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E*Trade

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E*TRADE FINANCIAL, INC. - 2007
E*TRADE FINANCIAL, INC. - 2007
Case Analysis
Submitted by: Pauline Mae L. Naranjo
Submitted to: Prof. Lacerona
CASE # 3 / MW / 10:30 am – 12:00 nn

Case Analysis
Submitted by: Pauline Mae L. Naranjo
Submitted to: Prof. Lacerona
CASE # 3 / MW / 10:30 am – 12:00 nn

Time Context: * 1982, E*TRADE is founded as a service bureau by inventor and physicist, Bill Porter. Same year, the company was incorporated in California * 1992, E*TRADE Securities Inc. was born to start online investment services. * 1996, E*TRADE’s demands blasted. * July 1996, The Company was reincorporated in Delaware. * August 1996, E*TRADE went to public. * 1997, Porter appointed Christos Cotsakos as CEO. * 2000, E*TRADE purchased Telebanc Financial and to become known as E*TRADE Financial. * 2001 E*TRADE acquired Online Mortgage originator LoansDirect, and is now known as E*TRADE Mortgage. * 2004, E*TRADE sold substantially all of its assets and liabilities of E*TRADE Access. * Year-end of 2006 E*TRADE had 4705 employees. The revenue increased to $2.4 billion and net income to &629 million. * At present, E*TRADE is active in Germany, Australia, Canada, New Zealand, Denmark, Hong Kong, Japan, Korea, Sweden, and the United Kingdom E*TRADE is in a Process of searching for a new advertising agency to replace the current Goodby, Silverstein & Partners E*TRADE owns and operates over 15,200 Automated Teller Machines E*TRADE is becoming a complete full service financial support and execution portal for individual investors

Summary of the Case:
E*TRADE Financial Corporation is a global company, offering a wide range of financial solutions to the self-directed consumer under the brand “E*TRADE FINANCIAL.” They use technology to provide differentiated trading, investing, banking and lending products, primarily through the Internet and other electronic media. Because they offer and deliver our products in this manner, their customer base is geographically dispersed and they have a lower operating cost structure than many traditional “brick and mortar” financial services companies. This lower operating cost structure allows them to provide financial solutions to their customers at a lower price/rate than traditional financial services companies. During the past three years, they have focused on broadening our product offerings to expand relationships with customers and to integrate our products and their supporting technologies to improve profitability.
E*TRADE Financial Corporation offers financial solutions to retail and institutional customers worldwide. It provides retail investments and trading services, interest-earning checking, money market, savings, sweep deposit, and certificates of deposit products, and a variety of loan products including mortgage, home equity, margin and credit cards, real estate loans, and other various consumer loans. E*TRADE Financial primarily provides services through its website at www.etrade.com, however, the company also offers services through its network of customer service representatives, relationship managers, and investment advisors worldwide.
In this case analysis, E*TRADE Financial Corporation, is a very successful company in providing many financial services especially those related to exchange markets in the USA. They already established their stand in the market. The question is how far it can go despite of many problems, risks and any changes in the market that could affect. What are the strategies needed to implement in order sustain and develop more its position.
Vision Statement:
E*TRADE’s vision is “to empower self-directed investors to make informed investment decisions and to take control of their financial future with anytime, anywhere access to the world’s major investment markets”

Mission Statement:
To create long term shareholder value through superior financial performance driven by the delivery of a diversified range of innovative, customer-focused financial products and services and supported by an operating culture based on the highest levels of teamwork, efficiency and integrity.
Honours / Awards / Recognition
E-Trade earned five stars and finished first overall in the StockBrokers.com 2011 Online Broker Review. In 2012, they earned five stars and a second place finish along with several best in class finishes. For 2013, E*TRADE remained in second place earning four stars, Best Smartphone App, and Best Client Dashboard.

