CASE OVERVIEW
 Primary Business Segments
• Investor Services
• Advisor Services
• Corporate & Retirement
Services
Multi Channel Presence
Pioneered the concept of
Discount Brokerage firm
Known for Product and Service
Innovations
• OneSource – No Transaction
Fee Mutual Fund Supermarket
• Equalizer – DOS based
Electronic Brokerage Channel
•TeleBroker – Automated
Brokerage Phone Service
•StreetSmart (Windows Based)
•Well constituted IT Department
•No Outsourcing
•1300 Full time Employees
•70% of its IT Staff were baby-
boomers (unusual!)
•Regular Investment in
Technology and IT Infrastructure
•Decision: Whether to launch an
integrated brokerage solution or
not?
•Pricing- $39.95 or $29.95?
•Cannibalization cost: $125mn
•To stop heavy traders from
migrating to deep discount online
brokers
 As David Pottruck, would you cut prices on January
15, 1998? What alternatives did he have?

• Yes, we would recommend providing an Internet based

integrated solution and lowering the prices to $29.95 because

– Online Brokerage Accounts are projected to grow to 14.4mn (480%) by

2002
– Rise in number of online brokerage players (1560 in 1996)
– Heavy increase in Price sensitive customer segment
– These customers wanted to take the trading decisions by themselves
– They appreciate more value-added products and services at a decent
premium
– To prevent cannibalization of business from 20% traders who accounted
for 80% of revenues
– Can use existing branch network to build credibility
 What is your opinion on Merrill Lynch being a late
entrant in the online trading services market? Did
they do the right thing?
• No, they lost substantial business opportunity because
of entering late

– Schwab’s online accounts as a % of total accounts soared from 8.8%

(1995) to 25% (1997)
– Schwab’s assets in online accounts increased from 12.82% (1995) to
22.84% (1997)
– DLJdirect had made a significant presence in Online Brokerage space by
foraying into it at the right time
– The market was becoming more price sensitive and with increasing
Internet penetration, the number of customers has been increasing
– Down the line it is set to become a business of volumes
Thank You