E E **TRADETRADEFinancialFinancial

Corp.-2004Corp.-2004

Presented by: Presented by:

Megan Dow, Kristin Belanger, and Megan Dow, Kristin Belanger, and

Angèle BourgoinAngèle Bourgoin

Overview of E*TRADE Overview of E*TRADE PresentationPresentation

• Overview of E*TradeOverview of E*Trade HistoryHistory• StocksStocks• Stock InformationStock Information• Goals and ObjectivesGoals and Objectives• The Two Divisions The Two Divisions

• BankingBanking• BrokerageBrokerage

• BCGBCG• Their Mission and Vision Their Mission and Vision

StatementStatement• New Mission and Vision StatementNew Mission and Vision Statement• External Opportunities and External Opportunities and

ThreatsThreats• CPMCPM• EFEEFE

• Internal Strengths and Internal Strengths and WeaknessesWeaknesses• IFEIFE

• AnalysisAnalysis• SWOT MatrixSWOT Matrix• SPACESPACE• IE MatrixIE Matrix• Grand Strategy MatrixGrand Strategy Matrix

• Key RatiosKey Ratios• Different StrategiesDifferent Strategies

• QSPMQSPM• DecisionsDecisions• ImplementationImplementation• EvaluationEvaluation• Update!Update!• ReferencesReferences

Overview of E*TradeOverview of E*Trade• E*Trade Financial Corp. or E*Trade Financial Corp. or

known as E*Trade Group known as E*Trade Group Inc. (changed name later Inc. (changed name later on) in an online brokerage on) in an online brokerage firm that trades equities, firm that trades equities, keeps portfolios updated keeps portfolios updated and obtains market and obtains market information.information.

• E*Trade receives E*Trade receives commission from each tradecommission from each trade

• E*Trade offers 15,200 ATM E*Trade offers 15,200 ATM MachinesMachines

• E*Trade is becoming a E*Trade is becoming a complete financial support complete financial support by offering every service by offering every service you need in your financial you need in your financial life. life.

• E*Trade is active in 10 E*Trade is active in 10 other countriesother countries• GermanyGermany• AustraliaAustralia• CanadaCanada• New ZealandNew Zealand• DenmarkDenmark• Hong KongHong Kong• JapanJapan• KoreaKorea• SwedenSweden• United KingdomUnited Kingdom

HistoryHistory• Founded by Bill Porter, a Founded by Bill Porter, a

physicist & inventor in physicist & inventor in 1982.1982.

• There was an opportunity There was an opportunity to capitalize on to capitalize on potentially discount potentially discount brokerage so Bill Porter brokerage so Bill Porter came up with the idea came up with the idea that allows individuals to that allows individuals to use their own personal use their own personal computers to invest, and computers to invest, and this would pay less that this would pay less that traditional brokerage traditional brokerage fees. fees.

• In 1992 the company In 1992 the company became E*Trade became E*Trade Securities Inc. and began Securities Inc. and began offering online investing offering online investing services through AOL and services through AOL and CompuServe.CompuServe.

• 19961996• There was an increase in There was an increase in

E*Trade services by them E*Trade services by them launching launching www.etrade.comwww.etrade.com website. website.

• In August the Company In August the Company went public (IPO) and had went public (IPO) and had another stock offering 1 another stock offering 1 year later when Porter year later when Porter handed the company over handed the company over to Christos Cotsakos.to Christos Cotsakos.

• Cotsakos has over 20 Cotsakos has over 20 years of senior years of senior management management experience at Federal experience at Federal Express and A.C. Express and A.C. NeilsonNeilson

• Under new guidance E*Trade Under new guidance E*Trade became a global leader in became a global leader in online personal financial online personal financial services with branded web services with branded web sites around the world.sites around the world.

History ContinuedHistory Continued• 20002000

• E*Trade bank introduced E*Trade bank introduced the first purchase of the first purchase of Telebanc Financial (now Telebanc Financial (now E*Trades Financial) an E*Trades Financial) an online bank with more than online bank with more than 100,000 deposits.100,000 deposits.

• E*Trade bought Card E*Trade bought Card Capture Services (now Capture Services (now E*Trade Access) the E*Trade Access) the operator of 9,000 ATM’s operator of 9,000 ATM’s across the U.S.across the U.S.

• E*Trade acquired Canadian E*Trade acquired Canadian firm VERSUS Technologies; firm VERSUS Technologies; a provider of electronic a provider of electronic trading services.trading services.

