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    Charles Schwab Corporation (A) Group - 10

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    risheek sai
    Charles Schwab Corporation is a leading online brokerage firm based in San Francisco. It was the first discount brokerage firm established in 1975. Some key points: - It has $354 billion in total customer assets and generates $2.3 billion in annual revenue primarily from online and traditional brokerage services. - The document considers integrating internet trading services at a common price point of $39.95 per trade to increase market share while maintaining its brand of excellent customer service. - Any strategy needs to minimize cannibalization of existing services, support ongoing infrastructure upgrades, and smoothly transition existing customers to the new pricing model.

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    Charles Schwab Corporation (A) Group - 10

    Uploaded by

    risheek sai
    31 views14 pages
    Charles Schwab Corporation is a leading online brokerage firm based in San Francisco. It was the first discount brokerage firm established in 1975. Some key points: - It has $354 billion in total customer assets and generates $2.3 billion in annual revenue primarily from online and traditional brokerage services. - The document considers integrating internet trading services at a common price point of $39.95 per trade to increase market share while maintaining its brand of excellent customer service. - Any strategy needs to minimize cannibalization of existing services, support ongoing infrastructure upgrades, and smoothly transition existing customers to the new pricing model.

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    Charles Schwab Corporation is a leading online brokerage firm based in San Francisco. It was the first discount brokerage firm established in 1975. Some key points: - It has $354 billion in total customer assets and generates $2.3 billion in annual revenue primarily from online and traditional brokerage services. - The document considers integrating internet trading services at a common price point of $39.95 per trade to increase market share while maintaining its brand of excellent customer service. - Any strategy needs to minimize cannibalization of existing services, support ongoing infrastructure upgrades, and smoothly transition existing customers to the new pricing model.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    31 views14 pages

    Charles Schwab Corporation (A) Group - 10

    Uploaded by

    risheek sai
    Charles Schwab Corporation is a leading online brokerage firm based in San Francisco. It was the first discount brokerage firm established in 1975. Some key points: - It has $354 billion in total customer assets and generates $2.3 billion in annual revenue primarily from online and traditional brokerage services. - The document considers integrating internet trading services at a common price point of $39.95 per trade to increase market share while maintaining its brand of excellent customer service. - Any strategy needs to minimize cannibalization of existing services, support ongoing infrastructure upgrades, and smoothly transition existing customers to the new pricing model.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 14

    Charles Schwab Corporation

    (A)
    GROUP - 10
    • Aaruni Khare • Ria Tyagi
    • Kailash K • Divyansh Gupta
    • Nirjhar Mukherjee • Jarnendu Reang
    • Harsha Srivastava • Ronanki Sai Kumar
    Company Background
    • Based in San Francisco and launched in 1975
    • First discount brokerage firm after SEC
    • Technology oriented company
    • Differentiation point is innovation and excellent customer service
    • Firm’s founding proposition was that customers’ shouldn’t have to
    choose between price and service
    • Total customer assets $354 bn
    • Total revenue $2.3 bn; Market Leader in Online Brokerage
    • 40% employee shareholder
    • No immediate threat to business
    • Schwab was trading at 4.1 times its revenue
    • Risk taker – Spent $500K to bring back-office software in-house at a
    time when net worth was $500K
    Primary Business Segments

