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GRADUATE SCHOOL OF BUSINESS
STANFORD UNIVERSITY
CASE: SM-35
DATE: NOVEMBER 16, 1999
CHARLES SCHWAB & CO. INC. IN 1999
It may sound simple, but the real key is anticipating what kinds of products and services investors are going to want. Like Wayne Gretsky, we want to skate where the puck is going to be.1
Charles Schwab, 1998
With the June 1, 1999 edition of the Wall Street Journal spread before him, Dave
Pottruck, president and co-CEO of Charles Schwab Corporation (CSC), contemplated a piece of news that was about to send shock waves through the brokerage community. The newspaper had just announced Merrill Lynch’s decision to launch online trading on December 1st, 1999.
Customers at Merrill Lynch would be able to trade online for $29.95/trade or, for a minimum annual fee of $1,500, make as many trades as they wanted. Now that Merrill Lynch had joined the online trading revolution, Pottruck wondered, how would this affect Charles Schwab & Co.,
Inc. (Schwab), and what should the company do in response?
COMPANY STRUCTURE
As of 1999, Charles Schwab & Co., Inc. was CSC’s principal subsidiary.2 Schwab provided securities brokerage and related financial services to 6.1 million active customer accounts. The company had 304 branch offices in 47 states as well as offices in Puerto Rico, the
1
2
Rebecca McReynolds, "Doing it the Schwab Way,” USBanker, July 1998, p. 47.
Other subsidiaries included Charles Schwab Europe, (CSE) a retail securities brokerage firm in the U.K., Charles
Schwab Investment Management (CSIM), the investment advisor for Schwab’s proprietary mutual funds, and
Mayer & Schweitzer (M&S), a market maker in Nasdaq and other securities providing trade execution services to broker-dealers and institutional customers.
Margot Sutherland and Kelly DuBois prepared this case under the supervision of Professor Robert Burgelman as the basis for class discussion rather than to illustrate either effective or ineffective handling of
STANFORD UNIVERSITY
CASE: SM-35
DATE: NOVEMBER 16, 1999
CHARLES SCHWAB & CO. INC. IN 1999
It may sound simple, but the real key is anticipating what kinds of products and services investors are going to want. Like Wayne Gretsky, we want to skate where the puck is going to be.1
Charles Schwab, 1998
With the June 1, 1999 edition of the Wall Street Journal spread before him, Dave
Pottruck, president and co-CEO of Charles Schwab Corporation (CSC), contemplated a piece of news that was about to send shock waves through the brokerage community. The newspaper had just announced Merrill Lynch’s decision to launch online trading on December 1st, 1999.
Customers at Merrill Lynch would be able to trade online for $29.95/trade or, for a minimum annual fee of $1,500, make as many trades as they wanted. Now that Merrill Lynch had joined the online trading revolution, Pottruck wondered, how would this affect Charles Schwab & Co.,
Inc. (Schwab), and what should the company do in response?
COMPANY STRUCTURE
As of 1999, Charles Schwab & Co., Inc. was CSC’s principal subsidiary.2 Schwab provided securities brokerage and related financial services to 6.1 million active customer accounts. The company had 304 branch offices in 47 states as well as offices in Puerto Rico, the
1
2
Rebecca McReynolds, "Doing it the Schwab Way,” USBanker, July 1998, p. 47.
Other subsidiaries included Charles Schwab Europe, (CSE) a retail securities brokerage firm in the U.K., Charles
Schwab Investment Management (CSIM), the investment advisor for Schwab’s proprietary mutual funds, and
Mayer & Schweitzer (M&S), a market maker in Nasdaq and other securities providing trade execution services to broker-dealers and institutional customers.
Margot Sutherland and Kelly DuBois prepared this case under the supervision of Professor Robert Burgelman as the basis for class discussion rather than to illustrate either effective or ineffective handling of