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Published by: Asia Case Research Centre, The University of Hong Kong
Published in: 2000
Length: 16 pages
Data source: Field research

Abstract

In 1996, Charles Schwab Inc (Schwab) pioneered online trading, and experienced phenomenal growth by creating a whole new market for its products and services. In doing so it significantly altered its business model. The ease with which information could be obtained over the web meant that investors could bypass the traditional brokers (dis-intermediation) and trade on their own at a much cheaper price. This lured not only many new traders to the market but also many new competitors. Price wars followed, which shrunk margins. In order to retain its dominant position and continue growing, Schwab had to find other ways of expanding the market base. It began to re-intermediate by offering more products and services through multiple distribution channels, especially the web. It also began to expand its international operations, moving into Hong Kong, UK, Canada, and Latin America. But some of its competitors were already starting to do the same. This case outlines the important role information technology has played in Schwab''s development. It specifically focuses on how Schwab successfully created a new market of customers by pioneering the establishment of web-based trading and how this, in turn, has led to new challenges and opportunities. Students will learn how the Internet has transformed the brokerage industry and led to both dis-intermediation and re-intermediation effects. Students are asked to evaluate Schwab''s strategy in the face of rising competition.
Location:
Industry:
Other setting(s):
1998

About

Abstract

In 1996, Charles Schwab Inc (Schwab) pioneered online trading, and experienced phenomenal growth by creating a whole new market for its products and services. In doing so it significantly altered its business model. The ease with which information could be obtained over the web meant that investors could bypass the traditional brokers (dis-intermediation) and trade on their own at a much cheaper price. This lured not only many new traders to the market but also many new competitors. Price wars followed, which shrunk margins. In order to retain its dominant position and continue growing, Schwab had to find other ways of expanding the market base. It began to re-intermediate by offering more products and services through multiple distribution channels, especially the web. It also began to expand its international operations, moving into Hong Kong, UK, Canada, and Latin America. But some of its competitors were already starting to do the same. This case outlines the important role information technology has played in Schwab''s development. It specifically focuses on how Schwab successfully created a new market of customers by pioneering the establishment of web-based trading and how this, in turn, has led to new challenges and opportunities. Students will learn how the Internet has transformed the brokerage industry and led to both dis-intermediation and re-intermediation effects. Students are asked to evaluate Schwab''s strategy in the face of rising competition.

Settings

Location:
Industry:
Other setting(s):
1998

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