Online ISSN 1347-4456 Print ISSN 1347-4464

ABAS: Annals ofBusiness Administrative
ScienceVol. 3, No. 4, October 2004

Ayako TAKAI

53

Kenichi KUWASHIMA73

The Early Stage Competition in the Japanese Online Securities Industry:
Research Based on Case Studies of Leading Companies

A Note on New Product Project Selection Model:
Empirical Analysis in Japanese Chemical Industry

http://www.gbrc.jp© 2004 Global Business Research Center

ABAS: Annals of Business Administrative ScienceVol. 3, No. 4, October 2004

CHIEF EDITOR

Junjiro Shintaku

University of TokyoEDITORIAL BOARD

Makoto Abe
University of Tokyo
Takahiro Fujimoto University of Tokyo
Makoto Kasuya
University of Tokyo
Hotaka Katahira
University of Tokyo
Nobuo Takahashi University of Tokyo
Technical Editor: Maki Nishida, Global Business Research Center

ABAS: Annals of Business Administrative Science is published quarterly in January,
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Annals of Business Administrative Science Vol.3, No.4 (October 2004)

The Early Stage Competition in theJapanese Online Securities Industry:
Research Based on Case Studies of Leading Companies
Ayako TAKAI
Graduate School of Economics, University of Tokyo
E-mail: takai@grad.e.u-tokyo.ac.jp

Abstract: In the early stages of the online securities industry in Japan, combined
factors of expectation based on the precedent in United States created a “dominant
perception” that the customer base of the industry would dramatically increase.
Based on this perception, companies other than Matsui Securities continued toparticipate in endless and morass price competitions. These companies sharedsufficient knowledge on Matsui Securities’ strategies as well as Matsui Securities’
performance. However, at least for two years, they underestimated Matsui Securities
as “a niche company” and did not seek to its strategies. Thus, Matsui Securities wereable to enjoy overwhelming performance and establish a solid position in the initialstages of the industry without being imitated by others.
Keywords: online securities industry, internet business, dominant perception

1. Introduction
In

this

paper,

we(Williams, 1994). Especially in industries where
will

analyzehowsuchthere is severe competition, even core resources ordifferentiation between Japanese online securities

competencies that are hard to imitate are likely tocompanies, the source of high performance, has beenleak to other companies (Teece, Pisano & Shuen,created and maintained.

1997). The resulting minimization of differences

One company’s success always invites imitation

between competitors works toward reducing aby other companies, and competitive differencescompany’s competitive advantage (Noda & Collis,

among companies tend to decrease over time2001).
53

Takai2.

In the online securities industry, it is very easy

Outlineof

OnlineSecurities

to imitate another company’s successful strategy

Industry

because the products and services of competing

2-1. Beginnings of the Online Securities

companies are shown on their web sites in real-time,

Industryand because many of the companies publicly

The history of the online securities industry in Japan

disclose performance results. On the other hand, we

dates back to April 1996 with the entrance of Daiwa

can see that Matsui Securities’ operating revenue andSecurities. Within a year of the start up of Daiwa,

profit as of March 2003 was far above its

other major securities companies like Nikko andcompetitors, making it the “sole winner in the

Nomura, together with a few other middle tierindustry.” Matsui Securities’ strategy in the initialcompanies entered the market, and within two years,

stages of the online securities market may have been

the number of competing companies has grown tocorrect. However, had others followed Matsui

about 20.

Securities’ strategy immediately, Matsui Securities

Around this time, the so-called “Big Bang”

may not have been able to establish such a solid

financial market deregulation in Japan began, which

competitive edge as it has today. Nevertheless,dramatically changed the competitive environment

Matsui Securities was successful in establishing aof online securities trading (Takai, 2003a, 2003b).

predominant position in the initial stages of the

One of the first deregulation initiatives, conducted in

online securities industry. Therefore, the question

December 1998, was the transition from a securities

arises as to why this was possible.

company licensing system to a registration system.

In this paper, we will take a closer look at actual
cases

in

the

onlinesecurities

industry

Another big change was the deregulation ofincommission fees which occurred in October 1999.

chronological order, through which we will attemptWith these changes, it became possible for a lot of

to clarify the question: “How did the corporations

companies, including overseas companies anddifferentiate themselves from others, and how did

companies from different industries, to enter thethey maintain these differences in the initial stages ofmarket more easily. The number of companies in thethe online securities industry when imitation by themarket reached nearly 70 by March 2001 (Figure 1).

others were easy?”

