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Charles Schwab Company, Apple, Walt Disney Analysis

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Charles Schwab Company, Apple, Walt Disney Analysis

Introduction

Charles Schwab Company is an international brokerage firm that is based in San Francisco. Due to its wide range of operations and high number of clients seeking its services both as a financial advisor as well as an investment advisor, the company has opened quite a number of offices in US and in other foreign countries. This paper will keenly highlight the major economic contributions of Charles Schwab Company as a brokerage company. The paper will also intensively undertake the firms SWOT analysis.

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SWOT analysis

Strengths

The major strength that the company is proud of is the high number of clients which are approximately 7.8 million. With this high number of customers, the firm has positively enhanced the growth of individuals who seek its services whenever faced with an investment dilemma. Despite the fact that the company offers brokerage services similar to the one offered by its competitors, it is imperative to note that the fees and commission charged on its customers is lower as compared to other firms. However this does not affects the high level of profitability enjoyed by the company. Another strength that has enhanced the high performance of the company is the large number of advisers who are readily available to guide the company on how well to deliver its services. The over 5000 advisers gives a strong foundation for the company. This has positively enhanced its competitive advantage over its competitors.

Weaknesses

The company failure to form a strong strategy with other brokerage companies is one of its major weaknesses which have negatively affected its expansion strategies. For example, due to ineffective policies in terms of forming an alliance, the company failed to be compatible with US trust in 2000.In return both the companies experienced reduction of the customers’ loyalty as well as reduced value of their assets in the financial sectors in US stock market.

Opportunities

Charles Schwab Company was the first brokerage firm to conduct on line business. This was a great opportunity as compared to its competitors. While some of its rivals have not emulated use of e-marketing, others have not even recognized the importance of going global. In this regard, Schwab Company is in a better position to further expand its services especially in the current business environment when every firm is putting mechanisms to emulate e-marketing. Another opportunity that exists for the company is widening of its customers base. This is based on the fact that the company has continued to employ advisers who give their services on behalf of the company both to the individual investors as well as to investment companies.

Threats

The current cut throat competition in the business world is a major threat for the Schwab Company. The increased use of strategic marketing policies calls for equivalent strong marketing tactics by the company. Even though the company has done a reasonable use of current technology, there is a gap especially as a result of the global recession which if not effectively closed may lead to loss of clients and loss of revenue for the company. In this regard, it is prudent for the company to conducts more marketing research so as to have an upper hand in financial investment sector while at the same time keeping its competitors at a bay.

Competitive structure of the brokerage house industry using Porter’s five forces model

Threats by the substitute services and products

Charles Schwab Company has effectively applied the porter’s five forces in its operations. The first area is the recognization of threats by the substitute services and products. With the rising demand of the shares many companies have come with services which are offering high competition on the firm’s products. However, the company has adopted diversification of its product line as a way of counteracting its competitors. For example, through its 300 branches in the US, the company has launched new services including bond trading, mutual funds, annuities, investment research and more others. This did not only catch the competitors by surprise, but it also resulted to the reduction of the rivals’ market share.

Threat by new competitors

As mentioned earlier the financial market has attracted large number of firms. This has resulted to stiff competition in the sector. In order to safeguard its services from losing in the market, Charles Schwab Company applies market penetrating tactics. This entails adopting low prices for its products, low fees and commission for clients who uses their services. This has assisted the company in maintaining a competitive advantage over its competitors.

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Intensity of competitive rivalry

This is another porter’s aspect which the company has considered in its operations. One of the techniques which the company has put in place is the innovation in the information technology as well as in its products. Through its online services, the company has been able to put off other firms who have not invested in any online service. Secondly the company has involved advertising agencies so as to strength its marketing policies. For example, the firm chose RSCG New York as its advertising agency in 2004.This has positively increased its publicity through Television programs, bill boards and films.

Buyers power

To have a strong competitive position as compared to its competitors the company has embarked on providing the needs of its consumers. Likewise, the firm has emulated diversification of its products thus giving the clients opportunities to have wide range of services and products.

Suppliers’ power

Since its formation, the company has strengthened its relationship with its suppliers who range from legal advisors, to financial investors. In this regard the company has continued to utilize their high services leading to a continued good performance by the firm.

Financial analysis of Schwab Company

As at 29 January 2010, the company registered a sale of 10.5 million shares. This was an improvement of 0.7% from the end of December 2009.Similarly, the current level of earnings per share is at 18.29 US dollars. This has greatly attracted the stock of the company from majority of investors. The duty of the management therefore is to ensure that this level is maintained so as to maintain the profitability of the company at a high level. The divided yield has also risen to 13.94% in the recent years. Due to its history of paying divided to the shareholders, Schwab Company has greatly attracted high number of investors in its stock (Lynch et al, p 9).

