Charles Schwab & Co
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Introduction:
This case introduces Charles Schwab & Co the USs largest financial services providers of securities brokerage, wealth management, and related financial and investment. It was founded in 1975 by Charles Schwab as the first discount brokerage after the US Securities and Exchange Commission (SEC) eliminated the fixed-rate commissions. The company was purely brokerage service provider and gradually included many other services like, analyzing financial statements, providing advice, and developing high-tech tools to trade. The case discusses many topics about the history of Schwab Co during those years.
Main Points:
Company Innovation: During the companys age, technology played a huge part in its survival. It had to go with the new trend to provide many alternative methods to customers to trade, attract and target more customers, and utilize its location in the silicon-valley. Schwab set targets to make use IT. It was aiming to have, high-tech, high-touch, easy-to-use solutions.
Initially, Schwab launched a service extension using regular phones. The step was successful to ease up the process of trading remotely. Unfortunately, the process was lengthy and time consuming. Later in 1985, the company released Equalizer to trade online using special network access via modem connection. The process was successful. Everyone was pleased and added lots of benefits. Few years later, the company launches another service which was automated voice-response telephone brokerage service.
Schwab Co. kept releasing every few years another application, until it has acquired a famous one (CyberTrader) in 2000. It has enhanced it locally by embedding it with an in-house produce newer version of StreetSmart Pro.
Striving in Business: Schwab Co. was making profits in many times and losing in many other times. In 1982, had generated $54 million in revenues which led BankAmerica to acquire it for $57 million. Due to some internal conflicts, Schwab bought back his company with $280 million just 3 years later the initial acquisition. It went public just few months later selling its shares for $450 million. The stock price was impacted by the loss of the company made in the first quarter of 1998. In six months ending June 1998, it declined by 20% from $40/share to $33/share.
Due to many IT shifts in Schwab, the company made more profits cutting huge costs and increasing the number of online customers by end of 1998.
Due to the Internet bubble burst, Schwab has run into huge financial problems which were cause of the decline of the whole market along with the impact of the World Trade Center in New York. The companys stock has declined by 79% from $26.06 to $7.83 ending