In the beggining, online securities companies
only handled a limited numer of products. However,they soon began to provide products at the samelevel as face-to-face retail sales (i.e., at actual shop
counters), and the quality of services also improved.
As a result of such upgrading, the number of54

Early Stage Competition in the Japanese Online Securities Industry
exchangetransactions

conducted

online2-2.

kept

SampleCompanies:

Six

Onlineincreasing despite a depressed stock market. Within

Specialized Companies

few years time, the online securities market has

In this paper, we focus on the six leading companies

grown as large as the face-to-face retail sales market(Table 1). For reference, the total market share of the(Takai 2001).

six companies account for more than 70% of online

With this rapid market growth, companies faced

trading and also for more than 52% of the total

severe competition (Takai, 2004). Under the severe

trading by individuals including face-to-face retailcompetition, many companies including Schwab

trading. Thus, it can be assumed that these six

Tokyo-Marine which had been seen as one of thecompanies have a strong influence on the overall

major competitors to exit the market in 2001. By

online securities industry, as well as the securities

2004 the number of companies in the market

industry as a whole.

decreased by more than ten companies compared tothe peak in 2001. Currently, the oligopolization of

3. Matsui Securities: Making thethe industry is progressing where a few companies

Early Moves

handle most of the stock transactions.

Matsui Securities made its entry into the Japanese
online securities market in May 1998, making it the

Figure 1. Number of Competitors and Total Number of Accounts (Online Trading)（number of competitors）（accounts：million）
6

90
80

4.95

70

64

60

Number of competitors

67

66

63

60

4.24
3.92

3.55

51

50

5

56

4
55

55

3.09
3

40

1.93

30

22
11

0

2
96.9

4

5

97.3

97.9

Number of accounts

1.32

18

20
10

2.48

34

2

1

0.74
0.29

98.3

98.9

99.3 99.10 00.3

00.9

01.3

01.9

02.3

02.9

03.3

03.9

04.3

0

Source: Japan Securities Dealers Association “Result of an investigation about Internet trading.” Company annual
reports

55

TakaiTable 1. Profile of Six Companies Covered in the Case Analysis
Company

Entry for online businessBusiness grouping

Matsui Securities

May-98Middle-ranking securities firm

E*Trade Securities

October-99

Foreign company（USA：E*Trade;
Japan：Softbank)

DLJ direct SFG Securities

June-99

Foreign company（USA：DLJ Direct;
Japan：Mitsui-Sumitomo Bank )Monex Securities

October-99

Independent company（stakeholder: SONY, etc.）

Nikko Beans Securities

October-99

Leading Securities firm
(Nikko group)

Kabu.com Securities

February-00

Independent company（stakeholder: UFJ Bank, etc.）

Source: Company annual reports, investor’s reference guides, and press releases.

13th company to enter the market (Osaki, 1999).

sales persons and transitioning itself into a

Thus, it is clear that the company was not necessarily

call-center specialized securities company. Adding aahead of others in terms of the timing of market

new line of “internet business” to this “call centerentry. However, the company’s quest for a new

business,” Matsui Securities dropped from the callbusiness model started in 1992 when it announced

center business within half-years time after entering

the complete abolition of face-to-face sales activities.

internet business to become the first company toThis decision was driven by President of Matsui

specialize in online securities in Japan.

Securities’ conviction, based on his firsthandPrior to specializing in online securities

experience in Nippon Yusen (a shipping company),business, Matsui Securities conducted “firsthandwhere he worked prior to joining Matsui Securities,

analysis” using its own customer data to identify theandpost-deregulation

emerging trends in the Japanese online securities

competition. He firmly believed that the cost of sales

industry, something which no other online securities

persons would not be accepted by customers in acompanies had done before. Thus, Matsui Securities

deregulated market. Based on this conviction, Matsui

entered the as-yet-unknown market with the

Securities spent four years completely eliminating its

know-how and data accumulated through its

where

he

witnessed

56

Early Stage Competition in the Japanese Online Securities Industry
experience as a securities brokerage operating as ainvestment gained popularity not only amongcall center under the anticipation of eminent

affluent consumer groups but also among the general

deregulation.

public.
In contrast to this, the ratio of individual assets

4. The Formation of a “Dominantmade up by stock investments was very low in Japan

Perception”

as compared to the United States (see Figure 2)

The securities market became easier to enter inlargely because the securities companies have long

December 1998, upon its transition from a licensesince focused their efforts on providing face-to-facesystem to a registration system. Around this time,

service to their main customers, namely affluent

many companies specialized in online securities

middle-aged customers. Thus, in the Japanese

were incorporated, including DLJ, E*Trade, Monex,

securities industry before deregulation, the only

Nikko Beans, and the two companies that were thesuccessful business model was to have as many

former entities of Kabu.com. From the very initial“good customers” as possible. Securities companies

stage of market entry, these online securities

sought to keep good customers as long as possible

companies except for Matsui Securities, entered into

by providing valuable investment information andsevere competition to increase the number ofadvice tailored to the needs of each customer under aaccounts by way of discounting commission rates.

relatively high and uniform commission fee structure.

Behind these companies engaging in such

The fees were not viewed as particularly onerous tosevere competition to increase the number of

the affluent, middle-aged consumer groups with theiraccounts was a so-called “dominant perception” that
had taken hold in the early stages of the Japanese

Figure 2. The Ratio of Individual Assets
Made Up by Stock Investments (1999)

online securities industry.

