ABSTRACT
This chapter examines strategic management in financial intermediaries. One of the most important of an intermediary’s strategic decisions is choosing its organisational structure. A second, equally important challenge is preparing the firm to respond to future changes-either in its markets or in the technology it might employ. The chapter first outlines the factors affecting profitability when intermediaries consider whether their organisational structure might better be that of a multiproduct or a specialised firm. Next, the chapter examines economic issues that arise in adapting to changing markets or to technological change. Third, the chapter outlines the basic economics of intermediary operations. Finally, the chapter develops a model explaining how balancing expected profitability against risk can be studied.
