To: Professor Michael Scott Morton
From: Carsten Schlau
Subject: 15.939 Assignment #1: Analysis of CS First Boston
Date: November 20th, 1996 _____________________________________________________________________________

Corporate Structure of the CS Holding

CS Holding, a Swiss bank, is the parent of CS First Boston and Credit Suisse. Until 1996, CS Holding was considered to be a Swiss bank with international activities. In July, 1996, The CS Holding announced its intent to form a far-reaching corporate structure to enhance its services to clients worldwide and to further pursue its vision of becoming the most global financial institution in the year 2000. CS Holding strategy is to focus on its core business and to align its entities with the business segments to become an international financial institution with headquarters and some businesses in Switzerland. Business that do not fall within one of the core business segments will be divested in the long-run. The CS Holding will be renamed Credit Suisse Group and will start operating in the new organization on January 1, 1997.

Integration of CS First Boston in the CS Holding

CS First Boston, a leading force in global investment banking, will be incorporated as the group’s institutional banking business. This will include the institutional asset management business as the first autonomous business segment under the name Credit Suisse Asset Management, and the corporate and investment banking business as the second autonomous business segment under the name Credit Suisse First Boston.

CS First Boston

In the late 1980s and early 1990s, CS First Boston transformed itself almost entirely from a relationship-driven commercial bank into a provider of highly complex products and services. In 1993 it shifted from a geographic to a functional structure to install a “one firm” corporate culture. During this period CS First Boston was an highly creative but unruly institution with very cyclical earnings. Performance was mediocre, which led to an exodus of talented people. Today CS First Boston is run largely along product lines. It combines local market expertise and global focus, and its international network of offices enables CS First Boston to market a diverse range of products in almost every major financial market in the world. Major products and services include, securities trading, equity and fixed income trading, multicurrency account reporting, foreign exchange trading, international money markets, and other key functions of international banking. By adopting the product line structure, CS First Boston was better able to assess the profitability of each product line and to devise the distinct services that clients increasingly wanted. Shortcomings of the product line oriented structure are, that it tends to limit the exchange of information among the different product lines and that it makes cross-selling more difficult. To overcome these shortcomings and to enhance the product line, CS First Boston uses on of the most advanced information technology systems. To remain on the leading edge of using information technology in the financial industry, CS First Boston continuously experiments with and implements state of the art technologies.

CS First Boston’s reliance on information technology

CS First Boston operates a client/server based securities offering system, which links traders, who want to sell securities, with salespeople, who are trying to sell them to investors. The system enables CS First Boston’s traders to assemble offerings for investors in a few minutes, a procedure that without the system would take more than half an hour. Furthermore, by being able to use an application code on the workstations, investors are able to receive only those offerings that meet their approved preferences. Using the system cuts handling time to one seventh and increases volume. Besides using the securities offering system in-house, CS First Boston offers the service to other investors through a multi source data listing subscription service, which broadcasts CS First Boston’s daily offering list. In the Fall of 1996, CS First Boston introduced its new high-profile, Web-based Global Research Library designed by Informix Software, Inc. a leading provider of database technology. The Global Research Library elevates CS First Boston to a new level in electronic distribution of research, one of the most crucial differentiating features among trading companies. The system will distribute analyst reports and updates of investment vehicles on a worldwide bases almost in real-time. Today this will be done via the intranet to traders, and in the future, via the Internet to selected investors. The system operates on Sun hardware and supports several thousand user throughout CS First Boston worldwide operations, including four major installation in London, New York, Tokyo, and Zurich. Michelle Kildunne, a director of Fixed Income Trading Technology at CS First Boston, argues that the new technology extends CS First Boston’s distribution technology by providing a globally distributed architecture, platform independence, data integrity, and full text search. CS First Boston will further build on the Informix technology to facilitate the development of Web applications. The Global Research Library and the installed technology will further give CS First Boston a differentiating edge needed to quickly and easily deliver subsequent services.

What makes CS First Boston an interesting organization?

CS First Boston is an interesting organization, because of its global coordination and its use of leading edge information technology. CS First Boston’s competitive advantage is based on the ability to leverage its worldwide expertise in institutional banking by creating and processing information almost in real-time. Information technology further enables CS First Boston to customize products and services. Selected offerings are made regarding to customer needs. By reducing assembly time for offerings, traders can turn over many more transactions which ultimately leads to an increase in the customer base. Therefore, what differentiates CS First Boston from its competitors is the combination of being global and being able to make intelligent use of information technology. Another interesting aspect of CS First Boston is, that it is not only using its information technology to provide service to in-house user, but also providing hundreds of investors with access to CS First Boston’s offerings through a multiple source data listing subscription service.