（Billion yen）

The roots of this dominant perception can be

1,000（24.2％）

traced to what occurred in the United States after the
800

deregulation of securities commissions in 1975,
more than 20 years before such deregulation took

600

place in Japan. Deregulation in the United States400

spawned the creation of new types of securities
companies

called“discountcompanies

providedlittlebrokers.”
or

no

200

These

investment0

information and consulting services, but offeredUSA（6.4％）（12.7％）（9.3％）（6.5％）

Japan

Germany

EnglandFranceSource: Japan Securities Research Institute.

large discounts on commissions. Consequently, stock57

Takai
surplus assets, to which most of the securities

comparison,in

September

1999,

just

beforecompanies’ customers belonged (Saga, 2000).

deregulation in Japan, there were only 130,000

However, amid the public discourse of the “Bigonline securities accounts in Japan whereas theBang” financial reforms in Japan, which gained

figure in the U.S. was 13 million (Saga, 2000). Thus

momentum from around 1997, the government

the Japanese market was much smaller than that ofdecided that securities commissions were to be

the U.S. yet taking into consideration differences inderegulated from October 1999, among otherpopulation, individual asset compositions, and theanticipated deregulatory moves in the Japanese

total assets. Nevertheless, based on two significant

securities industries. At the time, there formed theupcoming

strong expectation that the assets of generalprovided by online services” and the “commissions

customers who had previously not been targeted byderegulation,”

the securities industry would flash into the stock

expectancy for explosive growth of the Japanesemarket upon commissions deregulation.

market based on the precedent in the United States.

changes,

namelysecurities“thecompanies

convenience

held

high

Providing support for this assumption was theMoreover, at the time, Japan was in the midst offact that there was a high increase in the number ofthe so-called “IT bubble economy,” with the Nikkei

online securities accounts after 1996 in the Unitedstock index enjoying a rising trend. Additionally,

States (see Figure3) where commissions had alreadywith various other financial policy reforms coming

been deregulated in 1975 and where the transition toalong around the same time (attempts to create theonlineso-called “Financial Big Bang”), the mass media andbusinesses

hasprecededJapan.

Byothersources predicted overwhelming

marketgrowth, with predictions such as, “This year will be
the year of the popularization of the securities

Figure 3. Increase of Online Securities
Accounts in USA & Japan

trading businesses. It may not be as big as the five（thousand accounts）

million accounts seen in the United States, however

14,000the market is still expected to grow vigorously.”

12,000In summary, the target customers in the

10,000USA

8,000

Japanese securities industry had been limited toAbout
30 times

6,000

affluent, middle-aged and elder customers for a longtime. However, as expectation of an increase in the

4,000

customer base rose, hopes for the viability of the

2,000
Japan
0

1996

1997

1998

online channel also rose. As such, driven by the1999

anticipation of explosive market growth, as seen in58

Early Stage Competition in the Japanese Online Securities Industry
the United States’ case, and with a push from the IT

major revenue source would continue to be “affluent

bubble economy, the dominant perception that

middle-aged customers,” and that they would“customers would vigorously increase” was formed.

continue to provide a high level service consisting offull investment advice in their retail establishments.

5. Reactions of Major Face-to-faceMoreover, the major securities companies judged

Securities Companies

that, since important retail customers might start

At this stage, the major securities companies thought

onlinethat, while continuing to target affluent middle-aged

information may be obtained online, it would becustomersthedifficult to differentiate the commissions charged

conventional face-to-face retail shops, they should

online from face-to-face transactions. Therefore theyalso start pursuing online business and take inannounced their policies to minimize commission

general customers who have no experience in stock

discounts after deregulation in October 1999.

as

their

major

customers

indealings

andsignificant

investment

As a result, it was difficult for major securities

trading.
Yet in the United States where deregulation ofcompanies to take proactive actions towardscommission fees drove the formation of discountexpanding of their online business because they werebrokers and popularized stock trading, not all

anxious to minimize “cannibalization”――revenue

customers switched to discount brokers for the sakeloss due to important long-term customers shifting toof cheaper commissions. Even in 1980, five years

online dealings. The semi-large and middle-sized

after deregulation, discount brokers accounted forenterprises, which did not spin-off online securities

only 1.3% of all brokerage fees for individual

divisions, were also facing the same situation more

trading by NY stock exchange members. In 1995,

or less. As a result, it was difficult for the online

twenty years after deregulation, the figure was stillbusiness divisions of the leading large-scale,

below 15%. It has been pointed out that the reason

semi-large or middle-sized companies to be thebehind this slow increase is that many customers

leading player in this market.

highly value the investment information and advice

On the other hand, companies specialized inwhich sales persons of full service securities

online securities trading quickly became the leading

companies provide (Osaki, 1999).

players of the online securities market. Despite theirentries into the market being later than the larger

