In 1971, Charles Schwab was incorporated as a small traditional securities broker. In 1975, the U.S. Securities and Exchange Commission (SEC) began to implement a bargaining commission system in securities transactions. Charles Schwab seized the opportunity and positioned itself as a discount broker that provided low-price services to customers and achieved initial development. In 1979, the company realized that computerized trading systems would become the mainstream of the industry, and therefore invested in the establishment of automated trading and customer record-keeping systems. At this time, the company's slogan was to become "America's Largest Discount Broker." In the early 1980s, mutual funds began to gain widespread recognition from American investors and became a convenient tool for diversifying risks. Charles Schwab began to incorporate fund business, which was highly technically related to the brokerage business, into the company's main business. In 1987, Charles Schwab's shares were listed on the New York Stock Exchange. At the end of 2001, the company's market value was $21.6 billion.
In the mid-1990s, with the rise of the Internet, Charles Schwab boldly foresaw that the Internet would become an important platform for large-scale integration of small and medium-sized scattered customers. Therefore, it took the lead in the industry to develop an Internet online trading system. Invest heavily. Since then, Charles Schwab has bundled its traditional brokerage and fund businesses on the high-speed Internet train. The entire company's performance has grown by leaps and bounds, and it has quickly become the largest online securities trader in the United States. Currently, the company manages more than $860 billion in assets for 7.8 million clients.
In the 10 years from 1990 to 2000, Charles Schwab's return on investment for shareholders has been among the top five of the Fortune 500 companies in the United States. The company's main operating indicators, such as customer assets, main business income, and net profit, all have compound annual growth rates between 25-30%. Charles Schwab has become a success story in the financial services and e-commerce industries. Although after the U.S. Internet bubble burst in 2000, the company's performance declined sharply in 2001 and 25% of its employees were laid off. However, the difference between Charles Schwab and other "cash-burning" Internet companies is that the company's online financial services The business has always had a strong cash flow fundamentals. The question facing Charles Schwab is how to build on its current scale amid increasing competition in the discount brokerage business and an overall downturn in securities trading. Currently, the company's management's response strategy is to add a full range of customer consulting services to its low-cost discount brokerage to build its customer-centric service brand to attract customers.
The success of Charles Schwab lies in its long-term implementation of the corporate strategy of "market segment integration". This strategy is characterized by the concentration of main business, and the subdivided businesses that constitute the main business are highly related in terms of technology, market and management. This is obviously different from the diversified operation of multiple business units, because there is generally no correlation between diversified business units, or the correlation is very poor. Tactically, the implementation of the "market segment integration" strategy is mainly to continuously explore the personalized needs of customers, conduct segmentation and sorting, and form a company's customer base structure, and then design corresponding personalized products according to this demand structure. product. Under this strategy, the expansion of the company's scale lies in the organic integration of a series of highly related market segment businesses. The competitive advantage of the "market segment integration" strategy lies in the fact that market segment integration is a segmentation and deconstruction force of the standard product market, because the characteristic of standard products is to smooth and blur the personalized demand structure of the customer group. .
From the perspective of customer introduction, the Internet online trading system is the key basic technology platform for Charles Schwab to achieve business integration. In 1999, 68% of customer business traffic was completed through the Internet online transaction system, accounting for 24% of the total online transaction volume in the United States. The characteristic of the Internet online trading system is that a fully personalized segmented service platform is integrated in a low-cost manner to provide customers with "complete varieties, low prices and high quality". Since 1994, the company's online trading commission rate per lot has been decreasing at an annual rate of 9%.
From the perspective of service content, the company's securities brokerage, market making and self-operation, funds, asset management and consulting services are highly intrinsically related. On the one hand, as a market maker, the securities trading flow can be completed through its own trading seat. On the other hand, the securities trading flow of its funds can also be completed through its own trading seat. In the main business income structure of Charles Schwab, brokerage commission income accounts for 48%, market-making spread income accounts for 12%, fund business income accounts for 19%, and in addition, interest spread income generated from the utilization of client assets accounts for 18% .
The above service content is suitable for integration on the Internet platform because of the high similarity of their client services. They all need to dynamically manage customer accounts, keep records of customer transactions, provide customers with transaction security, timely information services and consulting guidance, etc. These can all be accomplished using a unified computer-Internet system. The highly integrated nature of this computer-Internet platform for similar businesses has enabled the rapid development of Charles Schwab's fund and asset management businesses.