The mandate of the Competition Bureau is to ensure that Canada has a competitive marketplace and that all Canadians enjoy the benefits of competition. "After a comprehensive review, the Bureau [had] concluded that, as proposed, the merger [was] likely to substantially lessen or prevent competition, and that this would lead to higher prices and lower levels of service and choice for branch banking consumers in three local markets: Kitchener-Waterloo-Cambridge-Elmira, Port Hope and Brantford-Paris.

The Bureau [had] also concluded that the merger [would] substantially lessen or prevent competition in the general-purpose credit card networks market in Canada. " (Letter from the CB) Therefore, in response, TD sold off the branches in the three markets, and sold Canada Trust's MasterCard accounts to Citibank while keeping its Visa portfolio. Finally, TD's attempt to enter Wal-Mart stores in the United States wasn't exactly welcomed with open arms. Especially since the proposal might have required Wal-Mart employees help to run the in-store branches.

Therefore, not surprisingly, TD's strategy was subject to regulatory approval. In fact, the Office of Thrift Supervision (OTS) rejected the proposal in November of 2001. "Sources familiar with the situation said the initial proposal failed because of OTS and lawmaker concerns that it would breach the barrier between banking and commerce. " (Blackwell) "This revelation provoked sharp criticism from some banking groups and lawmakers, who said the plan would violate the spirit of the Gramm-Leach-Bliley Act of 1999.

The sources said the OTS officials reviewing the deal immediately objected to the plan and indicated they would not approve it if Wal-Mart employees would be used to provide banking services. " (Blackwell) Banking groups that had objected the plan were overjoyed by the OTS's decision. They had concerns from day one about the potential scope of the Wal-Mart/TD relationship. TD Securities Amidst all the success that Toronto Dominion Securities has had in recent years they undoubtedly face certain challenges in the future. Integrating the new firms that they have acquired will prove to be extremely difficult.

To ensure seamless transition in client service and coverage and to minimize disruptions to employees during all stages of integration, TD Securities will have to develop a detailed integration plan. However, as expected, when combining organizations, some duplications and redundancies are inevitable. TDS is also in the process of undergoing a strategic restructuring process. This, it is hoped, will enable a decrease in expenses and better position the firm for long-term growth. As a result, TD Securities will be reducing its workforce by approximately 7 per cent, or 200 positions around the world.

Furthermore, the move will require a one-time restructuring charge of approximately (CAD) $160 million. This shift will prove to be quite a trial for TDS, providing a true test to the infrastructure of the organization. Finally, the biggest challenge to TD Securities will lie in their attempt to maintain a substantial amount of growth in the international market. Due to the fact that the TDFG is a supra-regional bank it can easily maintain its stronghold in Canada, however it remains a minimal player in the major banking global market.

If it can achieve even the most minimal amounts of global growth, TD Securities can look upon that as attaining a major achievement. TD Waterhouse TD Waterhouse rushed to grab market share in the late 90s and early this decade in the burgeoning bull markets across the globe, and has successfully entered many markets across the globe. However due to the nature of the discount brokerage service it provides, there may be tough times ahead in the current global bear market.

Discount brokers tend to be able to provide services at a lower cost than full-service brokers due to reduced overhead costs, which means that there is not as much customer integration. For example, a full-service broker would be likely to maintain a strong relationship with its important clients, providing advice and assistance on the needs of such investors, and regular analysis of their portfolios. Online discount brokers feature less customer integration, and their main product offering is to provide their clients with a quick entry-point from which to trade securities.

In a bear market, the full-service broker would maintain contact with their clients, encouraging them to review their portfolio, and act accordingly. However, with discount brokers, customers simply don't trade. While TDW would argue that it does provide a mixture of full-service and discount brokerage, the majority of its clients would use TDW's online brokerage system due to its ease of use and relative cheapness, and it is these customers who are less likely to trade in the bull market, hurting TDW's profits.

An interesting development over the past few weeks has been in TDW's Japanese market. TD Waterhouse set up the Tokyo-Mitsubishi TD Waterhouse Securities Co joint venture with Bank of Tokyo-Mitsubishi in 2000, yet just this month, BTM has announced that it will buy new shares in the online brokerage taking its equity stake from 21. 8 percent to over 50 percent, giving it a controlling interest. This development displays some of the issues put forward by Bleeke and Ernst in their article 'Is your strategic alliance really a sale?

' Although that was in the context of strategic alliances, the warning as to the future of an alliance can be applied to joint ventures: one of the partners could in the future gain a controlling interest in the venture, or buy-out the partners' shares, possibly at an undervalued price. While the damage is limited if this occurs in a joint venture, and TD Waterhouse is not about to be bought out by BTM, it does highlight the importance of choosing your partners carefully, and having clearly set goals in place, especially when dealing with other companies in foreign markets.