This data seemed very encouraging to major
Japanese securities companies since they also

securities

provided full service. Based on such data, the major

implementing aggressive strategies because they had

securities companies who entered the online market

no “constraints of existing customers.” However,in its early stages, consistently maintained that theirmost of the online securities companies set their59

companies,

they

were

capableofTakaitargets for number of accounts at a level that was, in

October 1999, the proposed fee systems of theretrospect, too high. At the time, their objective wasleading companies specialized in online securities

to attract new customers of younger generations who

trading except for Matsui Securities were alreadyhad no securities transactions experience or from the

below the profitable line. Although there was alarge pool of businesspersons who were too busy tocommon understanding at the time that “3,000 yen

visit retail shops. Each company tried to be first to

was the profitable line,” the companies other thanobtain in such customers in bulk and a severely

Matsui Securities proposed fees that were below thiscompetitive environment ensued.

line (e.g., E*Trade=2,500 yen, DLJ=1,900 yen,Monex=1,000 yen). In fact, many of these

6. Competition for Increasing thecompanies admitted that upon deregulation they had

Number of Accounts: Fierce Price War

set the fee below the “profitable line,” as is shown inand Mergers

their comments: “We are prepared to suffer loss forWith deregulation, companies specialized in online

three years (Nikko Beans)” and “The fee will notsecurities trading announced unique commission fee

cover fixed costs (DLJ).”

schemes and proactively tried to attract new

Despite the fact that companies were alreadycustomers. However, many of them basically

incurring losses, a fierce price war soon started. The

adopted a “commission per transaction in proportion

first company to decrease its commission fee wasto the contracted price format,” along with setting up

E*Trade, which was also the company that was firstprice variation by target segment (i.e., transaction

to trigger “price destruction” in the United States.

price or setting up stages for level of required

Initially in October 1999, E*Trade began a “freedeposits).

commission fee” campaign for a limited period
without changing its revised price scheme that had

On the other hand, Matsui Securities alone

just been set up.

announced a “fixed commission fee system” underwhich the commission (3,000 yen) will remain the

Following this, HIS Kyoritsu, which entered thesame for up to three transactions as long as the total

market from the travel agency industry, attracted

amount does not exceed a set range (three million

attention by proposing a minimum of 800 yenyen). Matsui Securities claimed that their fee systemcommission fee. In March 2000, when E*Tradewas “unprecedented in Japan or overseas” in that it

lowered its commission fee by 20%, this was soon

was determined by a matrix of “the number offollowed by Monex which lowered its commission

transactions” by “the total contract amount.” Matsui

fee for relatively high range transactions of more

Securities called its system the “Box Rate Fee.”than two million yen. Also in October 2000, E*Tradestarted an extremely low-price 100 yen campaign for

When commission fees were deregulated in60

Early Stage Competition in the Japanese Online Securities Industry
Internet Trade Securities in March 2001, announced

a limited time.
About a year and half after the price war started,

its first commission fee change since deregulation.

a movement toward expanding scale began. Various

By this they lowered their minimum commission fee

attempts were made to increase the number offrom 1,000 yen to 700 yen, an amont smaller thanaccounts through mergers and acquisitions. In

E*Trade. This fee was only applicable to customers

November 2000, Kabu.com announced to bewhose accounts were worth more than ten million

incorporatedbyyen account deposit, but even for customers withannouncements of acquisitions by Nikko Beans andlower deposit the commission fee was changed; forMonex respectively in December 2000.

example it was lowered to 720 yen for contracts ofthrough

Following

a

these

merger,mergers’

followed

up to 200,000 yen. Thus, the price revision wasannouncements,

significant, offering an average of 16% discount.

E*Trade, which had been increasing the accounts
through its low commission fee strategy, changed its

DLJ, which initially had not been involved infee scheme again in February 2001, lowering its

the price competition but seeking to increase theminimum commission to 800 yen. Subsequently, in

number of accounts, in July 2001, announced that it

June 2001, Nikko Beans, which had just acquired

would run a “90 yen per transaction” campaign

Figure 4. The Strategy for Increasing Number of Accounts
1999.10〜2000.9（Beginning of Price War ）1999.9MatsuiE*tradeＤＬＪ
Monex
Nikko Beans

1999.12

2000.3

2000.6

Operatingprofit ratio

2000.10〜2001.9（Price War and M&A）
2000.92000.122001.3（Sep 2001）

2001.6

2001.925％
99.10(by 3 times)

99.10 99.10
0 yen

00.9
（no limit of number）

00.10
00.11
100yenLong/cred.
800yen00.3
20%
reduction

01.2
01.3
reduction Shareholders
Min.800yen campaign

01.9
reduction

00.8
More than
20 times
90yen

99.10

99.10

00.4
reduction

9％
-1％
-54％

01.7
M&A

-106％
01.3
M&A

99.10

01.6
reduction-54％

Kabu.com

01.4
M&A

Revision of commission（fixed commission ）Revision of commission （reduction, etc.）
Campaign of special commission rate

M&A

Source: Company annual reports, investor’s reference guides, press release, and Nihon Keizai Shinbun.

61

Takaibeginning in August, although the campaign was

others were pursuing price competition, President

limited to cases with more than 20 transactions per

Matsui expressed his opinion that new customers

month.

would not increase dramatically. President Matsui

Following

DLJ’s

announcement,

E*Tradedescribed his company’s target customer as: “Mostinstantly announced a further price reduction. In Julyof

2001, it announced that it would lower its minimum

age…ordinary investors. We do not intend tocommission to 700 yen, the same level as Nikko

increase the number of our accounts in the first place.

