Charles Schwab

Charles Schwab

From its conception, Charles Schwab & Company's exploratory innovations and customer-centered orientation lead to massive company growth. Although this momentum seemed unstoppable, 2000 brought shrinking share prices in the U.S. This caused online trading at Schwab to drop by 55%, and decrease revenue, net income, and its stock price. Refusing to gracefully bow out, Charles Schwab and his co-CEO are addressing the need to reverse the decline, rejuvenate growth, and attain a profit margin of 12% or better.

There are many issues to consider when attempting such an ordeal. For instance, the high industry concentration needs to be recognized, along with its accompanying factors. In 2002, there were 261 NYSE firms, with the 10 largest accounting for 59% of the gross revenue in the industry. Schwab & Company should also consider customer's increasing needs and preferences. As the industry changes, so does the wants of clients. Also, Schwab needs to consider its independent affiliates, and how their attitudes may affect the firm's name and performance. In addition, market leader loyalty needs to be scrutinized to allow a close comparison between cost of entry and worthwhile financial compensation.

Schwab & Company has a number of available options to help achieve their goals. One thing Schwab could do is focus more on deregulated practice, focusing mostly (if not completely) on their original brokerage group. The industry is flooded with brokerage firms, but Schwab has good name recognition in the discounter's area. Other areas, though not impermeable, are getting increasingly more difficult to penetrate, furthered again by customer loyalty. S&C is attempting to follow their customers from one area to another and they are spreading themselves too thin. Instead of splitting attention, set focus to the discounter area. Although you may lose aging customers to more recognized long term firms, you will pick up new clients as they come of age and succumb to curiosity. So, S&C can lower unnecessary headcount, without harming company value, convert long term assets into a more liquid currency, and set focus on single industry segment innovation. However, they may miss untapped opportunities and the wealth that comes with them. Also, Schwab name loyalty may carry over from low-end needs into other areas (financial consulting, high dollar investments,