Main elements of Schwab’s competitive advantage by the mid 1990’s

The main element of Schwab’s competitive advantage by the mid 1990’s was the acquisition of the Hampton Company, a US based retirement benefits firm. This greatly strengthened the company financial and marketing policies. Another competitive advantage was the strong relationship which existed between the CEO and the other members of staff. This resulted to higher performance by the entire company as compared to other similar firms in the financial sector.

The return and the objectives of Charles Schwab

The drop in the overall profit of the company in the second quarter of 2004, promoted the return of the Charles Schwab to take the position of CEO. This was after the board of directors questioned the competency of David Pottuck who was the leader of the company at that time. After his return, Charles aimed at increasing the companies’ financial advice to its customers in addition to getting appropriate avenues so as to increase the company revenues.

Apple is a large corporation that designs and manufactures electronics and computer products. The company is based in the United States and operates more than 280 retailing stores in different countries. It was incorporated in 1977 in California the United States. Apart from production of operating system software, the company manufactures computer hardware and multimedia software. Recently, the company diversified its product portfolio to consumer electronics.

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Apples SWOT analysis

Strengths

One of the greatest strengths of Apple is its sturdy branding in the electronics industry. The company enjoys a strong positive public image due to its effective marketing and publicity strategies. This strong branding ensured that the company sales for the year 2009 amounted to 43 billion US dollars. The company has invested in innovation and creativity leading to the production of quality products hence enhanced customer satisfaction and loyalty. Apple Corporation is one of the companies that have dedicated and competent employee. The management is very efficient while the other workforce is well trained and highly productive. Product diversification and market segmentation strategies have played a big role in positioning the company within the industry.

Weaknesses

Despite the huge investment in research and development, apple has not been able to consolidate its position in the market by increasing its market share. The company has not focused enough on those issues of concern to the customers like security and performance of their products. This means that the company is still in the thick of competition within the industry. The company has a shrinking financial base. More importantly, Apple has not paid any dividends to its shareholders for a very long time. Shareholders are a very critical component of the company and therefore Apple should come up with policies that will attract investments.

Opportunity

The emergence and growth of new markets for computer and electronic products has presented a big opportunity for Apple. The emergence of new powerful economies and the growth of information and technology industries in developing countries have opened new markets for the company’s products. The company has the technical and resource capability to meet the expansion in demand resulting from the emergence of these new markets.

Threats

Competition within the industry presents one of the biggest challenges to Apple. The company has to face the competition posed by hardware competitors like Dell Corporation, Microsoft and Cisco systems. In addition, there is threat from substitute products like music players and hardware devices.

The viability of the Macintosh product line is high. Macintosh is the original personal computer from Apple. The Macintosh product line has been improved from time to time to meet changing industry trends and customer needs. This continuous upgrading of product features like peripherals, storage, memory and design will lead to enhanced product performance.

iPod Product Line

The Apple’s iPod product line is very viable. There is a lot of publicity with this new electronic gadget and it is expected that the product will perform very well in the market. There is a rapidly growing global entertainment market that needs the iPod. However, the iPod will face stiff competition from rival companies like the Microsoft Zune.

Apple sustenance of its spirit of innovation and design leadership

Apple Corporation can sustain the spirit of innovation through increasing its budget allocation and avoid wastage of resources. In this way the company will be able to come up with its original products which do not conflict with those of its competitors such as Beatles or Creative technology. It is important to note that Apples’ legal cases with its competitors have resulted to high loss of revenues which should have been diverted towards innovation and staff motivation. The leadership style of Apple needs to adopt an international system. This can be achieved by opening of more branches which will be under the leadership of experienced managers. In this way the performance of the corporation will be greatly enhanced.

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Financial analysis of Apple Corporation

Apple incorporation has a history of not giving dividends. This has matched its competitors such as Dell incorporation and Cisco systems. As at 31st 2009, Apple Inc. had a gross profit of 1,635 million US dollars. With more than 900 million shares the company has significantly registered an increase in the gross profit up from 1.236 million US dollars registered in 2008.During its operations from 2006 up to 2009,the company has shown quite a high level of improvement in its performance. This has resulted to an average earning of 2.28 US dollars per share

As a potential and an optimistic investor I would buy the Apple stock. This is based on the fact that the company profitability has continued to grow significantly. As many corporations are intensively adopting strategic financial plans to address the impacts of global recession Apple stock will have good returns thus making it a very viable investment opportunity for me.

