Charles Scwab Corporation

Group 5

Animesh Patel

Aprajita Singh

Gyan Sinha

Rahul Bansal
 Agenda

1. Aalternatives views

2. IT issues

3. Online trading services

4. Who was smart

5. Learning

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 What alternatives did David Pottruck have just before January 15, 1998? As
David Pottruck, would you cut prices on January 15, 1998?

 Mr. David Pottruck had become increasingly uncomfortable with the distinction David, would recommend we suggest the price cut offer internet trading at
29.95$. because of Schwab’s performance in the last 3 years. due to
in service that was created by eSchwab product, and wanted to do away with the
pressure on them to take aggressive action in the internet trading market.
distinction between eSchwab & regular schwab and offer all customers low
priced internet trending with full complement of Schwab's customer service
The Internet Market - No internet users worldwide has been
option.
continuously growing.
 Mr. David have three alternatives way :- ( Ref Table B) Schwab's Performance –
 A. 19.95$ - Internet trading with full service. His main competitors in this price • Revenues were projected to be 2.3 billion, and the projected net income
range would have been DLI direct and E*Trade. but the balance of their superior was 270 million by end of 1997.
• Customer accounts were projected to reach 4.8 million, up 20% from
customer service & product offer , schwab did not want to enter a price war with
1996.
the bar-bone players offering the service at 8$ • Customer’s internet in the comfort of “self-directed" investment has
 B. 29.95$ - Internet trading with full service. However, this approach might have been continually growing.
cost the firm dearly , their initial estimations projected a hit of 125$ million in
revenue. this would have meant less money brand toey to invest in marketing The Decision on Whether to Take Action - Customer response to
and advertising to build there brand to compete with their competitors.
Schwab’s internet trading capacity was strong- in one year period prior to
Dec 1997, Schwab’s online account had frown by 94%
 C. 39.95$ - Start with this price initially and then reduce to 29.95$, because
Schwab's history of Technology Innovation - Schwab pioneer use
39.95$ offered less price elasticity. tech by launching many products that used the latest available technology.
they often felt pride in describing themselves as a technology company that
happened to be in the final service sector

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 What were the key IT issues in front of Dawn Lepore?

 There is strength in system capacity to handle the projected increase in online trading if it were to offer
29.95$ internet trading to all of its customers. Even with the growth of the online business, Schwab's
system available had reminded constantly at 99.2% over the past two years.

 IT issues in Dawn Lepore are below:-

 The number of internet users worldwide has been continuously growing.
 Revenues were projected to be 2.3 billion & projected net income was 270 million by end of 1997
 Customer internet in the comfort of "self-directed" investment has been continuously growing.
 customer accounts were projected to reach 4.8 million up 20% from 1996
 customer response to Schwab's internet trading capability was strong.
 Schwab has been a pioneer in the use of technology by launching many products that used the latest
technology. plans" and schedules. 4
 What is your opinion on their being a late entrant in the online trading services
market? Did they do the right thing?

 In spite of them always being an innovator when it comes to technology, I would consider them a late entrant in
embracing the ever-growing market of online trading services. due to this late entry, they could not gain the advantages
of setting the price standard while it was still growing.

1. Revenues were projected to be 2.3 billion and the projected net income was 270 million by end of the year 1997.

2. Customers' accounts were projected to reach 4.8 million, up by 20% from the year 1996.

3. Customers’ response to Schwab's internet trading capability was strong -in one year period prior to year Dec 1997, Schwab's
online account had grown by 94%

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 Out of the two companies (Charles Swab and Merrill Lynch), who was
smart? Why?
 Mutual funds - Charles Schwab easily gets the win here for having a wider selection of no-transaction-fee mutual funds. To be fair, Merrill
Edge offers plenty of commission-free mutual funds as well.

 Trading Charges and commissions fee - Charles Schwab is definitely a trailblazer in making stock trading more affordable for the average
individual investor. Charles Schwab is a leader in low fees and has helped drive down commissions across the industry. The company was
the first mainstream online broker to eliminate commission fees for online stock trades. Most competitors have since followed suit --
including Merrill Edge.

 Research report and benefit - Charles Schwab provides research and updates from Credit Suisse, Schwab proprietary ratings and research,
and news and reports from S&P, Reuters, and others. It also offers free Morningstar research reports for individual stocks. That's a major
selling point for those who prefer to pick individual stocks. Merrill Edge had 14k brokers and 600 professionals in it research group in 1997.
Merrill Edge customers get access to research and investment tips from Morningstar, S&P Capital IQ, and its own BofA Merrill Lynch stock
analysts. Those are just a handful of the benefits clients can expect.

 As per us, Charles Schwab is smart because They offer a lengthy list of mutual funds you can buy without paying a transaction fee on
the trade. Lowered minimum investments on many popular mutual funds through its OneSource™ platform also make it a top pick
for new investors. And the ability to buy fractional shares and invest in non-U.S. stock markets can be major perks for many people.

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 What is the learning from the case?

 Strengths:- Most popular discount brokerage company, empowers its customers by offering them all the information that they would
need to make investment decisions, very low operating costs, relationships with its customers, and launches advertising campaigns
regularly.

 Weaknesses:- Unable to shed its image as a discount brokerage firm, not having a large presence in emerging markets and advertising
campaigns increase the operating costs of the company.

 Opportunities:- It’s the largest company that provides financial services. This is despite the fact that the company focuses on
developed markets. and the American population provides the company with many growth opportunities. This is because it would
increase the number of retirement services that the company offers. This would improve the profitability of the company.

 Threats:- Reduced investor confidence threatens to lead to the total collapse of the company. During the global financial crisis, few
investors were willing to commit funds to the financial markets. Technology has revolutionized the provision of financial services.
There is increased competition in the financial services sector.

 Corporate-Level Strategy:- A company may decide to concentrate on a single business to improve its long-term profitability. In
addition, a company may use vertical integration or diversification to improve its long-term profitability. Charles Schwab uses vertical
integration to improve its long-term profitability. Throughout its history, the company has used mergers and acquisitions of other
companies in the industry to improve its long-term profitability.

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Thanks