    Offline Trading Internet Trading


    Services Services

    Mutual Funds Corporate and


    Online Supermarket Retirement Services

    • Multichannel presence
    • First to come up with the concept of discount brokerage firms
    • Known for innovation in technology and reliable customer service
    • Internet Trading Services accounts for 25% of revenue
    Examples of Innovative Products
    • One Source: No transaction fee mutual fund “supermarket”. Number
    three position among direct mutual fund distributors
    • Equaliser: DOS based electronic brokerage channel. 800 households
    still used Equaliser in 1997
    • TeleBroker: Automated brokerage phone service. In 1997 it accounted
    for 13% of Schwab’s trading volume
    • Voice Broker service: Speech recognition program to check stock
    quotes and mutual fund prices. Augmented the telephone channel
    • StreetSmart: Windows based trading software
    IT Department
    • Well constituted IT department
    • No outsourcing
    • 1300 full time Employees
    • Divided into two functional areas – corporate projects and individual
    enterprises (electronic brokerage, retail, etc.)
    • 70% of IT staff were experienced baby boomers (unusual)
    • Regular investment in IT and innovations
    • Heavy investment in training IT staff $200 per member
    • Highly reliable IT structure; no outage
    Schwab’s IT Architecture
    • 7 Mainframes • Middleware servers
    • 2 Data centers • Web servers
    Internet Trading
    • Internet is a growing industry with a rapid adoption rate
    • Projected Growth in Online Brokerage accounts: 3 million to 14.4
    Million by 2002
    • 60 internet trading firms by 1997
    • Competition from deeply discounted internet trading firms, with
    prices as low as $8 per trade, e.g. LOMBARD, E*trade
    • Lower commissions implies higher trading volume
    • Two internet trading services chargeable at:
    • $64 per trade – full customer service support
    • $29.95 per trade – 1 service call free; email support
    • 4.8 mn total active Schwab Customer accounts with customer assets
    of $354 billion
    • Market Leader: 1.2 mn online Schwab Customer accounts (100%
    growth from 1996) accounting for $81 bn worth customer assets
    Decision in Consideration

    • Integrate internet trading services? If yes, what should be the price


    point?
    • Pricing: $29.95 or $39.95 ?
    • How to reduce the impact of cannibalization costs?
    • How to stop heavy traders from migrating to deep discount online
    brokers?
    • Do the existing resources support change in strategy?
    Options

    • Provide discounted service 29.95 per trade to all users


    • Maintain status quo: Continue with existing pricing for online services
    • Offer internet trading with current customer services at $19.95 per
    trade to compete with DLJ direct and E-trade, rebrand it without the
    Schwab name. increase E.Schwab price to $39.95 per trade and
    provide full customer service
    Evaluation Criteria

    • Potential change in market share


    • Profit margin
    • Cannibalization costs
    • Long-term growth potential
    • Alignment with organizational principles
    • Maintaining brand image
    • Supporting infrastructure and resources
    Business Strategy (1/2)
    • Proposed Strategy: Integration of internet trading services at common
    price point of $39.95 per trade. All users will have full access to
    customer service under this plan

    • Reasons:
    ▫ Internet trading is a growing industry with online brokerage
    accounts increasing from 3 Million to 14.4 Million by 2002
    ▫ Capture larger market share and increase revenues through
    increased trading volume
     Trading volume doubled with the launch of eSchwab’s $29.95
    plan
     Yearly target of 25000 applicants achieved within 2 weeks of
    launch
    ▫ Competitive industry tilting towards price reduction
    ▫ Market leaders with philosophy of innovation and unparalleled
    customer service
    ▫ Brand personality of risk takers and pioneers
    Business Strategy (2/2)
    • Implementation:
    ▫ Minimize impact on profit margins by offsetting cannibalization loss
     Tweaking commissions on offline services and other products
    such as OneSource
     Differentiate offline services by increasing offerings, e.g.
    introduction of advisory services based on data analytics
     Will be offset in the long-term through increased trade volume
    ▫ Migrate all of the customer base for $64 internet trading plan to
    e.Schwab smoothly; prevent cannibalization from competition
    ▫ Delay action plan till commission servers are upgraded or provide
    additional support to expedite process if possible
    IT Strategy
    • Commission server: Delay proposed action plan to work on the
    commission servers or add resources to expedite the work on the
    servers.
    • Infrastructure: Has sound IT infrastructure, capable of handling
    planned and unplanned outages
    • Data processing capacity: Has sufficient processing power to
    accommodate increase in traffic
    • Data integration & sharing with customer service branches: The
    customer data of e.Schwab accounts must be made accessible to
    customer care executives at Schwab centres, Telephonic centres etc.
    This may require front end interface integration with back end data.
    THANK YOU!

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