Uses the Internet to Gain a Low-Cost Advantage Abstract The E*TRADE closing case is a perfect example of how the advantages of the opportunities offered by Internet could provide companies with possibilities to overcome barriers to entry and compete in the same level with leaders of specific market segmentation. The case also has shown the importance of how the company’s business policy and business strategy can be used to transform a company reliable and viable to its clients even though if it has to control its cost structure.
Case Discussion Questions . How have E*TRADE‘s business model and business level strategies changed overtime? The E*TRADE business model was created to take advantages offered by Internet to overcame barriers to entry and to make possible a new business compete with large and established companies. To do so, the company business model was based on its business level strategies that have followed two concepts of the costumers needs: price and quality.
The E*TRADE business strategies came up with a new software and hardware that made possible the customers make their own trade with a low costs and high quality.
The changed overtime of E*TRADE business model and business strategies started when the company came under pressure of a new generation of online brokerage houses. Those new companies began offered the same services for as low as 50% of E*TRADE’s services. The new strategy had to be taken and E*TRADE started a new differentiation appeal to its costumers offering a new software and hardware even easier to be used for the same price.
2. What is happening in the stockbrokerage industry today? How has E*TRADE been altering its business model and strategies to compete?
The today’s stockbrokerage industry is passing by a general process of differentiation. The pressure that suffered E*TRADE in 1999 by new companies offering low-cost products, has occurred in the market daily bases. The Internet has offered the instrument of agility, quality and price. Today’s companies have found a much more difficult and competitive market that can provide clients with a possibility to search and choose for companies offering the same products for low costs. However, even with the equality of possibilities offered by Internet, E*TRADE has fond a way to keep itself on the top of the brokerage business.
The company has worked in its business model and strategies by introducing new products such as: a new software and hardware that make its services easier and more reliable providing access to real-time stock quotes, more financial research tools and information about specific companies and the opportunity to invest in initial public offering of shares from new companies. Also, the initiative of E*TRADE to introduce an online bank (TELEBANK), has provided to its costumers online banking services. In addition it took a variety of insurance and financial service companies to offer a financial service line to its costumers.
The costumers feeling of been working with a reliable company has kept the fidelity of its clients who prefer not to switch to new low-costs companies because they “perceived that they were receiving extra value in terms of service and reliability”. E*TRADE business model and business strategy could create a competitive advantage of differentiation with its new products and services. The company has introduced a concept that has been passed to other companies: “They must find a differentiation advantage to be viable, even though if they have to control their cost structure”.