Beans, from September of that year.

Our aim is to invoke a price revolution andAs mentioned already, the companies that were

ourcustomers

expropriate

arecustomersaround

from

the

50

years

large

of

major

engaged in the price war had started off at a pricecompetitors.” Matsui Securities’ targeted “stocklevel that was below the profitable line. By theinvestors” and ignored the “general customers” who

middle of 2001, the commission fees of the various

were commonly believed to increase dramatically.

companies had been lowered to such an extent that it

Not only that, Matsui Securities openly announced

could be said that the price competition had reached

its target of acquiring customers of large major

its limit, that is, a commission discount would nocompanies――a “taboo” in the Japanese securities

longer serve as an inducement for customers.

industry at that time.

Moreover, during this period there was the so called

The index Matsui Securities had been focusing

collapse of “IT Bubble,” pulling down the Nikkei

from the very beginning was the “turnover rate” (i.e.,

stock index to less than 10,000 yen for the first time

the number of transactions per account). In the stockin 17 years, and causing a downturn in stock trading

brokerage business, securities companies gain

as a whole. Thus, the online securities companies

revenue by charging customers a certain commission

may have enjoyed an increased number of accounts,

fee for stock transactions. Therefore, to increase

nevertheless, their revenue suffered severely due torevenue either the customer base (number ofthe severe price cuts and downturn in stock trading

accounts) or the number of transactions (turnover(Figure 4).

rate) must be increased. While its main competitors
were eagerly trying to increase their customer bases,

7. Matsui Securities’ Unique Moves

only Matsui Securities focused on increasing the7-1. The Strategies of Matsui Securities

number of transactions per account, that is theContrary to its competitors, Matsui Securities held a“turnover rate.”completely different view regarding the market size

In detail, Matsui Securities established a systemand the projected growth trend based on their

which allowed its customers (experienced investors)

accumulated data. In September 2000 when manyto engage in any transaction they liked――however62

Early Stage Competition in the Japanese Online Securities Industry
small the amount may be and how many times theymodel ahead of others. However, the major securities

wished. Through this system, Matsui Securities

companies and other online securities companies didoffered services which took advantage of real time

not think of Matsui Securities a threat, largely

processing capability of online businesses. That is

because Matsui Securities was still a small-scale

highly risky and requires specific knowledge,

company having only 20,000 accounts in Octoberregarding margin trading and option trading, for1999. In short, competitors saw Matsui Securities as

instance. Moreover, Matsui Securities abandoned thea niche company who provided broking service

commission per transaction system and established awithout sales persons to advanced customers who

fixed commission fee system that only charged awere highly experienced in stock trading and who

certain commission fee for multiple transactions as

were generally considered to be a limited segment oflong as the total amount fell within a set range.

market――those “obsessed” with stock trading.

These services and this price structure were

Also, Matsui Securities’ commission fees

established to target “active users” who would makeremained relatively higher than the minimum

a few transactions per day utilizing margin trading

commission fees of its competitors who wereand option trading.

engaging in price decreases after the deregulation in
October 1999. Therefore the majority of the industry

7-2. Others’ Evaluation of Matsui Securities

thought that Matsui Securities’ performance was not

The mass media paid much attention to Matsui

enough to constitute a threat. Opposing this view,

Securities’ unique strategies so that the otherhowever,competitors must have had good knowledge of whatfrequently saying “The media says Matsui Securities

Matsui Securities was doing. However in spite oftakes in ‘day traders,’ but this is not the case. In

this, the competitors appear to have underestimatedJapan, there are almost no ‘day traders’ like those in

Matsui Securities to some extent and did not attempt

the United States. Our customers are ordinary

to imitate the company.

investors.”

President

MatsuiNevertheless,counter-argued

other

by

companies

It was 1996, more than three years before

maintained their views that Matsui Securities’

deregulation, when Matsui Securities fully converted

strategies were special and not a model to be

its business model to a call-center-only securities

imitated even in 2001. They were quoted as saying;company. At the time, Matsui Securities faced the“Matsui Securities is surely improving its revenue,

restriction of not being able to differentiate itself

but we only see them as a niche company.” And,

from its competitors in terms of commission fees,“Our competitors are not Internet specialized

but it nevertheless attracted a lot of attention in thecompanies, but rather the large-scale, leading

media for adopting a “no sales person” businesscompanies like Nomura, Daiwa, and Nikko. Matsui
63

Takai
Securities focuses on margin trading. It targets the

September 2001, when Matsui Securities was still

limited and ‘obsessed’ segments of the market, inseen as “niche” or “day traders” company, Monex

other words ‘day traders’ who trade stocks

ranked on top with 178,000, followed by E*Trade’sfrequently every day. Ultimately, Matsui Securities

168,000, DLJ’s 111,000, Nikko Beans’ 78,000, andwill not be able to attract the general public.”

