Charles Schwab & Co., Inc. in 1999 SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Charles Schwab & Co., Inc. in 1999
Dave Pottruck, president and co-CEO of Charles Schwab Corp. (CSC), is contemplating a piece of news in the June 1, 1999 edition of the Wall Street Journal 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 1, 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? Pottruck observes that Merrill Lynch, ETrade, WingspanBank, and Schwab, although competing for similar customers, appeared to be doing so from very different starting points. Pottruck considers the competitive dynamics of the brokerage industry and wonders: How can Schwab maintain its growth trajectory in the face of so many, varied competitors? What other firms might enter the space? How could Schwab protect and grow its existing customer base? Was Schwab getting "squeezed in the middle" or could it create a "category of one?"
Authors :: Robert A. Burgelman, Margot Sutherland, Kelly Dubois
Swot Analysis of "Charles Schwab & Co., Inc. in 1999" written by Robert A. Burgelman, Margot Sutherland, Kelly Dubois includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Schwab Pottruck facing as an external strategic factors. Some of the topics covered in Charles Schwab & Co., Inc. in 1999 case study are - Strategic Management Strategies, Competitive strategy, IT, Networking, Strategic planning and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Charles Schwab & Co., Inc. in 1999 casestudy better are - – wage bills are increasing, cloud computing is disrupting traditional business models, there is backlash against globalization, geopolitical disruptions, central banks are concerned over increasing inflation, increasing transportation and logistics costs, there is increasing trade war between United States & China,
increasing energy prices, technology disruption, etc
Introduction to SWOT Analysis of Charles Schwab & Co., Inc. in 1999
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Charles Schwab & Co., Inc. in 1999 case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Schwab Pottruck, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Schwab Pottruck operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Charles Schwab & Co., Inc. in 1999 can be done for the following purposes –
1. Strategic planning using facts provided in Charles Schwab & Co., Inc. in 1999 case study
2. Improving business portfolio management of Schwab Pottruck
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Schwab Pottruck
Strengths Charles Schwab & Co., Inc. in 1999 | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Schwab Pottruck in Charles Schwab & Co., Inc. in 1999 Harvard Business Review case study are -
Diverse revenue streams
– Schwab Pottruck is present in almost all the verticals within the industry. This has provided firm in Charles Schwab & Co., Inc. in 1999 case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Ability to recruit top talent
– Schwab Pottruck is one of the leading recruiters in the industry. Managers in the Charles Schwab & Co., Inc. in 1999 are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High switching costs
– The high switching costs that Schwab Pottruck has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Low bargaining power of suppliers
– Suppliers of Schwab Pottruck in the sector have low bargaining power. Charles Schwab & Co., Inc. in 1999 has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Schwab Pottruck to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Schwab Pottruck is one of the most innovative firm in sector. Manager in Charles Schwab & Co., Inc. in 1999 Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Schwab Pottruck digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Schwab Pottruck has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Analytics focus
– Schwab Pottruck is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Robert A. Burgelman, Margot Sutherland, Kelly Dubois can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High brand equity
– Schwab Pottruck has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Schwab Pottruck to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Schwab Pottruck is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Schwab Pottruck is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Charles Schwab & Co., Inc. in 1999 Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Schwab Pottruck has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Schwab Pottruck has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Effective Research and Development (R&D)
– Schwab Pottruck has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Charles Schwab & Co., Inc. in 1999 - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Schwab Pottruck has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Charles Schwab & Co., Inc. in 1999 Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Weaknesses Charles Schwab & Co., Inc. in 1999 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Charles Schwab & Co., Inc. in 1999 are -
Interest costs
– Compare to the competition, Schwab Pottruck has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Capital Spending Reduction
– Even during the low interest decade, Schwab Pottruck has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Low market penetration in new markets
– Outside its home market of Schwab Pottruck, firm in the HBR case study Charles Schwab & Co., Inc. in 1999 needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Schwab Pottruck is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Charles Schwab & Co., Inc. in 1999 can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Need for greater diversity
– Schwab Pottruck has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High bargaining power of channel partners
– Because of the regulatory requirements, Robert A. Burgelman, Margot Sutherland, Kelly Dubois suggests that, Schwab Pottruck is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High operating costs
– Compare to the competitors, firm in the HBR case study Charles Schwab & Co., Inc. in 1999 has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Schwab Pottruck 's lucrative customers.
Increasing silos among functional specialists
– The organizational structure of Schwab Pottruck is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Schwab Pottruck needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Schwab Pottruck to focus more on services rather than just following the product oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Charles Schwab & Co., Inc. in 1999, in the dynamic environment Schwab Pottruck has struggled to respond to the nimble upstart competition. Schwab Pottruck has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Charles Schwab & Co., Inc. in 1999, it seems that the employees of Schwab Pottruck don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Charles Schwab & Co., Inc. in 1999, is just above the industry average. Schwab Pottruck needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Opportunities Charles Schwab & Co., Inc. in 1999 | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Charles Schwab & Co., Inc. in 1999 are -
Buying journey improvements
– Schwab Pottruck can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Charles Schwab & Co., Inc. in 1999 suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Better consumer reach
– The expansion of the 5G network will help Schwab Pottruck to increase its market reach. Schwab Pottruck will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Low interest rates
– Even though inflation is raising its head in most developed economies, Schwab Pottruck can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Creating value in data economy
– The success of analytics program of Schwab Pottruck has opened avenues for new revenue streams for the organization in the industry. This can help Schwab Pottruck to build a more holistic ecosystem as suggested in the Charles Schwab & Co., Inc. in 1999 case study. Schwab Pottruck can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Schwab Pottruck can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Schwab Pottruck to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Schwab Pottruck in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– Schwab Pottruck has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Charles Schwab & Co., Inc. in 1999 - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Schwab Pottruck to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Schwab Pottruck can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Schwab Pottruck can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Schwab Pottruck can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Schwab Pottruck is facing challenges because of the dominance of functional experts in the organization. Charles Schwab & Co., Inc. in 1999 case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Schwab Pottruck to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Schwab Pottruck to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at Schwab Pottruck can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Threats Charles Schwab & Co., Inc. in 1999 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Charles Schwab & Co., Inc. in 1999 are -
Shortening product life cycle
– it is one of the major threat that Schwab Pottruck is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Schwab Pottruck in the Strategy & Execution sector and impact the bottomline of the organization.
Consumer confidence and its impact on Schwab Pottruck demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Regulatory challenges
– Schwab Pottruck needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Environmental challenges
– Schwab Pottruck needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Schwab Pottruck can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Schwab Pottruck can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Schwab Pottruck
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Schwab Pottruck.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Schwab Pottruck.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Schwab Pottruck can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Charles Schwab & Co., Inc. in 1999 .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Schwab Pottruck in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Schwab Pottruck business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Charles Schwab & Co., Inc. in 1999 Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Charles Schwab & Co., Inc. in 1999 needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Charles Schwab & Co., Inc. in 1999 is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Charles Schwab & Co., Inc. in 1999 is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Charles Schwab & Co., Inc. in 1999 is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Schwab Pottruck needs to make to build a sustainable competitive advantage.