• The International Capital The International Capital announced plans to offer announced plans to offer IPO to European InvestorsIPO to European Investors

• 20012001• E*Trade entered consumer E*Trade entered consumer

leading business when leading business when acquired online mortgage acquired online mortgage originator Loans Direct originator Loans Direct (now E*Trade Mortgage).(now E*Trade Mortgage).

• E*Trade Mortgage had E*Trade Mortgage had 3,400 employees at 3,400 employees at the end of 2003 which the end of 2003 which was only down 5 was only down 5 employees from 2003employees from 2003

• 20032003• revenues increased to revenues increased to

$2008 Million and net $2008 Million and net income increased to $203 income increased to $203 Million.Million.

Info about ETInfo about ET

• Traded on NYSE under symbol ETTraded on NYSE under symbol ET• Before 2/15/01 traded on Nasdaq under EGRPBefore 2/15/01 traded on Nasdaq under EGRP

• The option symbol is ET plus 2 letters The option symbol is ET plus 2 letters indicating month & strike price.indicating month & strike price.

• The first IPO 8/96 net proceeds 46.4 The first IPO 8/96 net proceeds 46.4 million million

• The secondary IPO 8/97 net proceeds The secondary IPO 8/97 net proceeds 188.8 million.188.8 million.

Goals and ObjectivesGoals and Objectives• GoalsGoals

• To provide financial solutions to retail and institutional To provide financial solutions to retail and institutional customers globally.customers globally.

• ““In the Internet economy, the only competitive advantage In the Internet economy, the only competitive advantage is speed. We’ve got to move quickly and powerfully with is speed. We’ve got to move quickly and powerfully with one another to achieve our goals. We must operate in a one another to achieve our goals. We must operate in a global context always ready to adapt to emerging global context always ready to adapt to emerging opportunities. We thrive on chaos. We feel empowered to opportunities. We thrive on chaos. We feel empowered to act quickly and adjust as often as needed. And if we fail, act quickly and adjust as often as needed. And if we fail, we learn from it and restart in the direction of our goals. we learn from it and restart in the direction of our goals. We are risk-takers.”We are risk-takers.”

• ObjectivesObjectives• Offers retail investing, trading products, services with Offers retail investing, trading products, services with

automated order placement and limit equity, futures, automated order placement and limit equity, futures, options, exchange-traded funds, bond orders; real-time options, exchange-traded funds, bond orders; real-time streaming quotes, commentary, and news; advanced streaming quotes, commentary, and news; advanced trading platforms, for traders, personalized portfolio trading platforms, for traders, personalized portfolio tracking and access to more than 7,000 mutual funds. tracking and access to more than 7,000 mutual funds.

Divisions of ETDivisions of ET

BankingBanking• Includes the Includes the

E*Trade BankE*Trade Bank• Access to 15,200 Access to 15,200

ATM’sATM’s• VERSUS TechnologyVERSUS Technology• TIR Holding LimitedTIR Holding Limited

The service center The service center for institutional for institutional investors, comprises investors, comprises the Global & the Global & Institutional segmentInstitutional segment

BrokerageBrokerage• Cash accounts or Cash accounts or

also called a margin also called a margin account, with or account, with or without the options without the options trading feature. trading feature.

• Has E*Trade Has E*Trade Securities and Securities and E*Trade Clearing as E*Trade Clearing as protection agencies protection agencies within the divisionwithin the division

BCGBCG

Due to unforeseen circumstances the Due to unforeseen circumstances the financials for both Banking and financials for both Banking and Brokerage divisions do not exist. The Brokerage divisions do not exist. The revenue for both divisions is revenue for both divisions is combined into one. Without the combined into one. Without the required information we were unable required information we were unable to actually do a BCG. Thank you for to actually do a BCG. Thank you for your understanding. your understanding.

Their Mission StatementTheir Mission Statement

Using technology to set the standard for Using technology to set the standard for innovation, service, and value for investors innovation, service, and value for investors seeking more control over their investments. seeking more control over their investments. E*TRADE’s rich suite of products and services can E*TRADE’s rich suite of products and services can be customized to reflect a customer’s unique be customized to reflect a customer’s unique needs and interests, including portfolio tracking, needs and interests, including portfolio tracking, free real-time quotes, market news, and research free real-time quotes, market news, and research available 24 hours a day, seven day a week. available 24 hours a day, seven day a week. Customers can assess their E*TRADE accounts Customers can assess their E*TRADE accounts virtually any time anywhere around the world.virtually any time anywhere around the world.

