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Introduction
Investor confidence is one of the major factors that determine the funds that investors are willing to invest in various sectors of the economy. The current economic conditions determine the confidence of the investors. In addition, the future economic outlook also determines the investor confidence. Favorable future economic outlook increases the confidence of investors.
Prior to the global financial crisis, investor confidence was very high. Investors were willing to invest huge funds in the financial markets. This led to the growth of companies that specialized in the provision of financial services. These companies include stock brokerage firms, insurance companies, and banks. Charles Schwab is one of the companies that existed during this period.
Charles Schwab was one of the most profitable companies that provided financial services. The company specialized in the provision of discount brokerage services. This helped in differentiating the company from other companies that provided financial services. However, the company also faced several problems. These problems necessitated the company to undertake several strategic decisions to improve its competitiveness.
History, Development, and Growth of the Company
One can trace the history of Charles Schwab to 1963. Charles R. “Chuck” Schwab was one of the founders of the company. In 1963, Chuck Schwab formed the Investor Indicator newsletter with the help of two other partners. They incorporated Investor Indicator on April 1971 as First Commander Corporation. First Commander was a subsidiary of the Commander Industries.
The main business activity of First commander was to conduct a broker-dealer business and publish an investment magazine. Chuck Schwab and four others partners decided to buy back the stock of the company from Commander. This facilitated the formation of Charles Schwab & Co., Inc. The company has its headquarters in San Francisco. Brokerage transactions were the main services that the company offered.
The U.S. Securities and Exchange Commission (SEC) helps in the regulation of companies that engage in brokerage services. The SEC is one of the major bodies that determine the growth of brokerage firms. From time to time, the SEC implements various regulations that affect companies that provide financial services.
Soon after the incorporation of Charles Schwab, the SEC implemented several changes that affected brokerage firms. In 1975, the SEC enacted regulation that that increased the flexibility of charges that companies that offered financial services charged its customers.
Several brokerage firms took advantage this directive to increase their commissions. However, Charles Schwab took advantage of this directive to increase its competitiveness. The company established discount brokerage. This was a new type of brokerage. This move enabled the company to attract more customers.
In the financial services sector, service hours determine the number of customers that an organization may serve. Therefore, it is vital for companies to have long service hours. This would enable them to serve more customers. Throughout its history, Charles Schwab has used service hours to increase its competitiveness.
The company has prolonged its service hours on several occasions. In 1978, Charles Schwab prolonged its service hours. This was the first time that a company in the industry had prolonged its service hours. This strategic move enabled the company to attract more customers. This strategic decision helped in increasing the number of customers of the company to more than 40,000.
In 1980, Charles Schwab formed a 24-hour quotation service. This was the first time that a company had established a 24-hour quotation service in the industry. This strategic move enabled the company to increase its customers significantly. It enabled the company to increase its customers to approximately 150,000.
The New York Stock Exchange (NYSE) is one of the major stock exchanges in the world. Therefore, it was vital for Charles Schwab to become a member of this renowned stock exchange. Charles Schwab joined the NYSE in 1981. This enabled the company to trade on various stocks and securities in the stock market.
When Charles Schwab became a member of the NYSE, its clients were more than 200,000. The company was on its way to becoming one of the most popular companies that offered financial services in the U.S.
Technology enables companies that provide financial services to create a network that helps in supporting the activities of companies in this sector. Charles Schwab realized the importance of technology in its growth. In 1979, the company made huge investments in a mainframe that used modern technology. This system enabled the company to automate its transactions.
In addition, the system helped in improving the record keeping of the company. In the 1980s, the company launched several technological solutions that helped in improving the competitiveness of the company. In 1984, the company introduced the ‘Mutual Fund Marketplace.’ In addition, the company launched the ‘TeleBroker’ in 1989.
Launching several technological products helped in establishing the company as a leader in the online investment revolution. Charles Schwab used mergers and acquisitions to maintain its growth. In 2000, the company merged with U.S. Trust. During the same year, the company acquired CyBerCorp, Inc. This enabled the company to improve the quality of services it offers to online traders.
Training Americans on how to be financially fit is one of the most recent campaigns of the company. The company collaborated with the Boys & Girls Clubs of America to teach young people about money management. This helped in improving the visibility of the company in the industry. In addition, it guarantees the future growth and profitability of the company.
This is because the teens are the future customers of the company. Various strategic decisions have enabled Charles Schwab to become a leader in the provision of financial services. The company has more than 300 offices and 7 million client brokerage accounts.
In addition, the assets of the company’s clients are approximately $1 trillion. Various subsidiaries of the company enable it to offer a wide range of financial services to its customers.