Kabu.com’s 76,000. Taking the second billing of theabove latecomer companies, Matsui Securities’

7-3. The Actual Reactions of the Customers

accounts were only 63,000.

and Matsui Securities’ Performance

When comparing the number of transactions per

The total number of accounts in the early stages ofaccount per day or the amount of sales ofJapanese online securities industry increased at atransactions per day, there was an extreme difference

remarkably rapid pace as is shown in Figure 1. At

between Matsui Securities and others, ranging fromthis stage, companies other than Matsui Securities

more than three to ten times of difference (Figure 5).

interpreted this growth as “the customer base is

The ratio of operating profit to operating revenue inincreasing at a favorable pace,” and announced

the fiscal year ending March 2002 was 19%, 17%,comments such as “Many people are beginning to be

and 1% for Matsui Securities, E*Trade and DLJ,

interested in stock investment,” and “there are many

respectively. On the other hand, for Kabu.com,

potential investors.” Based on these beliefs, they

Nikko Beans, Monex, it was -9%, -22%, and -44%,

continued to lower commission fees in order torespectively, showing that these companies still

increase accounts.

suffered losses even three years after their market

However, it gradually became apparent that inentry. In addition, E*Trade suffered loss in the stock

reality, it was normal for one customer to hold four

brokerage business. This means in reality, only

to five accounts, or looking at the breakdown of the

Matsui Securities was really making profits.

explosive increase in online accounts, it was

In summary, it can be concluded that companies

discovered that the majority of these accounts were

except for Matsui Securities focused all their efforts

held by customers of the three leading brokerageon obtaining the customers who were expected tocompanies which mainly provide retail services. As

increase dramatically, according to the “dominantthese facts became clear, a new recognition started toperception” in the industry. However, even two years

prevail: In Japan, the actual number of “customers”

later, the actual number of customers did not appear

who engage in the actual stock trading largely

to have actually increased by much, although, thedeviate from, or rather, is significantly less than thenumber of accounts seemed to have grown due to thetotal “number of accounts.”

price competition. Thus, as President Matsui had

Comparingthenumberofaccounts

predicted earlier, “there was no explosive increase inin64

Early Stage Competition in the Japanese Online Securities Industry
Figure 5. Number and Sales of Contract Per AccountThe number of transactions per account per day
0.5
0.4

Sep. 2001Number and Sales of contract per accounts
Mar. 2003

0.3

27% 44%

13% 15%

15% 19%10% 25%

0.2
0.1

（n/a）

0

The amount of sales per account per day

0.4
0.3

23% 50%38% 62%

9%

22%

8%

34%

0.2
0.1
0

（n/a）

MatsuiE*trade

ＤＬＪ

Monex

Nikko
Beans

Kabu.com

Source: Company annual reports, investor’s reference guides, and press releases.
Note 1: The data in this table is correct as of September 2001.
Note 2: The numbers inside of circles are ratio when set the number of Matsui
Securities into 100%.

general stock investors in Japan during this period.”

time, Matsui Securities’ revenue was significantly

While other companies engaged in pricehigher than the others. In addition, as mentioned

competition based on the “dominant perception,”above, the industry became aware of the fact that in

Matsui Securities maintained its unique strategy

reality it was normal for one customer to hold four towhich was completely different from the others.

five accounts, and looking at the breakdown of the

The result was that it steadily increased its number

explosive increase in online accounts, it wasof accounts to a scale much larger than that of adiscovered that the majority of these accounts were

niche company, and maintained top profit level inowned by customers of the three leading companies

the industry, saying “several hundred customers awhich mainly provide face-to-face services. As thesemonth switch from Nomura and Daiwa” (Matsui &facts became clear, a new recognition started to

Matsumoto, 2001).

prevail in the other online securities companies: In
Japan, the actual “customers” who engage in the

8. Imitation of Matsui Securities’

actual stock trading largely deviate from, or rather, is

Strategies and Time Lag

significantly less than the “number of accounts.”

From around the latter half of 2001, competitors

Until then, the industry players targeted thestarted to imitate Matsui Securities’ strategy. By thisgeneral investors which they envisioned would
65

Takairapidly increase and insisted on attracting such new

At this point, E*Trade, which had been thecustomers by lowering the commission fees.

price-cutting leader undertaking price competition

However around mid-to-late 2001, these othermost proactively, admitted as success the transition

companies began to introduce margin trading forfrom the conventional strategies based on dominantadvanced users and also fixed commission fee

perception to strategies that sought to meet the needs

systems, imitating Matsui Securities’ strategy forof active users. Monex also admitted that their

attracting active users through margin trading andfailure had been caused by its delay in following the

fixed commission fee system. By this time, however,others to shift its strategies by more than a year.
Today, various companies including E*Trade,

two years had already passed since Matsui Securities

DLJ, and Monex, have succeeded in attracting

first implemented these strategies.
Figure 6 summarizes the transition from

customers of Matsui Securities by imitating its

competition focused on increasing the number ofstrategy, and as a result they have succeeded inaccounts to competition focused on increasing the

reducing

number of active users. After the shift, theRegarding this, President Matsui was quoted ascompanies that had engaged in fierce pricesaying; “Looking at the industry as a whole, E*Trade,

competition found their accounts stop to increase,

DLJ, Kabu.com has survived the competition just by

but experienced a favorable turn in business byimitating the Matsui Securities system…Having

following Matsui Securities’ strategy (Figure 7, 8).

