Charles Schwab

In early 2000`s Schwab faced mainly three type of challenges those centered around technology, competition, and mismanagement. During the dot com boom of the late 90’s technology was at the forefront of business growth. For the first time personal computers were financially attainable to the general public. Coupled with the widespread availability of fast networking systems, there was a relatively inexpensive entry point for competitors into the marketplace. Following the commoditization of basic brokerage trades due to the passing of the Gramm-Leach-Bliley Act, Schwab began losing its edge as the low cost leader of trades. Companies such as Ameritrade, E*Trade, and TD Waterhouse undercut Schwab’s low prices becoming the cost cutters of the segment. Schwab countered by offering financial services to differentiate themselves from that segment. In doing so Schwab further alienated themselves by becoming too expensive to be a low cost provider, while not offering the full array of the financial services that the full service brokerage houses provided. They were straying from their core competencies as a low cost brokerage house that offered value to its customers. Events in September 2001 had huge influence to economy and financial markets together with many company bankruptcies (Enron, WorldCom, Tyco) in early 2002 investors behavior was changed a lot. Investors started to look more for safe investment rather than high return and started to seek the help of professional advisors more. Analyst saw Schwab branch staff under qualified (they were originally taken as order takers) and necessary to change with more experienced and more expensive financial advisors. As a result company launched an alternative for investment research, Schwab Equity Ratings, and two new advisory services for affluent investors, Schwab Private Clients and Schwab Advisor Network ( Robert A Burgelmand ,Philip E Meza ).  The market downturn in 2000 hit the company hard. By the August 2001, the...