On The Security Group Strategy

With China's imminent entry of WTO, the date for opening of China's securities business to the outside world is approaching. However, compared with those renowned foreign securities companies, China's securities companies are characterized with poor economy of scale, insufficient competitiveness, etc.According to the economy of scale theory of enterprise economics & modern enterprise management (organizational structure),coupled with the status quo of China's securities industry, this thesis holds the point of view that in order to implement the collectivization strategy, China's securities companies must resort to the fundamental measure of having controlling shareholding and realize the transition of organizational structure from head office-filiales system to parent company-subsidiaries system as major group skeleton.In implementing the collectivization strategy, it would be appropriate to set up organizational structure in types of linear function mainly based on setting up shareholding companies. In addition, an internal control system must be established in terms of separation of duties, mutual balancing and close monitoring etc.In terms of financing choices for securities companies to carry out the collectivization strategies, securities companies should actively using new types of financing instruments like going public, issuing bonds, merging & acquisition etc. and making use of various short-term financing instruments Securitiescompanies may directly go public or buy a shell company to do so. Meanwhile, during the implementation of collectivization strategy, they have considerable room to raise funds by way of issuing bonds. Owing to the fact that bonds should be honored upon maturity, reasonable debt scale and repayment term should be fixed according to the current conditions and the development trend of securities companies as well as securities markets. Whereas, as one of the financing instruments, merge & acquisition among securities company is deemed as flexible, speedy and cost-saving and is regarded as essential instrument in carrying out securities companies' collectivization strategy in China.In order to guarantee the economic benefit and control risk after implementing collectivization of securities companies, it is necessary to establish a relative investment principle in terms of diversity, kernel competition ^ degree of association and risk-control. Based on innovation of traditional investment instruments like brokerage, underwriting, and self-trading, securities companies should actively participate in new fields like merge & acquisition; asset management, investment fund, futures and investment consultancy to expedite the internationalization progress.The evolvements of large overseas securities companies have proved that it is essential that merge & acquisition is fundamental for securities companies in their collectivization and strengthening of competitiveness. Securities companies should select proper partners according to their own strategy and objective in theprocess of merge and acquisition.. Whether securities companies can realize the expected enhancement of efficiency after their implementing of M&A strategy is mainly subject to whether they could thoroughly restructure and effectively reform the assets that are being merged or acquired in terms of the organizational structure, management system, personnel arrangement, business activities, corporate cultures so as to bring them into the management of and reach integrity with the whole group.Owing to the fact that the collectivization strategy of our securities companies still stays in theoretic research and probing stage, the main issue discussed in this thesis could not supported by any actual case as investigation material in China, which is sure a great pity. Nevertheless, it is still necessary to supplement relevant cases for investigation with the continuous deepening of the collectivization process for China's securities companies.