Charles Schwab & Co

What is the history of the Company and its founder ? What did the Company start as - what was its original mode of doing business (what we will call Original Schwab - pre 1975

Schwab was incorporated as a brokerage firm in 1971 , by Charles Schwab in California . The company started as a full-service brokerage firm . It would advise its customers on the timing of buying and selling of securities . The year 1975 , when brokerage commissions were deregulated opened up new opportunities for Charles Schwab . The company shifted its focus from selling advisory services

to providing a low cost access to security transactions for investors

What was the fundamental major disruption ' in 1975 that Schwab responded to so well ? [Remember that disruptions can potentially come from many sources such as new technologies , events , changes in the legal framework , marketplace or population]

The year 1975 has been a defining moment in the history of Schwab . Until 1975 , government regulated the brokerage commission that firms could charge their customers . In 1975 the regulation was removed . In the deregulated scenario many brokerage firms , have decided on cutting down their commissions by more than half . Schwab did respond to this deregulation . The firm decided that it would no longer sell advisory services . Instead it would offer investors low cost access to security transactions

What was the fundamental innovation or new way of doing business that Schwab introduced as a response to this major disruption , and that in fact became the basis for the Company 's positioning ' in the industry (i .e . what it was known for ) and its growth for the next fifteen years (What we will call Middle Schwab 1975- 1991

Schwab was the first firm to have harnessed the power of technology . The firm believed that technology would help reducing costs for the customers . It invested 2 million in IBM mainframe in 1977 . This is despite the fact that the firm did not have a substantial customer base .In 1985 the firm realized the personal computers can be used as an efficient distribution channel for financial services . In that year the company introduced a DOS based software product called equalizer . The product helped customers conduct on-line transactions and research . From then on till 1990 the company has introduced many technology based products which have emerged as critical components of the firm 's business

Why did the established leaders in the brokerage field like Merrill Lynch not respond in the same way as Charles Schwab and Company to the opportunity ' created by the disruption

Players like Merrill Lynch did react to disruptions . The companies have started offering online services much like Schwab did . Schwab has been able to surpass competition by being innovative . The choice of channels that customers had coupled with the range of products helped Schwab to march ahead of competition . Schwab did not feel it to be a threat to help its customers access other products through its channels . Many of the competitors feel threatened by such a service . It is this...