Walt Disney

Walt Disney is one of the world’s largest companies in the media and entertainment industry. Two brothers founded the company in 1924, where they dealt with animations, travel, Television and film production. Over some time, the company has expanded its operations. The firm operates in four major units, the studio entertainment, parks and resorts, media networks and the Disney consumer products.

Walt Disney SWOT analysis

Strengths

One of the strengths of the Walt Disney is its strong branding. Branding is the creation of positive image for the products in the market. The company has invested in attracting customers through the provision of quality products and services. In the same way, the company has successfully extended its brands while maintaining quality and value to its customers. Innovation and adaptation have also played a big role in enhancing the performance of the company. The company has well established divisions, which supports the product differentiation efforts. The segmentation strategies have ensured that the firm keeps its wide customer base satisfied thus enhancing satisfaction and customer loyalty. The other Strength for the Walt Disney Company is its financial position. The company is experiencing increasing trends in overall revenues and stabilization of profits (Hill et al, p 34).

Weaknesses

Walt Disney generates about 80% of its revenue in the United States. This over reliance on a single market is one of the weaknesses of the company. Poor management is another weakness that has posed a weakness to the company. For instance, the management should have guided the company to cross the borders, expand its operations and trade in the international markets. In addition, the company’s target customers are mainly children, which limit its business ventures.

Opportunities

Walt Disney has the opportunity to move into different market segments. There is a growing opportunity to cater for adult entertainment hence generating more revenue. Market development especially in developing economies presents another opportunity for the company. By spreading its revenue base the company can minimize business risks and expand its customer base. To improve its management practices, malt Disney can utilize the Disney school of management and training to enhance the performance of its employee. Reduction in operating costs and good inventory control management are the other opportunities that the company can use to cut on overall costs and increase its profit margins.

Threats

The media and entertainment industry is a very competitive sector. Walt Disney is constantly at the threat of this high competition. The competitive environment is even tighter at the international markets where the company plans to venture. Government policies present the other threat for the company. Outside the United States, the company will content with regulatory and laws practiced in different countries. Walt Disney is under the threat of low employee retention rates. This means that the company is facing a bigger problem of human resource management. Keeping the employee turn over low is a sure way of enhancing company stability.

In the 1990’s Disney engaged in animation technologies, theatre and publishing ventures up until the time of merger with Capital Cities/ABC. During this time, the company’s operations focused more on film production through the Walt Disney motion Pictures Group. Disney expanded its business operations and acquired the ABC broadcasting network. This venture included the Disney cable television, ABC family, publishing and theatre units.

The main factors that influenced Michael Eisner decision to take over ABC were to use ABC’s strong branding to diversify Disney business operations. In addition, the take over of ABC was a strategic venture that Michael Eisner wanted to use to enhance Disney’s competitive advantage. This take over meant that Disney had diversified its products and services which in effect led to a bigger market share and hence competitive edge. Disney’s revenues and profits were expected to grow tremendously after the take over.

However, the merger with ABC brought in some disadvantages. The company did not have the managerial capacity to drive the immense business portfolio. In effect, the management was overwhelmed with key tasks like planning and coordination. It is also very clear that this merger with ABC reduced the efficiency once associated with the Disney. The diversification of business interests proved too difficult for the company to focus on specific markets, which was a big disadvantage for the Walt Disney.

A current financial analysis of the company indicates that Walt Disney’s total revenue for 2009 was 36,000 million dollars, which is less than the total revenue collected in 2008 at 37,800 million dollars. The gross profit for 2009 also dipped to 5,700 million dollars from 7,400 million dollars the previous year. The company’s income after tax was 3,600 million dollars for the year 2009, which is lower than that of the previous year that stood at 4,500 million dollars.

As a result of the merger between the two companies, Disney is facing management challenges. This is due to the expansion and diversification of Disney’s business interests which require an efficient organizational structure. Product differentiation and branding are some of the difficulties associated with the merger of the two companies. The company faces the problem of implementing effective marketing and promotional strategies. It is also apparent that segmentation and targeting tactics will need a review to enhance the company’s competitiveness.

References

Hill, Charles and Jones.Gareth strategic management, Hoighter Mittin. Boston: Macmillan Publishers, 2010, p33-39

Lynch, M, Pierce, Fenner and Smith. Revising a Sonorous Piece of Americana. The New York Times, 1957.

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