I. Central Problem
To be able to sustain and grow its competitive advantage, what will be the strategies needed to do is the central problem in this case. Since for the past years, they already establish a good reputation to the public but then how come they could maintain all of this especially the nature of business is affected by marketing facts and assumptions. The Company clears and settles securities transactions for customers of other broker-dealers, including E*TRADE Securities LLC, and E*TRADE Securities Ltd, both affiliated broker-dealers. Accordingly, the Company carries security accounts for customers’ and is subject to the requirements of Rule 15c3-3 under the Securities Exchange Act of 1934.
II. Objectives * To be the global leader in online financial and investment services * To commit to helping the customers of all ages achieve their financial goals by using state-of-the-art technology * To provide a continuous improvement environment for the customers, employees, and stockholders * To provide career opportunities for employees and profitable growth for shareholders
III. Areas of Consideration
STRENGTHS
* E*TRADE uses technology to offer a wide range of innovative financial products and services. The company’s products include trading, investing, cash management, lending, and managing employee stock plans. * E*TRADE has an effective and efficient leader, Mr Mitchell Caplan since January 2003. * E*TRADE has a great continuously improving advertisements to help the promotions of their products and services. * E*TRADE endeavours to cut costs and streamline by means of reducing their people. It reduces their expenses. * In its most recent earnings report, E*TRADE announced its first quarterly profit in three years. It had been steeped in red ink for a long time because loan losses accumulated at a much faster pace than anticipated, but it looks as though E*TRADE may be ready to turn the tide after demolishing analyst expectations. The company greatly reduced its provision for loan losses, and its net charge-offs declined as well. * Furthermore, among great competition from other brokers such as TD AMERITRADE (Nasdaq: AMTD) and Charles Schwab (Nasdaq: SCHW), E*TRADE managed a net increase of 18,000 brokerage accounts. * In June, E*TRADE announced a reverse 1-to-10 stock split, which was done to boost the price of its shares so it could avoid the possibility of a Nasdaq delisting. While you never want to see your shares languishing around $2 a pop, at least now E*TRADE doesn't have to worry about exchange requirements.
WEAKNESSES
* Although E*TRADE is best known for its online brokerage service, it also has a mortgage and banking services unit. The reason you may not know that is because since 2007, this segment has done nothing but report negative operating profits. At the end of May, E*TRADE had about $18.4 billion in loans outstanding, of which $2.1 billion was delinquent. While net charge-offs decreased this quarter, they were still $225 million, a pretty significant number. * Overall, E*TRADE's balance sheet and past performance aren't something to brag about. With a debt-to-equity ratio of 2.7 and lingering questions about its provisional loan losses, it's no wonder the company has been too busy to worry about boosting revenues. In the past five years, sales have decreased by almost 10% annual.
OPPORTUNITIES
* E*TRADE still hasn't joined the price-slashing ETF brokerage wars. So far, Fidelity has teamed up with Blackrock's (NYSE: BLK) I Shares line of exchange-traded funds, and Vanguard has its own arsenal of ETFs as well. E*TRADE could benefit should it find itself in a position to partner up with either State Street (NYSE: STT) , which is behind the popular SPDR ETFs, or Invesco (NYSE: IVZ ) , which runs Power Shares ETFs. * E*TRADE often ranks high versus the other brokers with regard to its banking services; trying to scale out and continuing to diversify its offerings should give it an opportunity to break away from the pack.
THREATS
* The effect of market place reality, facts and assumptions such as the changes in economy, corporate earnings, new trends in technology and fluctuating price in stock market. * Various negative issues and scandals that may affect the integrity and transparency of their work since they are engaged in trading, investing, banking and lending products, primarily through the Internet and other electronic media. Like what is stated in this case, a flood of corporate accounting and other scandals have weighed on stock prices and led to a crisis of confidence among investors. * Since they are engaged in using Internet and electronic media, they are prone to any unexpected problems such as natural disasters, spam and virus attacks and security breaches by hackers. * There is no shortage of online brokers these days, and each one is cutting costs to try to maintain a competitive advantage. Schwab, Vanguard, and Fidelity all recently cut ETF fees (to free in certain cases). According to a 2010 Smart Money broker survey, E*TRADE ranks No. 2 overall for online brokerage services. That's certainly strength, but reigning supreme means there are plenty of other companies gunning for your spot. Competitors such as Share builder, Trade King, Bank of America (NYSE: BAC), andoptionsXpress all offer unique products that could eat into E*TRADE's financial pie.
IV. Alternative Courses of Action
A. Expansion of global trading platform to give customers access to over 42 international exchanges and related currencies.
Advantage: International Investing opens up a world of exciting possibilities. It can broaden the investing and trading horizons, diversify your portfolio, and even tap into the potential of emerging markets. Choices include individual stocks of foreign companies, international mutual funds and international ETFs. While there are special considerations and risks, there's also the potential for increased total returns.
Disadvantage: These will open to more risks that could the transactions. It involves additional risks related to currency fluctuations, economic and political differences and difference in accounting standards.