Internal Strengths and Weaknesses
Engaging is discount brokerage is one of the factors that has improved the competitiveness of Charles Schwab. Charles Schwab was one of the first companies that offered discount brokerage. The company offered discount brokerage instead of increasing its commission fees due to the SEC regulations that facilitated the negotiation of commission rates.
Other companies took advantage of this directive to increase their commission rates. Therefore, this move helped in improving the image and reputation of the company.
People associate the company with discount brokerage. It is a fact that Charles Schwab is not one of the cheapest discount brokerage in the industry. However, being among the first companies that engaged in discount brokerage has improved the reputation of the company.
It is vital for companies that provide financial services to focus all their efforts on their customers. They should strive to improve the welfare of the customer while making handsome profits. Availability of information determines the investment decisions of customers. It is vital for companies that offer financial services to provide customers with all the information they may need to make sound investment decisions.
Charles Schwab strives to provide their customers with all the information that they may need to make investment decisions. In addition, the company offers its customers various technological tools that enable them to make sound financial decisions.
Empowering customers helps in improving the image and reputation of the customers. It reduces the likelihood of customers making the wrong financial decisions. This improves customer loyalty.
It is vital for companies to strive to form good relationships with their clients. Customer relationships determine the competitiveness of companies. Companies that provide services use several strategies to improve the relationships with their customers.
Forming personal relationships enables these companies to gain the trust of the customers. Charles Schwab strives to form personal relationships with its customers. This enables the company to increase customer loyalty.
Companies in various industries strive to reduce their operating costs. This helps in increasing the profitability of the companies. Companies may use several strategies to reduce their operating costs. Technology is one of the major tools that enable companies to reduce their operating costs. Charles Schwab is one of the companies that use technology to reduce their operational costs.
Throughout its history, the company has implemented various technological tools that have reduced its operating costs. In addition, these technological tools improve the quality of services that the company offers.
Using an online platform is one of the strategies that have enabled the company to reduce its operating costs. It enables customers to place orders without having to visit the company’s offices. Online processing reduces the costs of maintaining the staff of the company.
The perception that people have on a certain company determines its competitiveness. Since its inception, people have perceived Charles Schwab as a discount brokerage firm. This has made it difficult for the company to attract the high-end customers. High-end customers usually prefer full brokerage firms.
This is because they offer personalized services. Despite being a discount brokerage firm, Charles Schwab also offers services that resemble those in full brokerage firms. Therefore, it is vital for the company to use various strategies to attract the high-end customers.
However, the company should ensure that it does not shed its image as a discount brokerage firm. This is because the low-end customers are the major clients of the company. Therefore, losing these customers may have devastating effects on the company.
It is vital for companies that would like to guarantee their future growth and profitability to improve their presence in emerging markets. Saturation of companies and services in developed countries reduces the growth potential of companies in these countries.
Charles Schwab does not have a good presence in emerging markets. The company concentrates its activities in developed countries. Saturation in these markets reduces the growth potential of the company. Therefore, it is vital for the company to improve its presence in emerging markets.
Nature of the External Environment
Online trading holds the key to the future growth of companies that offer financial services. Charles Schwab was one of the first companies that realized the importance of online trading in financial services. However, the revenue that the company gets from online trading has been declining.
Increased competition is one of the major factors that have reduced the revenue from online trading. Companies can easily open online trading platforms. This has increased the number of companies that offer online trading services.
Retirement packages account for a sizeable percentage of the products of companies that offer financial services. The U.S. population is aging. This would increase the demand for various retirement services.
Therefore, it is vital for companies that offer financial services to take advantage of the changing population patterns. This would improve the profitability of the companies. Companies should create several products that target people who are retired.
The global and domestic economic conditions affect the profitability of companies that provide financial services. Slowing of the economy has a negative effect on the growth and profitability of companies that provide financial services. Slowdown of the economy necessitated Charles Schwab to undertake several strategic decisions to safeguard its position.
Investor confidence also determines the profitability of companies that offer financial services. Reduced investor confidence reduces the amount of money that investors are willing to invest in financial markets. In 2008, there was a significant reduction in the investor confidence. People were not willing to invest in the financial markets due to the revelations of problems in the subprime market.
Most people withdrew their investments in the financial markets. Reduced investor confidence had a negative effect on the financial markets. It led to the steady decline of market indicators in various regions. This reduced the profitability of Charles Schwab. Market volatility also determines the profitability of companies that offer financial services. During the global financial crisis, the financial markets were on a steady decline.
Companies that offer financial services operate in a highly regulated environment. The SEC is one of the major bodies that regulate companies that provide financial services. Regulation helps in safeguarding the investments of customers. It ensures that companies do not engage in illegal activities. In addition, it ensures that companies do not exploit their customers.
