Japan Net Bank Case Analysis

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01/24/02

Japan Net Bank: Japan's First Internet-only Bank

Yoshiyuki Miyai had a vision. He wanted to establish a completely new standard of banking in Japan – that of Internet-only banking. As president of Japan Net Bank (JNB), the first Japanese online bank with no physical branches, Miyai emphasised that customer satisfaction should be the focus of JNB's business – his customers should enjoy convenient access to accounts, competitive rates, customisation and secure transmission of information over the Web. To bring out the best services, he saw to it that JNB was run with low operation costs, a flat management structure, flexible computer systems and a small workforce – all drastically different approaches from those adopted by traditional banks.

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JNB already had 130,000 accounts in April 2001, merely six months after it opened shop. But in order for it to maintain a sustainable competitive position in the long-term, Miyai needed to tackle several important issues. How could the Company maintain the interest and support of its large shareholders? What advantage could be gained from the established customer bases and marketing channels of its alliances? In other words, how could the company best manage its alliances? Furthermore, how should the Company design a scalable information technology infrastructure capable of providing performance on demand but without overinvesting? Company Background

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In July 1999 Sakura Bank, a major Japanese bank, and electronics giant Fujitsu announced their plan to create an Internet-only bank. After over a year of preparation, including getting other companies to invest in the venture, The Japan Net Bank Ltd. was established on 26 September, 2000, with capital of ¥20 billion (US$167 million).1 JNB began operation on 12 October, 2000, after receiving a Banking Licence from the government.

The senior management of JNB consisted of five directors, including the president, Yoshiyuki Miyai, who was appointed in September 2000. At the age of 49 he became the youngest and lowest-paid president in Japan's banking industry.2 Before being recruited to his JNB job he was a manager at Sakura Bank's headquarters, and was mainly in charge of the planning of mass-retail corporate business promotions and the construction of database marketing

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US$1=¥120
Kakuchi, Suvendrini, "Economy-Japan: First On-line Bank Takes on Financial Giants", Interpress Service, 25 January, 2001.

Vincent Mak and Pauline Ng prepared this case under the supervision of Dr. Ali F. Farhoomand for class discussion. This case is not intended to show effective or ineffective handling of decision or business processes. This case is part of a project funded by a teaching development grant from the University Grants Committee (UGC) of Hong Kong.

© 2002 by Centre for Asian Business Cases, The University of Hong Kong. No part of this publication may be reproduced or transmitted in any form or by any means - electronic, mechanical, photocopying, recording, or otherwise (including the Internet) - without the permission of The University of Hong Kong. Ref. 01/109C

24 January, 2002

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Japan Net Bank: Japan's First Internet-only Bank

systems. He also worked at the Sakura Research Institute, where he founded and headed the "Center for Aging and Environmental Studies".
Profiles of Shareholders3

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At the time of JNB's launch, Sakura Bank, as the major shareholder, owned 50% of the shares, with Sumitomo Bank, Fujitsu and Nippon Life Insurance each holding 10%. Mitsui & Co., NTT East, NTT DoCoMo and Tokyo Electric Power each held 5% of the shares. After Sakura and Sumitomo Banks merged on 1 April, 2001, to become Sumitomo Mitsui Banking Corp. (SMBC), the major shareholder of JNB was SMBC, with a 60% stake [see Exhibit 1]. Sumitomo Mitsui Banking Corp. (SMBC, www.smbc.co.jp, 60% stake)

The result of a merger between Sumitomo Bank and Sakura Bank,...
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