TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES

COLLEGE OF BUSINESS EDUCATION

BUSINESS POLICY AND STRATEGY (BUS 403)

CASE ANALYSIS: E*TRADE FINANCIAL,

INC. – 2007

Lagran, Darwin C.

Tamang, Ron Oliver C.

Quinones, Carmela Dawn A.

Rambuyon, Christine Diane M.

Reyes, Gladys Anne B.

Oamil, Thea Kimberly A.

Arriola, Tricia Marie A.

BSA42KC2

EXECUTIVE SUMMARY:

The E*Trade Financial Incorporation is an organization that specializes on

financing specifically on trade equities, company portfolio and making different markets

proximate on their respective customers. Headquartered in New York City as service

entity, E*Trade has made subsidiaries around the globe such as Canada Hong Kong,

United Kingdom, France, Germany and Japan. It is on the sweat of Bill Porter that

makes the E*Trade successful and in demand on the market.

The E*Trade has projected itself to earn a modest income on the first five years

of the operation that will not just make the company profitable but making the

shareholders wealthy and customers reliant on our amenities on banking, investing and

trading, and lending.

As an online brokerage company, E*Trade commits itself in giving services to

customers on its high best and reaching the different people around the world. In

connection with that, E*Trade strategizes to maintain a competitive edge among others

by having affiliates in different countries who are ready to serve customers directly and

avidly.

BACKGROUND:

VISION:

To establish prominence when it comes to financial support and execution portal

for individuals, by diversifying and offering every service you need in your financial life,

with access to your accounts anytime, anywhere in the whole world.

MISSION:

E*TRADE is an online brokerage firm for everyone concerned with their financial

freedom, which allows trade equities, create a portfolio, get market information at any

time around the world. With our technology to set the standard to be innovative, service,

and control over the investors’ investment, this will help us grow as a company in

becoming a complete financial support business offering every service you need in your

financial life, while making our customers, stockholders and employees happy.

VALUES:

Customer First: At E*TRADE we consider what is best for the customer in all

decisions and actions; we anticipate and look for creative ways to deliver a best‐in‐class

experience, resulting in customers recommending us to others and prospects becoming

customers; we seek out – and listen to – customer and marketplace needs, and quickly

work to meet and exceed them; and we utilize every interaction to deepen our customer

relationships.

Respect: We treat everyone with respect; we value – and take pride in – the

significant contributions and ideas that come from the diversity of individuals regardless

of department, position or background; we are inclusive, open and honest in dealing

with others, building transparency and trust; and we are socially responsible and

contribute time and effort to improve the communities where we work & live.

Integrity: Our employees do the right thing and deliver on commitments; we take

action based on facts, data and our values; we operate within the letter and spirit of the

law; and we communicate honestly, with the courage to tell the truth and deliver difficult

or unpopular messages.

Teamwork: We work collaboratively, within and across departments to

accomplish shared goals, developing mutual respect, accountability and trust; we plan

inclusively and considers the impact of decisions on other parts of the organization; we

collaborate and leverage cross‐functional talent and the collective intelligence of the

entire organization to accomplish shared goals; and we week and provide feedback and

uses these lessons to improve self and others

Our Customer

E*Trade offers online brokerage that trades equities, keeps portfolio updated and

obtain market information, offer 15,000 ATM Machines. And it also give complete

financial support by offering every service a customer need. It provides services to ten

active countries such as; Germany, Australia, Canada, New Zealand, Denmark, Hong

Kong, Japan, Korea, Sweden, and United Kingdom.

Our Neighborhood

E*trade was named a leader in Corporate Social Responsibility according to

Brendan Hurley, a Chief Marketing Officer. E*TRADE valuated the impact based on

Goodwill's ability to fulfill that mission and deliver sustainable and measurable services

to the populations we serve. To support its mission investment, E*TRADE also asked its

employees to devote volunteer hours helping Goodwill students develop resumes, cover

letters and prepare for job interviews.

This hands-on style exhibits a willingness to contribute human capital along with its

financial capital. The combination of the two ensures that each of those investments is

properly managed and produces the desired results. Quite simply – a smart business

approach to corporate social responsibility (CSR).

With this multi-tiered CSR model, E*TRADE demonstrates that it is fully behind its

community and its employees who want to share in the social impact their company is

making.

E*TRADE's contribution of 100 volunteer man hours (to date in 2014) has already led to

the successful placement of 66 graduates from Goodwill’s Career Navigation and

Security & Protective Service training programs. At an average starting wage of

$14/hour, amortized over a 12 month period, E*TRADE’s investment of time and money

will result in a return of $1.9 million in earned wages by September of 2015. And that is

based solely on the number of graduates placed as of today, which is only going to

increase.

E*TRADE understands that people who are working are also establishing credit,

building capital and making financial investments. Therefore, E*TRADE believes

correctly that it is not only investing in a social cause. It’s also investing in its own future.

