Strategic Management Case Solution : How E*TRADE uses the internet to gain low-cost advantage.



CASE: How E*TRADE uses the internet to gain low-cost advantage.


Q1: how have E*TRSDE’s business model and business level strategies changed over time?


From three of business level strategy   E'TRADE's business model adopted two important strategies. Cost Leadership & Differentiation


Firstly, the company cut its price by almost 100% for surviving low cost competition in brokerage industry. It cut its price from $19.95 to $9.95.And it further cut prices from $ 9.95 to $7.95 to survive in the industry.


Then the company differentiated appeal to its customer by offering a higher quality of service and broader product line. It introduce new software package that made it even easier for customers to use the Internet to trade shares. Very importantly, the new software was more reliable in that customers were able to make its trades when they wanted.


Finally, it offers customers to invest in Initial Public Offering (IPO) north potential risk & returns. It can continue its differentiation strategy. It offers customer a broad range of online banking services as boll paying.


Q( 2): What is happening in the stoke brokerage industry today? How has E*TRADE been altering its business model and strategies to compete?


part(1).In many ways, brokers and exchanges now compete with each other: brokers may internalize order execution, they may use alternative exchanges or dark pools; established exchanges offer “direct market access” (DMA) and are occupying increasing space in the investment process, both pre-trade and post-trade.


Life has become very tough for brokers.

Evolution of the securities industry part(2)F'TRADE has been altering its business model and strategies in many times to survive in competition in brokerage industry.

In  the first the company adopt cost leadership strategy to survive in the low cost competition story in the brokerage industry.


Thennl the company alter its business model by offering IPO to its customers.

In the mean time the company alter its strategy that is differentiation. It's merge with an online bank, TeleBank, so that it could offer its customers a broad range of online banking services, such as bill paying online and thus become one stop online shopping site for all of a customer's financial needs. Even this company can control its cost structure today.


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