been imitated by others who have differentiatedtherevenuedifference(FigureFigure 6. Imitation of Matsui Securities
1999.9 1999.12 2000.3 2000.6 2000.9 2000.12 2001.3 2001.6 2001.9 2001.12 2002.3 2002.6 2002.9 2002.12 2003.3 2003.6

2000.10〜2001.9

1999.10〜2000.9

Competition
for accounts（beginning of Price War） （Price War and M&A）

Time lag … more than 2 years!
E*tradeMatsui
98.5

00.11
99.10

ＤＬＪ

Monex

01.9

00.9

02.12
01.12
Nikko Beans

01.8

Kabu.com
01.11

Start of margin trading

Start of fixed commission fee system

Source: Company annual reports, investor’s reference guides, and press releases.

66

02.8
02.11

03.04

Imitationof Matsui
Securities

5).

Early Stage Competition in the Japanese Online Securities Industry
Figure 7. Ordinary Profit Ratio
（％）
100
50
0

Competition of accounts

Figure 8. The Growth of Accounts

Imitation of Matsui（accounts）
70,000

Matsui60,00050,000E*tradeCompetitionof accounts

Imitationof Matsui

40,000-50

Kabu.com

Monex

30,000

Nikko Beans

-100
-150
-200

20,000DLJ
10,00002000.3 2000.9 2001.3 2001.9 2002.3 2002.9 2003.3

Source: Company annual reports, investor’s reference
guides, and press releases.

MatsuiE*trade

ＤＬＪ

Monex

n/a

n/a

Nikko
Beans

Kabu.com

Note: A bar graph shows the number of net increases ofaccounts for every half a year. From the left, 2000.9,
2001.3, 2001 9, 2002.3, 2002.9, 2003.3.

themselves from us by their lower commission fees,

To the first half of the question, “how did thesome of our customers have shifted to these othercorporations differentiate themselves from others?,”

companies” (Matsui, 2003).

the following results became clear: In the early

However, it is important to note that today

stages of the online securities industry in Japan,

Matsui Securities still remains as the leading

combined factors ―― the U.S. case, IT bubble

company in the industry. Thus, we can see that

economy――created a “dominant perception” that

Matsui Securities successfully built a solid position“thein the market, taking advantage of not being imitateddramatically increase.” Based on this perception,by others for more than two years.

companies

customer

base

other

of

than

the

industry

Matsuiwould

Securities

underestimated to some extent and did not attempt to

9. Discussion and Conclusion

imitateIn this paper, we made a case-based analysis tocompetitors, Matsui Securities held a completely

answer this research question: “How did thedifferent view about the market size and projected

corporations differentiate themselves from others

growth trend based on their “accumulated data.” Inand how did they maintain these differences in the

September 2000, when many others were pursuing

initial stages of the online securities industry when

price competition, President Matsui expressed his

imitation by the others were easy?”

opinion that new customers would not increase67

Matsui’s

Strategy.

ContrarytoitsTakaidifficult-to-follow and highly cohesive information

dramatically.
To the latter half of the question, “how did they

(Dierickx & Cool, 1989). Besides, in order tomaintain these differences in the initial stages of theimplement what turned out to be the key factors toonline securities industry?,” we need more in depth

superior performance, (i.e., a combination of fixed

description. As mentioned earlier, it is basically quite

commission fee system and margin trading), based

easy to imitate the strategies of competitors in theon this kind of “difficult-to-follow and highly

online securities industry because the products andcohesive information,” it was essential that aservices of the competing companies are shown on

custom-made information system were built. Matsui

web site in real-time, and because many of the

Securities built such information system, thereby

leading

theircreating the other key of competition. Most of the

Securities

information systems used by other companies which

succeeded in establishing a predominant position inhave entered in the early stages of this industry were

the initial stages of the industry. Therefore, apackage products. Therefore, it was difficult forquestion arises as to why Matsui Securities’ strategy

these companies to introduce significant services andwas not imitated for so long. Two points relating to

products (i.e., fixed commission fee system andthe reason for the phenomenon are addressed below.

margin trading). Furthermore, even if the otherFirstly, Matsui Securities’ advantage of having

companies had tried to imitate the Matsui Securities,

unique know-how in advance enabled them toit would have required new investment such as

develop a unique information system, which others

information system alteration. Any new investment

could not imitate immediately. Matsui Securities had

would likely have been difficult for these companies

professed and sought to build an original businessas they had generally not yet finished paying backmodel consisting of securities broking without sales

their initial investments. However, it can be said that

persons from 1992. Through its efforts, the company

this was not a fatal constraint. As seen before, thehave accumulated know-how and data and found out

other companies were able to change their strategies

that the most important index is the turnover rate ofin the latter half of 2001, so that they could finallytransactions per account, since the number of coreovercome this constraint in several months at any

customer is limited and new customers were notrate.