CSR is not just about writing a check. CSR is about rolling up your sleeves and making

a difference in business and your community. E*TRADE gets that.

Competitors

E*Trade competitors are Fidelity Investment, group of privately held companies

that is currently the largest broker in the industry, Charles Schwab, considered second

largest broker, TD Ameritrade (AMTD), they provide inline brokerage services, internet-

based personal financial management service, touch-tone telephone and market data,

and research tools.

Organizational Chart

Mitchelle H. CaplanChief Executive Officer and Director

Connie M. DotsonChief Communication Officer

Nicholas A. UttonChief Marketing Officer,

E*Trade Financial

Russel A. ElmerGeneral Counsel and Corporate

Secretary

Arlen W. GelbardPresident E*Trade Financial

Chief Administrative Officer, E*Trade Financial

R. Jarret LillenPresident, Chief Operating Officer

Dennis WebbPresident, E*Trade Capital Markets

Robert SimmonsChief Financial Officer

I. TIME CONTEXTSecond quarter of 2007.

II. VIEWPOINTMr. Mitchell H. Caplan, he is the Chief Executive Officer and Director of

E*Trade Financial Inc.

III. STATEMENT OF THE PROBLEM

Major Problem:

Maintaining continuous operations.

Minor Problem:

Vulnerability of the system.

IV. STATEMENT OF THE OBJECTIVES

1. To commit helping the customers of all ages achieve their financial goals

by using state of the art technology.

1.1 Acquire advanced technology with updated software to give

customer quality service.

1.2 Warrant monthly maintenance of equipment and software.

2. To provide career opportunities for employees.

2.1 Provide trainings for employee development

2.2 Give a problem solving task to help them grow not just as

employee but also as individual.

2. E*Trade is just securities and solely online. 2. Not the Lowest price

STRENGTHS WEAKNESSES

1. Access to accounts 24/7. any day (Convenience Network ) 1. Experienced of Computer System failures.

3. Brand Name for online investing. 3. Security Risks4. Discount on Brokerage fees. 4. Credit Losses5. Wide variety of products and services 5. Lack of Physical Branches

OPPORTUNITIES THREATS

1. Growing demand 1. Fear of computer hackers2. Gaining Customers because other unethical business 2. Rapidly growth of market; more competitors3. Aging Demographics

4. Numerous corporate scandals, investor confidence3. Provide research database and personal assistance

4. Global increase in internet accessibility5. Scale out its offering to its banking services 5. Economic Recession

W2T2 - Acquire other firms with more offeredservices to reduce the number of competitorsand increase the number of services offered.

different locations around the world. system to ensure the website is securedand capable.

S1T3 - Allowing investors to work from W1T1 - Use debt financing to improve computer

S5O5 - Offer diversified services to itsbanking services.

ST STRATEGIES WT STRATEGIES

S3O2 - Discounted brokerage fees for W204 - Expand into businesses with the services first time customers. that are offered through E*Trade.

STRENGTH WEAKNESS

OPPORTUNITIES

SO STRATEGIES WO STRATEGIES

THREATS

3. AREAS OF CONSIDERATION

A. SWOT ANALYSIS

B. SWOT MATRIX

C. PORTER’S FIVE FORCES ANALYSIS

1. Rivalry among other competitors – High

Rivalry among competitive firms is high because clients prefer to go to

firms that are well known and have established their name. These firms who are

engage to this kind of business are being spread to different countries that make

them attract more clients. Online brokerage firms are competing to be the best

provider of electronic trading services and the convenience that they give to their

clients. Competitive advantage can be attained by having a stable and strong

security system, and maintenance of service quality.

2. Potential entry of new competitors – Low

The threat of new entries into the industry is low because it is hard to

compete to the firms that have a strong foundation and credibility in the client’s

mind. Although, there are only few firms that render this kind of service, its

competitors have already proven their quality service and handle millions of

accounts that affect the preference of the future clients.

3. Potential development of substitute products – Low

The substitute service for online brokerage firm is low for the reason that

this service is rare that it’s hard to find an alternative that can provide you more

convenience that enables you to access and monitor your personal accounts.

HIGH MODERATE LOW

Do they practice discretion when purchasing the product?

Rivalry among Competing Firms

Potential Entry of New Competitors

Potential Development of New Subsitute Products

Bargaining Power of Supplier

Bargaining Power of Consumer

Do they sell it at much cheaper price?

Are switching costs low?Are buyers more informed?

Advanced Technology

Availability of attractively priced substitutesHow satisfactory are the substitutes in terms of quality service?

Can consumers switch brand easily?

Brand and customer loyaltyEconomies of Scale

PORTER'S FIVE FORCES

Is the number of competitors increasing?Is demand growing?

4. Bargaining power of suppliers – Low

The bargaining power of suppliers is low because there are numbers of

suppliers available that are competing among themselves which makes it easier

for a firm to switch to a new contract to a more preferable provider.