B. To acquire TD Ameritrade or another online brokerage firm to gain economies of scale and market share.
Advantage: TD Ameritrade is an American online broker based in Omaha, Nebraska, that has grown rapidly through acquisition to become the 746th-largest US firm in 2008. TD Ameritrade Holding Corporation (NYSE: AMTD) is the owner of TD Ameritrade Inc. Services offered include common and preferred stocks, futures, ETFs, option trades, mutual funds, fixed income, margin lending, and cash management services. As of December 31, 2012, Ameritrade had 5,836,000 funded customer accounts and client assets of $481 billion. Through this, if E*TRADE acquire TD Ameritrade, their competitors will be reduced then they will acquire bigger economic scales and market share.
Moreover, an online broker is a firm that charges a relatively small commission by having its clients perform trades via automated, computerized trading systems rather than by having an actual stockbroker assist with the trade. Most traditional brokerage firms offer discount options and compete heavily for client volume due to a shift towards this method of trading. Other ways to lower costs for these brokers is by executing orders only a few times a day by aggregating orders from a large number of small investors into one or more block trades which are made at certain specific times during the day. They help lower costs in two ways: * By matching buy and sell orders within the firm's order book, the overall quantity of stock to be traded can be reduced, thus reducing commissions payable to others by the brokerage firm. * The broker can split the bid-ask spread with the investor when matching buy and sell orders - a win-win situation in most cases
Since investor money is pooled before stocks are bought or sold, it enables investors to contribute small amounts of cash with which fractional shares of specific stocks can be purchased.
Disadvantage: This is usually not possible with a regular stockbroker. Also, it takes risks to the banking system in the country.

C. Offer Customers certificates of deposits in foreign currencies to give investors new opportunities to diversify their portfolios.
“Foreign currency Certificates of Deposit can diversify your portfolio with foreign currency.”
Advantage: There are lots of advantages that could get from these certificates that could attract more customers. Some are: (1) Interest. Like any Certificate of Deposit, depositors benefit from the interest paid on the invested amount. Depending on the currency, these rates can be quite high and can be higher than the equivalent rate of return in US dollars and (2) Currency Movements. As the currencies you invest in rise and fall against the dollar, you can make or lose money.
Disadvantage: It bears certain risks.

V. Strategy Formulation / Recommendation
I therefor conclude that the best solution to the problem is alternative course of action #1. Global trade is a worldwide business that involves making and collecting payments for transactions in goods and services, and transporting them to interested markets. The overall reduction of global trade barriers and the ease of advertising to foreign markets via the Internet have increased the potential for a company doing business outside one's home country. If E*TRADE will expand, it will give more access of the customers to other currencies. It will also attract other customers since they will offer more access to 42 international exchanges and currencies.

VI. Plan of Action 1. Redesign E*TRADE complicated services to be convenient. 2. Design a big promotional advertising campaign, that should be lunched through business related TV channels and financial web sites. 3. Training E*TRADE’s employees to the new services and on customer relationship marketing. 4. Give the authority, the tools and empower the employee for optimum customer service satisfaction. 5. Educate the customers on the services in an easy and convenient way. 6. E*TRADE should participate in exceptions, seminars and events about financial services. This will have good impact on the company’s image and brand loyalty. 7. A well organized and highly skilled team should be formed to direct this action plan step by step, evaluating its effectiveness and updating it to meet new changes in the industry. 8. E*TRADE will provide a bundle of complete and integrated financial services that competitors could not provide their customers with. E*TRADE will compete on service quality and high value of our service. Many services are unique to E*TRADE and other competitors having hard time provide or copy these services. E*TRADE provides total solutions for customers’ financial needs.

VII. Potential Problems 1. Investing outside the United States involves additional risks related to currency fluctuations, economic and political differences and difference in accounting standards. 2. Some customers have a very high standard of expectation that neither E*TRADE nor other market competitors could provide with the recent available technology used. 3. Some customers are concerned about the brokerage services price, and they are considering the movement to another brokerage firms that provide same services with lower prices. 4. Many of the customers especially the older ones, have difficulties in using some of E*TRADE advanced services; such as and not only triggered stop loss order and options trading.