companies

performances.

publicly

Nonetheless,disclose

Matsuiincreasing as much. President Matsui pointed out

Secondly, a more important factor as to why

that: “Even big securities companies as well as new

Matsui Securities was not imitated for so long is theentry companies did not have the kind of firsthandfact that companies other than Matsui Securities did

information that we had.” So it may be said that thenot seek to imitate Matsui Securities’ strategy sincekind of information Matsui Securities possessed was

they
68

remainedcommitted

tothe“dominantEarly Stage Competition in the Japanese Online Securities Industry
perception.” In short, because the companies other

Securities had offered was the “dominant design” atthan Matsui Securities were committed to thethe initial stages of the industry, because companies“dominant perception” believing that the number ofother than Matsui Securities were beholden to thecustomersthey“dominant perception,” they would not follow

misunderstood the significance of Matsui Securities

Matsui Securities’ strategy, even though theyand viewed the company as only a niche player.

acknowledged the strategy and its intention quite

would

increase

dramatically,

In fact, however, in the early stages of thewell. As a result, Matsui Securities kept growing

online securities industry, a strategy that could beunder the situation that appeared to be similar to thecalled “increasing the number of active users” turned

so-called “gap created by concentration of severalout to be one of the key factors of competition incompanies” (Shimamoto, 2001).

accordance with the actual customer needs at that

There has been an increase in the number oftime. The effectiveness of this strategy should havestudies that have focused on the social and politicalbeen clear for all the other companies throughprocesses that surround the companies in the early,

published material and President Matsui’s remarks.

uncertain, and fluid stages of the industries (e.g.,

Nevertheless, the other companies continued to

Numagami, 2000). For example, “the technical result

follow the “dominant perception,” which said thatfrequently published in an academic community”“customers would increase dramatically,” and the(Fujii, 2002) or “the technical policy” (Shimamoto,companies

competition,2001) specified “the axis of competition” throughrepeatedly cutting the commission whenever otherssocial interactions between the companies, then they

did.

had great influence on the process of an innovation

engagedinsevereAs stated before, it took no less than two years

or a competition. Under such situation, while afrom the real rise of the market for the reputationcompany that has accumulated know-how and deepthat “Matsui Securities grabs active users who are

information is able to judge information alternatively

the core customers of this stage of the online

and actively (Itami, 2004), a company without

securities market” to replace the view of Matsuiknow-how and information can only understandSecurities as a niche player that only attracts “dayinformation passively, and it may be at high risk totraders.”

follow the “dominant perception.”This

replacement

was

a

kind

of

‘Copernican revolution’ in the industry’s view of theUsually, since the late-coming company does

market. However, by the time the change occurred,

not have such know-how in many cases, it may be

the distance between Matsui Securities and theput in a disadvantageous position. What should suchothers was considerable. Evaluating the casea company do? I think that to find out customers’

afterwards,

true

even

thoughtheservice

Matsui
69

needs

by

repeatingsmallTakaiexperiments”

Paper presented at the regular symposium of the(Kagono, 1988), and to deal with them quickly will

Academic Association for Organizational Science,

be most important for latecomers without know-how

Tokyo, Japan. (In Japanese)“hypothetical-verification

type

Kagono, T. (1988). Soshiki ninshikiron [Organizationand information.

epistemology].

For the purposes of this study, we only analyzed

ChikuraShobo:

Tokyo.

(In

Japanese)

limited number of leading companies of the industry.
However, we have already started preparation for a

Matsui, M., & Matsumoto, O. (2001). Kabushiki

study that seeks to determine what kind of

toshi kaikaku sengen [Declaration of securities

companies can survive severe competition, throughtrading reforming]. Tokuma Shoten: Tokyo. (Insurvival analysis method using data from all

Japanese)companies in the industry. Of course, it must be

Matsui, M. (2003). Minnaga nishi mukya ore ha

noted that there are many important issues remaining

higashi [When everyone looks to the West, I onlythat are left untouched by the present research. Theselook to the East]. Jitsugyo No Nihon: Tokyo. (Ininclude a comparison of the Japanese online

Japanese)

securities industry with that of the United States

Noda, T., & Collis, D. J. (2001). The evolution ofwhere a precedent was set that helped drive theintraindustry firm heterogeneity: Insights from aformation of the “dominant perception,” and anprocess study. Academy of Management Journal,

investigation

44(4), 897-925.

of

the

strategies

andresultingperformances of the large-scale securities companies

Numagami, T. (2000). Koi no keieigaku [Toward anthat could not become the major players in online

action system theory of management]. Hakuto

securities industry in Japan. We would like to

Shobo: Tokyo. (In Japanese)

analyze these issues in researches to follow.

Osaki, S. (1999). Intanetto shoken torihiki noshinjitsu [Truth about online securities trading].

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72