5. Bargaining power of consumers – Moderate

The bargaining power of consumers is moderate for the reason that the

clients or the consumers can choose which firms charge a relatively low price for

their service or they can pick an expensive one because for them it is a trusted

company.

D. STEEPLE FRAMEWORK

Social

Technological

Economic

EnvironmentalPolitical

Legal

Ethical

STEEPLE is an abbreviation that comprises of Social,

Technological, Economic, Environmental, Political, Legal and Ethical

aspects. These factors play an important role in the market analysis and

affects the organization significantly if not taken properly.

Figure 1.1 STEEPLE Framework

SOCIAL

Population Growth- This aspect determines the number of consumer that

might be engage in E*Trade. Growing of population is inevitable, thus, upon

an increase on this factor may increase consumer.

Consumer’s Necessity- Nowadays, transactions happens in snap of a finger

through technology. E*Trade is one of the firm that made exchange of stock

through brokers easier. Likewise, E*Trade’s financial services and banking

are timely because the necessities of consumers today are demanding and

time centered. It is important to satisfy this factor exceptionally because it will

result to customer loyalty or dissatisfaction.

TECHNOLOGICAL

Easy Form of Communication- Apparently, E*Trade is engaged in the use

of technology. Through the use of it, they can easily identify and communicate

with their consumer and have transactions with them. Establishing a good

communication fallouts good relationship with consumer and understanding

between two parties and loyalty takes place.

Online Availability and Services- Through online services, fast transaction

happens and it reduces labor cost. Moreover, queries and feedbacks of

customers are easily acknowledge and assess.

ECONOMIC

Competitors- Competition is always present on market. This factor always

become a basis on how E*Trade will serve consumers and surpass the

services that other competitor company has.

Economic Variation and Trends- Ideally, having a good curve in an

economy gives company a smooth sailing operation and various opportunities

arises like high employment, customer’s good purchasing power, meeting

sales ration and other economic elements that will serve as revenue

generating factor.

ENVIRONMENTAL

Environment Sensitive- Consumers often take into consideration the

company’s dealing with environment. Usually, consumer dig companies to

have sustainable solutions on organization’s problem and deal with it in a

resource-saving way as possible.

POLITICAL

Government policy – government in different countries create different rules,

regulations and framework, thus operating in different countries can force

business to change their operations.

Tax Rulings- Tax, being the most powerful inherent power of a state, has

negative implication on business revenue recognition. Corporate tax is charge

against companies and it infers a direct relationship in a sense that if income

increases, tax also increases.

Labor Law and Unions- It is extremely important to observe the labor code

and how do business operates with their employees. Human Resource is the

most important part of every businesses and their voice must be properly

address by their employers.

LEGAL

Consumer’s Right- The consumer provide laws and regulations that governs

consumer’s right. This is because there are some abusive businesses that

take some consumers under them. Accordingly, the seller must be held liable

on whatever defects or failure that their product or service might incur.

ETHICAL

Company’s Image- Maintaining a good company image is a great factor in

order to make customers stay and induce customers to have engagement

with them. Reputation makes an abstract implication on customers that make

them reliant on company’s services. In order to do so, company must be

diligent and professional in rendering services to its clients.

Ethical Standards - E*trade is an Equal Opportunity Employee who

encourages diversity in the workplace. All employees will receive

consideration for employment without regard to the race, color, national

origin, religion, sex, age, disability, citizenship, marital status, sexual

orientation, gender identity, military or protected veteran status, or any other

characteristics protected by applicable law.

Rating Score Rating Score Rating Score1. Advertising 0.15 3 0.45 4 0.60 3 0.452. User Friendly Website 0.10 3 0.30 4 0.40 3 0.303. Revenue Growth 0.15 3 0.45 4 0.60 3 0.454. Financial Condition 0.25 3 0.75 4 1.00 4 1.005. Customer Loyalty 0.15 2 0.30 4 0.60 4 0.606. Service Quality 0.15 3 0.45 4 0.60 3 0.457. Price Competitiveness 0.05 1 0.05 3 0.15 4 0.20

Total 1.00 2.75 3.95 3.45

COMPETITIVE PROFILE MATRIXE*Trade Charles Schwab AmeritradeCritical Success Factors Importance Weight

E. COMPETITIVE PROFILE MATRIX

The Competitive Profile Matrix (CPM) is a tool that compares the

firm and its competitors and reveals their relative strengths and weakness.

The matrix compares them using industry’s critical success factors. The

analysis also reveals which areas should the company focus and improve

and which areas to protect.

The CPM analysis reveals that the Charles Schwab is the strongest

player in the industry with the highest score of 3.95 and relative strengths

in advertising, user friendly website, revenue growth, financial condition,

customer loyalty and service quality. On the other hand, Ameritrade excels

in financial condition and price competitiveness. This analysis shows that

the E*trade Financial Inc. should enhance its advertising, user friendly

website, revenue growth, and financial condition. And improve its

weaknesses in terms of customer loyalty and price competitiveness to

become more competitive and successful in the future.