22 Aug Case 15 Charles Schwab Charles Hill IntroductIon In 1971, Charles Schwab, who was 32 at the time,
Case 15
Charles Schwab
Charles Hill
IntroductIon
In 1971, Charles Schwab, who was 32 at the time, set up his own stock brokerage concern, First Commander. Later he would change the name to Charles Schwab & Company, Inc. In 1975, when the Securities and Exchange Commission abolished mandatory xed com- missions on stock trades, Schwab moved rapidly into the discount brokerage business, offering rates that were as much as 60% below those offered by full com- mission brokers. Over the next 25 years, the company experienced strong growth, fueled by a customer centric focus, savvy investments in information technology, and a number of product innovations, including a bold move into online trading in 1996.
By 2000, the company was widely regarded as one of the great success stories of the era. Revenues had grown to $7.1 billion and net income to $803 million, up from $1.1 billion and $124 million respectively in 1993. Online trading had grown to account for 84% of all stock trades made through Schwab, up from nothing in 1995. The company’s stock price had appreciated by more than that of Microsoft over the prior ten years. In 1999, the market value of Schwab eclipsed that of Merrill Lynch, the country’s largest full service broker, despite Schwab’s revenues being more than 60% lower.
The 2000s proved to be a more dif cult environ- ment for the company. Between March 2000 and mid 2003 share prices in the U.S. tumbled, with the technol- ogy heavy NASDAQ index losing 80% of its value from peak to trough. The volume of online trading at Schwab slumped from an average of 204,000 trades a day in 2000 to 112,000 trades a day in 2002. In 2003 Schwab’s rev- enues and net income fell sharply and the stock price tumbled from a high of $51.70 a share in 1999 to a
C-210
low of $6.30 in early 2003. During this period Schwab expanded through acquisition into the asset management business for high net worth clients with the acquisition on U.S. Trust, a move that potentially put it in competi- tion with independent investment advisors, many of who used Schwab accounts for their clients. Schwab also en- tered the investment banking business with the purchase of Soundview Technology Bank.
In July 2004 founder and chairman Charles Schwab, who had relinquished the CEO role to David Pottruck in 1998, red Pottruck and returned as CEO. Before step- ping down in 2008 he refocused the company back on its discount brokering roots, selling off Soundview and U.S. Trust. At the same time, he pushed for an expansion of Schwab’s retail banking business, allowing individual investors to hold investment accounts and traditional bank accounts at Schwab. Schwab remains chairman of the company.
In 2007–2009 a serious crisis gripped the nancial services industry. Some major nancial institutions went bankrupt, including Lehman Brothers and Washington Mutual. The widely watched Dow Industrial Average Index plunged from over 14,000 in October of 2007 to 6,600 in March 2007. Widespread nancial collapse was only averted when the Government stepped in to support the sector with a $700 billion loan to troubled compa- nies. Almost alone amongst major nancial service rms, Schwab was able to navigate through the crisis with rela- tive ease, remaining solidly pro table and having no need to place a call on Government funds. By 2010–2013 the company was once again on a growth path, fueled by
School of Business, University of Washington, Seattle, WA 98105, June 2013.
84487_case-15_ptg01_hr_C210-C225.indd 210
22/10/13
4:59 PM
expanded offerings including the establishment of a mar- ket place for Exchange Traded Funds (EFTs). Schwab’s asset base expanded at around 6% per annum during this period. The major strategic question going forward was how to continue to grow pro tably in what remained a challenging environment for nancial service rms.
the SecurItIeS Brokerage InduStry1
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.