VIII. Contingency Plans
1. E*TRADE can send explanatory materials as part of their daily market research e-mail, talking about issues regarding advanced services wanted or needed by their customers.
2. To retain customers, E*TRADE will develop a strong customer relationship. This is done by 3 strategies: 1- Core service provision by delivering excellent service, 2- Putting some switching barriers, 3- Building relationship bonds with the customer. This could be accomplished by lowering transaction costs for active traders, work on structural bonds by designing the right service into the service delivery system, and Customization bonds could be improved by organizing events and build customer loyalty. (Zeithaml et al. 2006)

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...1. Read Module 3 Topic 7, Module 4 Topic 1 and 2, Module 5 Topic 1~2. 2. Do the drills for the topics. 3. Read the Chapter 3 sections 2, 5 and Chapter 4 sections 1~3 in your textbook. 4. Do Homework for week 5 (you can find the list in the conference). Week 5 Supplementary Notes Chapter 3 Section 3.2: Polynomial Function of Higher Degree A polynomial function P is given by , where the coefficients are real numbers and the exponents are whole numbers. This polynomial is of nth degree. Far-Left and Far-Right Behavior The behavior of the graph of a polynomial function as x becomes very large or very small is referred to as the end behavior of the graph. The leading term of a polynomial function determines its end behavior. x becomes very large x → ∞ x becomes very large x → ∞ x becomes very small -∞ ← x x becomes very small -∞ ← x We can summarize the end behavior as follows: The Leading-Term Test If is the leading term of a polynomial, then the behavior of the graph as x → ∞ or as x → −∞ can be described in one of the four following ways. If n is even and an >0: ▼ ▼ | If n is even and an <0:▲ ▲ | If n is odd and an >0: ▲▼ | If n is odd and an <0: ▲ ▼ | Polynomial Function, Real Zeros, Graphs, and Factors (x − c) If c is a real zero of a function (that is, f(c)=0), then (c,0) is an x-intercept of the graph...

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Math 220

...Writing in Mathematics Exercises 119. Explain how to solve an exponential equation when both sides can be written as a power of the same base. a. An exponential equation is defined as an equation that contains a variable in an exponent. In order to solve an exponential equation we need to look at the steps that are required. Exponential equations that have the same base are in the form of If bm=bn. When we see an equation of exponents with the same base we will find the answer by setting the exponents equal to each other. The formula that we can look at to understand how to solve an exponential equations is defined as If bm=bn, then m=n. The steps that we will take are as follows: 1. Rewrite the equation in the form bm=bn. 2. Set m=n. 3. Solve for the variable. 120. Explain how to solve an exponential equation when both sides cannot be written as a power of the same base. Use 3x=140 in your explanation. a. In order to solve an exponential equation when both sides are not written with the same base, we need to use logarithms. To convert an exponential equation into logarithmic form we look at the formulas below: by=x is equivalent to y=logbx Using 3x=140, we would solve the problem by performing the following steps: 1. Isolate the exponential equation 2. Take the natural logarithm on both sides of the equation for bases other than 10. Take the common logarithm on both sides of the equation for base 10. 3. Simplify using one of the following...

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What

...“anyone lived in a little how town” ee cummings • non-conformity • form = function o Poe’s unity of effect o poem = unique, does not conform to any poetic standards, grammatical rules, expectations • songs: o Justice & Independence, Jack & Diane (JC Mellencamp) o The Dance, The River (Garth Brooks) E. E. Cummings' "anyone lived in a pretty how town" tells the story of anyone. The name has a double meaning; anyone could be anyone in the dictionary definition sense, and could be seen as a singular entity, reinforcing the theme of isolation the independent individual has from the rest of society. The events all occur in a "pretty how town". "Pretty" connotes a mere façade, describing the superficiality of the town's inhabitants. "How", an adverb, is used as an adjective here. It could be describing the extent of the town's prettiness, but a better reason is that it describes the routine humdrum of the town's activities, since "how" also means "in a method or manner". The juxtapositions continue into the next line, "(with up so floating many bells down)". The rhythm of the line and the vowels emulate both the motion and the sounds of bells. This line occurs again later in the poem, and its function here is the same as it is there - to signify the passing of time. The next line is an ordered list of the seasons, also symbolizing the passing of time, describing anyone's activities as occurring continuously. The activities...

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