STRATEGIC PLAN FOR E*TRADE

Strategic Plan for E*TRADE

Strategic Plan for E*TRADE

Implementation Plan

E*TRADE illustrates the value of identifying and focusing on specific dimensions of competitive differentiation. E*TRADE is a leading provider of cost-effective online financial services. As a self-service innovator, E*TRADE has become synonymous with the term “online trading” by being one of the first to establish a leading, branded destination Web site that offers self-directed investors compelling prices and direct access to high-quality, real-time information. (us.etrade.com)

As a start-up, E*TRADE illustrates an interesting aspect of e-business design: the tension between incumbent firms and start-ups. Incumbents and new entrants have different sets of advantages. Incumbent trading firms, such as Merrill Lynch, have cash, financing, customers, production assets, and brand. New entrants, such as E*TRADE, have a clean-slate business design, an entrepreneurial culture, and nimble decision-making processes.

Table A captures the key differences in strategic planning between successful large firms and innovative start-ups. At E*TRADE, the role of management is to create change through creative destruction. It's the classic “ready, fire, aim” so typical of the entrepreneurial spirit. Too often, in large companies, it's “ready, aim, appoint a committee.” Another difference between the start-ups and established companies is the payback period. In most traditional planning models, payback is often 5 to 10 years, with a conservative ROI of 10 percent to 15 percent. Start-up companies often aim for a payback of 2 to 3 years, with an exponential ROI in excess of 100 percent. (Pasher, 2011)

Up-and-coming companies, capable of a faster time to market are taking the lead, albeit for a short time. To understand the success of such underdogs as E*TRADE, we must examine why start-up companies are successful in creating an e-business strategy. For start-ups, the logic of e-business differs from that of established firms when addressing the five basic dimensions of strategy: assumptions about customers, customer segments, customer value, resources and capabilities, and product and service offerings. (Andersen, 2009)

Success Factors

The most important success factors of E*Trade is its Strong market position in online brokerage provides revenue visibility. E*Trade has been a pioneer in online stock broking and has been consistently ranked among the top online brokers. The company has been ranked as the number one online broker by SmartMoney for the third consecutive year. According to Barron's, E*Trade was awarded four out of five stars in 2010 'Online Brokers Survey' and described it as one-stop shopping destination, highlighting the company's mobile-trading technology, and listed among the best firms for both long-term and international investing. Strong market position in online brokerage provides revenue visibility for the company.

Another important success factors of E*Trade is the optimistic customer metrics providing scope for return to profitability. E*Trade management monitors number of metrics in evaluating company's performance. In FY2010, the company's end of period brokerage accounts increased to 2,684,311, as compared to 2,630,079 in FY2009, and 2,515,806 in FY2008. This represented a CAGR of 3.3% over the period 2006-10. Brokerage related cash increased to $24.5 billion in FY2010, as compared to ...