ETrade Securities, Inc.

By Chuck Glew, Rajiv Lal, Mark Lotke, Mario Palumbo, Marc Schwartz
1996 | Case No. M286
ETrade pioneered the electronic deep-discount brokerage business and experienced phenomenal growth by making extensive use of technology to achieve significant cost advantages over traditional firms. ETrade’s strategy has been to pass these cost savings from automation on to its customers as it amortized its fixed costs over a greater number of accounts. By 1996, a flood of new competitors are establishing Internet sites and ETrade has been dethroned as the price leader. While some executives within ETrade believe they should continue to lower prices and go head-to-head with eBroker, others believe the company faces a larger challenge from Charles Schwab’s entry into the market. Defending against Schwab would require focusing resources on enhancing its product/service offering, which might jeopardize ETrade’s low-cost position. ETrade must decide where it can create a profitable and sustainable position along the price/quality (service) trade-off.
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