Their Vision StatementTheir Vision Statement

E*TRADE’s vision is “to empower E*TRADE’s vision is “to empower self-directed investors to make self-directed investors to make informed investment decisions and informed investment decisions and take control of their financial future take control of their financial future with anytime, anywhere access to with anytime, anywhere access to the world’s major investment the world’s major investment markets.”markets.”

New Mission StatementNew Mission Statement E*TRADE provides is an online brokerage firm for anyone and E*TRADE provides is an online brokerage firm for anyone and

everyone concerned with their financial freedom, it allows you to everyone concerned with their financial freedom, it allows you to trade equities, create a portfolio, get market information any day trade equities, create a portfolio, get market information any day at anytime around the world, and much more. With our at anytime around the world, and much more. With our technology to set the standard to be innovative, service and technology to set the standard to be innovative, service and control over the investors investment, this will help us grow as a control over the investors investment, this will help us grow as a company in becoming a complete financial support business company in becoming a complete financial support business offering every service you need in your financial life, while making offering every service you need in your financial life, while making our customers, stockholders and employees happy. We help the our customers, stockholders and employees happy. We help the communities through non-profit partnership, volunteer work, and communities through non-profit partnership, volunteer work, and increase financial literacy in the neighborhoods. In becoming more increase financial literacy in the neighborhoods. In becoming more profitable, we set ourselves apart from tradition brokerage firms, profitable, we set ourselves apart from tradition brokerage firms, we have huge discount brokerage fees to help customers be more we have huge discount brokerage fees to help customers be more affordable.affordable.

New Vision StatementNew Vision Statement

To become the a leading and complete To become the a leading and complete financial support and execution portal for financial support and execution portal for individuals, by diversifying and offering individuals, by diversifying and offering every service you need in your financial every service you need in your financial life, with access to your accounts anytime, life, with access to your accounts anytime, anywhere in the whole world.anywhere in the whole world.

Key External FactorsKey External Factors

• OpportunitiesOpportunities• Commission revenues Commission revenues

increased, declining volatile increased, declining volatile stock pricesstock prices

• Business’s turn to E*TRADE Business’s turn to E*TRADE because of other unethical because of other unethical business’s, gaining business’s, gaining customerscustomers

• Stock markets have Stock markets have remained turbulentremained turbulent

• Excited market overseas, Excited market overseas, slightly betterslightly better

• Expanded into new Expanded into new business’sbusiness’s

• 22ndnd largest market share in largest market share in the industry the industry

• ThreatsThreats• U.S economy may fall back U.S economy may fall back

into recessioninto recession• Lowered interest ratesLowered interest rates• Geopolitical fearsGeopolitical fears• Numerous corporate scandals, Numerous corporate scandals,

investor confidenceinvestor confidence• Aggregate pretax profits, fell Aggregate pretax profits, fell

33%33%• Investment Services Industry Investment Services Industry

fell 24% fell 24% • Market for electronic financial Market for electronic financial

services are growing rapidly, services are growing rapidly, more competitorsmore competitors

