Essay on Charles Schwab Case

1796 Words May 15th, 2005 8 Pages
Charles Schwab, a Stanford MBA, founded Charles Schwab & Company in 1971 in California. The company quickly established itself as an innovator. A defining moment came with the 1975 "May Day," when Schwab took advantage of the new opportunities deregulation offered. Schwab would not provide advice on which securities to buy and when to sell as the full-service brokerage firms did. Instead, it gave self-directed investors low-cost access to securities transactions. From the late 80s to the early 90s, before the commercial use of the Internet, Schwab used technology to increase efficiency and quality and expand its services. Schwab's innovations harnessed technology to the solution of business problem. As Schwab's President and co-CEO David …show more content…
Notable limited-service discount brokers include Charles Schwab, Quick & Reilly, and Fidelity Investments.

In the mid-1990s, the growing use of the Internet induced online brokers to launch Internet trading. In the years since, several discount brokers, as well as pure electronic brokers, entered the new business segment and fought aggressively for market share.
The Internet offered such firms essentially two technological advantages.
First, online brokers can provide less expensive trade execution than their offline counterparts. Placing orders online allows investors to circumvent personal brokers, reducing transaction costs. As a large number of investors established Internet connections, the web became a ubiquitous network that can be used as a communication channel between a brokerage firm and its customers. Online trading also lets brokerage firms automate their order placement process, thereby economizing on personnel time and effort.
Secondly, the Internet contributed to the emergence of online trading by becoming a medium for the transmission of information. Large groups of consumers became increasingly sophisticated and more able to direct their own financial affairs without the help of a personal broker. The Internet facilitates the diffusion of information, eroding one of the main advantages of professional brokers:

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