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Team Presentation. September 16, 2004 Mahn Chey Sandra Chong Gerald Koh Jeong Min Lee Jun Kyu Lee Cynthia Morikone. Contents. Overview Business Model Competitive Structure Value Chain Analysis SWOT Analysis IT Use Q&A. Overview.

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Presentation Transcript

Team Presentation

September 16, 2004

Mahn Chey

Sandra Chong

Gerald Koh

Jeong Min Lee

Jun Kyu Lee

Cynthia Morikone


Contents

Contents

Overview

Business Model

Competitive Structure

Value Chain Analysis

SWOT Analysis

IT Use

Q&A


E trade financial has emerged as a diversified financial services company

Overview

E*TRADE FINANCIAL has emerged as a diversified financial services company.

  • Website : www.etrade.com

  • Core strategy is to create value for customers and competitive advantage by utilizing technology primarily through electronic delivery channels

  • The third largest online brokerage and a leading site for active traders.

  • More than 4 million account holders trade stock through online services, the Internet and phone.

  • Power E*TRADE : $9.99 flat commissions and 9-second execution guarantee

  • The eighth largest OTS1)-regulated financial institution.

  • The second largest domestic ATM network

Products

Customers

  • Retail

  • Corporate

  • Institutional

  • Brokerage

  • Banking

Channels

  • Web

  • ATMs

  • Financial Centers

  • Relationship Managers

  • Call Centers

1) OTS: Office of Thrift Supervision (U.S. Dept. of Treasury)

Source: Yahoo! Financial, Hoover’s Online, E*TRADE website


Overview – Brief History

Building on its foundation in online brokerage, E*TRADE has expanded to provide an integrated financial services

  • 1982 William Porter founded E*Trade, an electronic brokerage service for stockbrokers

  • 1992 Established E*Trade Securities, whichbecame one of the pioneers in electronic brokerages

  • 1996 Began offering its services on the Internet with the launch of its website www.etrade.com

  • 1996 IPO

  • 1998 Began to position itself globally (Australia, Canada, Germany, Israel, Korea and Japan)

  • 1999 Acquired Telebanc, an online bank with more than 100,000 depositors, and started E*TRADE Bank

  • 2000 Acquired more than 4,000 ATMs from XtraCash ATM, Inc.

  • 2001 Began the consolidation, restructuring and exit of certain international brokerage operations

  • 2002 Became E*TRADE Financial

  • 2003 Progressing on its restructuring plan implementation

Source: Yahoo! Financial, Hoover’s Online, E*TRADE website


E trade provides a wide array of financial services to retail corporate and institutional customers

Business Model – Products and Services

E*trade provides a wide array of financial services to retail, corporate, and institutional customers

E*TRADE Product and Service Offerings

Retail

Corporate

Institutional

Brokerage

  • U.S. retail

  • International retail

  • Professional trading

  • Stock plan administration

  • Options management

  • Institutional marketing making

  • Cross-border trading

  • Independent research

Bank

  • Deposits (checking, savings)

  • Credit cards

  • Mortgages

  • Consumer finance

  • Insurance

  • ATM Network

  • Money management programs

  • Employee banking

  • Asset management

  • Investment portfolio

  • Correspondent mortgage

Source: E*TRADE 10-K, 10-Q SEC Filings, www.etrade.com


Diversification drives revenue growth

Business Model - Revenue

Diversification drives revenue growth

Revenue growth (1996-2002)

Net Revenues (2002)

Unit: Million $

Other banking related revenues

$ 1,326 Million

Gain on sales of loans

held-for-sale and securities

Gain on sales of

originated loans

Commissions

Net banking

interest income

Net brokerage

Interest income

Other

brokerage

related

revenue

$ 52 Million

U.S. retail

brokerage

Principal

transactions

Banking

Brokerage

$459 Million (34.6%)

$867 Million (65.4%)

Source: E*TRADE 10-K SEC Filings


Cost of services and operating expense are 43 and 38 respectively as a percentage of revenue

Business Model - Cost

Cost of services and operating expense are 43 % and 38% respectively as a percentage of revenue.

Cost of services and operating expenses (2002)

($ million)

  • Cost of services

    • Customer service, system maintenance and technology operation.

  • General and administrative expenses

    • Executive and administrative personnel, professional services and other corporate activities

  • Selling and marketing expenses

    • Expenditures for advertising placements, creative development and collateral materials

  • Technology development

    • Design and development expense to internally develop software to add substantial new functionality

General

and

administrative

Selling

and

marketing

503

Technology

development

Total

net

revenue

Cost

of

services

Operating

income

Operating

expenses

Source: E*TRADE 10-K SEC Filings


Business Model - Profitability

However, profitability has been low and was severely strained in the recent economic slowdown and fierce competition

ROE, % (1996 - 2002)

Source: E*TRADE 10-K SEC Filings, www.etrade.com


1996 market space

Competitive Structure

1996 Market Space


Current market space

Competitive Structure

Current Market Space


Competitive structure using porter s model

Competitive Structure

Competitive Structure using Porter’s model


Value chain analysis

Planning/Management Environmental Corporate Services/Facilities Financials Legal External Relationships

Manage Human Resources

Develop & Maintain Systems/Technology

Procure Materials / Services

Target market & set risk criteria

Develop account strategy

Manage relationships/ cross sell

Define & price products

Setup & maintain account files

Process transactions

Calculate fees/interest

Process & maintain positions

Perform cash management

Perform customer service

Perform remittances

Prepare customer statements

Prepare deal confirmations

Brokerage

Perform Credit analysis

Structure & negotiate transaction

Review & Extend credit

Develop investment strategy

Perform collections

Perform asset recovery

Manage assets

Banking

Market

& Sell

Originate & Monitor Credit

Manage Investment

Process &

Maintain

Accounts

Customer

Service

Collect

Value Chain

Value Chain Analysis

Source: PriceWaterhouseCoopers


Swot analysis

SWOT Services/Facilities Financials Legal External Relationships

SWOT Analysis

Opportunities

Strength

Economic recovery

Increasing number of internet users

High switching cost

First mover & strong ecommerce brand

Strong IT background

Efficiency and scalability of its E-business model

Revenue diversification

Personalized and integrated online hub

Weakness

Threat

Customer’s service demand increase

Intense competition

High switching cost

Easily be commoditized

Hard to expand services that require human interaction


Leveraging it and passing savings on to customers

IT Use Services/Facilities Financials Legal External Relationships

Leveraging IT and passing savings on to customers

Early Stage

Today

  • IT Background: On-line brokerage services provider

  • Outstanding IT system

    • Reduced cost & commission  Attracted more frequent traders

  • Backbone of the company's strategy

    • Fully integrated financial operations

    • Digital Financial Media : wireless trading anytime, anywhere and from any device

    • Global cross-border trading network


Thanks! Services/Facilities Financials Legal External Relationships

Q & A


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