EFEEFEKEY EXTERNAL FACTORS WEIGHT RATING

WEIGHTEDSCORE

Opportunities      

1. Commission Revenues Increase 0.10 4 0.40

2. Gaining Customers because other unethical business's 0.10 3 0.3

3. Stock markets remained turbulent 0.05 2 0.10

4. Excited market overseas 0.10 2 0.20

5. Expanded into different business's 0.10 4 0.40

6. 2nd largest market in the industry 0.10 4 0.40

Threats      

1. U.S may fall back into a recession 0.10 3 0.30

2. Lowered interest rates 0.05 2 0.10

3. Geopolitical fears 0.05 1 0.05

4. Numerous corporate scandals, investor confidence 0.10 2 0.20

5. Aggregate pretax profits, fell 33% 0.05 3 0.15

6. Investment Industry fell 24% 0.05 3 0.15

7. Market is growing rapidly, more competitors 0.05 2 0.1

TOTAL 1.00 2.85

CPMCPM

E*TRADE Schwab Ameritrade

Critical Success factorsWeights0.0 to 1.0

Rating1 to 4

Weighted Score

Rating

1 to 4

Weighted

ScoreRating1 to 4

Weighted Score

Market Share 0.17 3 0.51 4 0.68 2 0.34

Financial Position 0.17 3 0.51 4 0.68 2 0.34

Customer Loyalty 0.15 3 0.45 3 0.45 2 0.30

Global expansion 0.15 4 0.60 3 0.45 3 0.45

Organizational structure 0.13 2 0.26 3 0.39 3 0.39

Customer service 0.15 3 0.45 4 0.60 3 0.45

Management experience 0.13 3 0.39 3 0.39 2 0.26

Advertising 0.12 3 0.36 2 0.24 3 0.36

TOTAL 1.0 3.02 3.20 2.55

Key Internal FactorsKey Internal Factors StrengthsStrengths Rich suite of products Rich suite of products

financial services on the financial services on the internetinternet

Access to accounts 24/7, 7 Access to accounts 24/7, 7 days a weekdays a week

Discount on brokerage Discount on brokerage feesfees

Located and have access Located and have access throughout the worldthroughout the world

ATM’s located around the ATM’s located around the worldworld

You can do your financial You can do your financial services yourself in your services yourself in your homehome

Incurred $227 million to Incurred $227 million to restructure its operationsrestructure its operations

WeaknessesWeaknesses Does not have as many Does not have as many

services as a traditional services as a traditional brokerage firmbrokerage firm

Distribution of money, Distribution of money, expendituresexpenditures

Revenue is fallingRevenue is falling Regaining the investors Regaining the investors

confidence backconfidence back

IFEIFE

KEY INTERNAL FACTORS WEIGHT RATINGWEIGHTED

SCORE

Internal Strengths      

1. Rich suite of products 0.05 3 0.15

2. Access to accounts 24/7, any day 0.10 4 0.20

3. Discount on brokerage fees 0.15 4 0.60

4. Located and have access through the world 0.10 4 0.40

6. ATM's located around the world 0.10 4 0.40

7. You can do your financial service in your home 0.05 3 0.15

8. Incurred $227 million to restructure its operations 0.15 4 0.60

Internal Weaknesses      

1. Does not have many services like traditional firms 0.05 2 0.10

2. Distribution of money, expenditures 0.15 1 0.15

3. Revenue is falling 0.05 1 0.05

4. Regaining the investors confidence back 0.05 2 0.10

TOTAL 1.0 2.90

SWOTSWOT

SPACESPACE

IE MatrixIE Matrix

Grand Strategy MatrixGrand Strategy Matrix

Key RatiosKey Ratios

• Rev: 1.63BRev: 1.63B• Market cap: 11.24 BMarket cap: 11.24 B• Return on assets: 1.18%Return on assets: 1.18%• Return on equity: 15.86%Return on equity: 15.86%• REV. per share: 4.388REV. per share: 4.388• Total Debt: 17.39 BTotal Debt: 17.39 B• Total debt to equity: 5.114Total debt to equity: 5.114• Operating Cash: 568.77MOperating Cash: 568.77M

Different StrategiesDifferent Strategies

Acquire other firms in order to Acquire other firms in order to diversify the services offered to diversify the services offered to clientsclients

To restructure the internal To restructure the internal organization of E*Trade in order to organization of E*Trade in order to compete with competitorscompete with competitors

QSPMQSPM

Decisions Decisions

Restructurization of the internal Restructurization of the internal aspect of E*Trade aspect of E*Trade • QSPM numbers signify thisQSPM numbers signify this

ImplementationImplementation

Distribute the money throughout the Distribute the money throughout the companycompany

Include everyone involved with Include everyone involved with E*trade to put suggestions where the E*trade to put suggestions where the company needs to be reformedcompany needs to be reformed

Short termShort term Long termLong term

EvaluationEvaluation

Re-evaluating the strategic planRe-evaluating the strategic plan Financials for money flowFinancials for money flow Quarterly reportsQuarterly reports CompetitorsCompetitors Work on any suggestions that Work on any suggestions that

continue to appear continue to appear

Update!Update!

As of this year E*Trade is 5As of this year E*Trade is 5thth in the in the Top Investment Brokerage FirmsTop Investment Brokerage Firms

ReferencesReferences

http://www.etrade.comhttp://www.etrade.com http://finance.yahoo.comhttp://finance.yahoo.com Strategic Management Concepts and Strategic Management Concepts and

CasesCases