In 2008, the SEC implemented various regulations to help in safeguarding the investments of customers of companies that offer financial services. However, these measures did not increase the investor confidence. Increased regulation may jeopardize companies that offer certain financial services. Regulation may increase the bureaucracy of the companies.
This may reduce the number of customers who are willing to invest in the companies. In addition, regulation may limit the ability of companies to venture into various markets. This is because companies that offer financial services have to meet stringent requirements to receive licenses to operate in various regions. These requirements prevent companies from engaging in illegal activities.
SWOT Analysis
Strengths
The presence of Chuck Schwab in the management of Charles Schwab is one of the major strengths of the company. Schwab has undertaken several strategic decisions that have helped in developing the company. In addition, he has invaluable experience in the stock brokerage industry. Schwab offers visionary leadership that helps in improving the current and future growth of the company.
Charles Schwab is one of the most popular discount brokerage companies. The company has a very strong brand name. Charles Schwab was one of the first companies that offered discount brokerage services.
Charles Schwab empowers its customers by offering them all the information that they would need to make investment decisions. This helps in improving the image and reputation of the company.
Charles Schwab has very low operating costs. The company uses technological tools to reduce its operating costs. The technological tools also enable the company to improve the efficiency of its activities.
Charles Schwab forms personal relationships with its customers. This enables the company to retain its customers. In addition, it helps in improving customer satisfaction.
Charles Schwab has efficient marketing strategies. The company launches advertising campaigns regularly. These advertising campaigns help in improving the visibility of the company
Weaknesses
Charles Schwab has been unable to shed its image as a discount brokerage firm. This has reduced the ability of the company to attract customers who have a high net worth. Therefore, customers who have a low net worth form the bulk of the company’s customers.
Charles Schwab does not have a large presence in emerging markets. Most of the company’s operations are in developed markets. This limits the future growth and profitability of the company since the developed markets are already saturated.
Charles Schwab engages in expensive advertising campaigns. These advertising campaigns increase the operating costs of the company.
Opportunities
The aging of the American population provides the company with many growth opportunities. This is because it would increase the amount of retirement services that the company offers. This would improve the profitability of the company.
Charles Schwab is one of the largest companies that provide financial services. This is despite the fact that the company focuses on developed markets. Therefore, venturing into the emerging markets would help in improving the future growth and profitability of the company.
Threats
Slowdown of the global economy would reduce the growth and profitability of the company.
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. Therefore, it is vital for the company to undertake several changes that would incorporate new technology regularly. Failure to do so would make the company become irrelevant.
There is increased competition in the financial services sector. Various companies provide online financial services. The ease of opening platforms that enable companies to provide online financial services have increased the number of companies that provide financial services.
Corporate-Level Strategy
Corporate-level strategy guides the strategic decisions of a company. Companies use their corporate-level strategies to create value in their activities. The corporate-level strategy helps in coordinating different activities of the company. Companies use the corporate-level strategy to determine the direction that the organization should follow in the long term.
The corporate-level strategy enables companies to gain a competitive advantage. The corporate-level strategy enables an organization to determine the businesses that the organization to concentrate on to improve its long-term profitability.
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.
Charles Schwab acquired companies that provide online services to improve its ability to provide online financial services. In 2000, the company acquired CyBerCorp. CyBerCorp was a company that provided online financial services.
In 2001, Charles Schwab renamed the company to Cyber Trader. In addition, Charles Schwab enhanced the software of the company. This helped in improving the quality of services of the company.
The inability to capture customers who have a high net worth was one of the major problems of the company. In addition, most customers of the company left the company after their assets reached $500,000. This reduced the profitability of the company. Charles Schwab used vertical integration to capture the high net worth customers.
The company merged with the U.S. Trust. The U.S. Trust was a company that focused on managing the wealth of high-end customers. This strategy enabled the company to increase the number of high-end customers. In addition, it enabled the company to retain customers whose assets reached $500,000. This strategy enabled the company to shed its image as a discount brokerage firm that served low-end customers.
Charles Schwab later sold the U.S. Trust to Bank of America. Advances in technology enabled the company to retain high-end customers. The company used various technological tools to generate model investment portfolios. These portfolios helped in personalizing the financial services of the company.
Technological tools enabled the company to reduce the number of forms of advice. This helped in improving the quality of services that the company offered its customers. In addition, it enabled the company to offer sound financial advice to customers in various locations.
Vertical integration enables Charles Schwab to take advantage of the capabilities of other companies. Retirement-plan services are some of the major products of the company.
However, the company would not have been able to increase its retirement products if it had not acquired other smaller companies that provided retirement services. In 1995, Charles Schwab acquired Hampton Co. Hampton was a company that specialized in the provision of retirement-plan services.
Charles Schwab uses diversification to increase its long-term stability. The company offers a wide range of financial services. These include brokerage of securities, mutual funds, investment advisory services, and banking. In addition, the company also provides retirement services. The growth of online financial services has helped in the growth of the company. In 2003, the company launched the Charles Schwab Bank.
The bank provided home mortgage loans. Schwab Retirement Plan Services, Inc. enables the company to provide retirement services. Subsidiaries of the company enable it to provide a wide range of financial services effectively.
Business-Level Strategy
Business-level strategy helps in identifying the methods that a company would use to compete in a certain industry. Therefore, the business-level strategy determines the competitive strategy of the organization. One of the major differences between business-level strategy and corporate-level strategy is that business-level strategy focuses on only one business.
On the other hand, corporate-level strategy focuses on a wide range of businesses within an organization. Therefore, the business-level strategy enables an organization to manage its business effectively. The business-level strategy ensures that the activities of the business units conform to the corporate-level strategies of the organization.
In addition, business-level strategy enables an organization to develop capabilities that would help in improving the competitiveness of the organization. Business-level strategy also helps in monitoring the industry environment of the company. Some business-level strategies include cost leadership, differentiation, and focus.
Cost leadership is one of the major business-level strategies of Charles Schwab. The company strives to organize its activities in a method that enables it to provide various services at a lower cost. This enables the company to offer various services at very low prices. This strategy enables the company to gain a competitive edge in the provision of financial services.
Use of information technology is one of the major methods that the company uses to reduce its operating costs. Technological tools enable the company to automate various activities. In addition, technological tools enable the company to improve the quality and efficiency of its activities.
Online trading platforms enable companies to reduce their operational costs. They eliminate the need to open branches in various locations. Customers only need an internet connection to access the financial services. E*Trade is one of the major competitors of Charles Schwab. It was one of the first companies to offer its services via the internet only.
This strategy enabled the company to reduce its operating costs significantly. Reduced operating costs enabled the company to offer its services a lower price. The threat posed by the company necessitated Charles Schwab to launch an online trading platform. The company launched ‘eSchwab’ to counter the threat posed by E*Trade. This product enabled the company to provide real-time personalized financial information to customers.
It enabled customers of the company to undertake financial transactions via the internet. In addition, it enabled customers to access financial information via the internet. This strategy enabled the company to reduce its operating costs significantly. Therefore, it could afford to reduce the prices of its services.
Charles Schwab strives to empower its customers. The company offers financial information that helps customers to make sound investment decisions. Offering financial help helps in increasing customer loyalty. In addition, offering financial help enables the company to increase its interaction with customers. The company uses various strategies to show that it is willing to offer financial advice to its customers.
The ‘Talk to Chuck’ campaign is one of the recent advertisements that highlight the willingness of the company to offer financial advice to its customers. In addition, this advertising campaign showed the transparency of the company. It enabled customers to access information about the company.
Organizational Structure
Charles Schwab specializes in the provision of financial services. The company has operations in the United States, Hong Kong, and various European countries. In addition, the company offers online financial services to people around the globe. The company manages financial assets that are worth more than $1 trillion. Charles Schwab offers a wide range of financial services.
These services include banking, mutual funds, and retirement-plan products. Therefore, it is vital for the company to use an organizational structure that would help in managing its activities efficiently. Charles Schwab uses a matrix organizational structure. This organizational structure enables the organization to coordinate its activities.
Charles Schwab has various managers that oversee various functions of the organization. These functions include networking, engineering, sales and marketing, and communication. This organizational structure enables the organization to benefit from the talent of its employees in various functions. The size of Charles Schwab makes it difficult for the company to use only the functional organizational structure.
In addition, the company offers various financial products. Charles Schwab employs a divisional organizational structure to help in the management of various products of the company.
This organizational structure enables the company to manage its banking services, retirement-plan products, and online financial products effectively. In addition, this organizational structure enables the organization to fulfill the needs of various stakeholders quickly.
Charles Schwab uses teams to accomplish various tasks within the organization. This helps in improving the quality of the products of the organization. In addition, the company empowers employees to develop various innovative products that would improve the competitiveness of the company. Empowering employees helps in improving the quality of their services.
Conclusion
Charles Schwab is one of the most popular companies that offer financial services in the U.S. The company has more than 300 offices in various regions around the world. Investing in technology is one of the major factors that led to the success of the company. Investing in technology enabled the company to reduce its operating costs. This enabled the company to offer its services at very low costs.
Charles Schwab is renowned for its discount brokerage services. This image limits the ability of the company to attract high-end customers. The company merged with U.S. Trust to shed this image. The growth of the internet poses several risks to the company.
This is because it has increased the number of the companies that provide online financial services. These companies have very low operating costs. This enables the companies to offer various financial services at very low costs.
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