Porter’s Five Forces Analysis of Charles Schwab Corporation
Key Facts
| Name | Charles Schwab Corporation |
| Industry |
Banking and Financial Services |
| Founded | 1971 |
| Headquarters | San Francisco, California, United States |
| CEOs |
Walter W. Bettinger II |
| Revenues | US$18.52billion,2021
US$ 20.76 billion,2022 |
| Profit | US$5.36billion, 2021
US$ 6.63 billion,2022 |
| Competitors | Morgan Stanley, JP Morgan Chase, Bank of America, Citigroup, Wells Fargo |
Company Overview
Headquartered in San Francisco Charles Schwab is a leading financial firm holding largest funds globally as of October 2022 of US$ 72.25 billion.The corporation was founded by Charles R. Schwab in 1971. The company gave record performance with revenues of US$ 20.76 billion with a revenue growth of 12% and with Net Income of US$ 6.63 growth of 24% in FY 2022 with Net Asset of US$ 551.77 billion.It is placed 142th on the Forbes Global2000 list and 188th on Fortune 500 list.
Porter’s Five Forces Analysis
Porter’s Five Forces Analysis is used to determine the company’s competitive position reference to it’s Industry for better strategizing the companies’ operations for higher profits and less competition, defined by Professor Micheal E. Porter in 1979,at Harvard Business School.
Charles Schwab Corporation Rivalry among Existing Competitor
- Charles Schwab Corporation:It is a banking and financial services organization that provides wealth management, securities brokerage, banking, asset management, custody, and financial advice.Its annual revenue increased from US$5.44 billion in 2013 to US$11.69 billion in 2020 and then jumped significantly to US$18.52 billion in 2021. Its last three year net income is US$5.36 billion, US$3.04 billion, and US$3.53 billion in 2021, 2020 and 2019 respectively. Its total assets amounts to US$ 667 billion as of FY 2021.
- Morgan Stanley:Morgan Stanley is amongst top five financial services providing companies in the world with a market share of 5.4% of the total global financial services transaction.Its revenue increased from US$31.30 billion in 2010 to US$48.76 billion in 2020 and then jumped significantly to US$59.76 billion in 2022. Its last three year net income is US$15.12 billion, US$11.18 billion, and US$9.24 billion in 2021,2020 and 2019 respectively. Its total assets amounts to US$1,222.23 billion as of FY 2021.
- JPMorgan Chase:It is the world’s leading financial institution with largest market share of 8% of the financial global market. Its net income has steadily increased from US$8.48 billion in 2005 to US$48.33 billion in 2021, despite the 2008 financial crisis, and no losses have been reported in the previous 17 years. Its net revenue has steadily increased from US$62 billion in 2006 to US$126.65 billion in 2021. Its total assets have increased from US$2,031.99 billion in 2009 to US$3,743.57 billion in 2021. JPMorgan Chase was the largest bank in the United States as of December 31, 2022, with a market value of US$393.34 billion. On this criteria, Bank of America was the second-largest bank, followed by Wells Fargo.
- Bank of America:Bank of America is amongst top banking services provider based in USA getting edge by transforming it’s services via digital banking. Its total assets have increased from US$2,230.23 billion in 2009 to US$3,169.49 billion in 2021. Its revenue increases from US$31.56 billion in 2003 to US$111.39 billion in 2011, then maintains between US$83 billion and US$94 billion from 2012 and 2021. Its past three years’ revenue was US$89.11 billion, US$85.53 billion, and US$91.24 billion for 2021, 2020, and 2019, respectively. Their net income fluctuates as follows: a profit of US$6.3 billion in 2009, a loss of US$(2.2) billion in 2010, and then a profit of US$31.98 billion in 2021.
- Citigroup: It provides financial services and goods. Its revenue ranges from US$77.64 billion to US$69.53 billion from 2011 and 2021, with last three-year revenue of US$71.90 billion, US$74.30 billion, and US$74.29 billion for 2021, 2020, and 2019, respectively. Its net income fluctuates as follows: it incurs a large loss of US$(27.70) billion in 2008, followed by a loss of US$(1.60) billion in 2009 during the global financial crisis; thereafter, it continues to produce profits except for a loss of US$(6.80) billion in 2017.
- Wells Fargo:Well Fargo provides a wide range of services from banking, insurance to business lending and financial services. From 2009 and 2021, its revenue ranged from US$74.26 billion to US$88.9 billion. Its last three years of sales were US$78.49 billion, US$74.26 billion, and US$86.83 billion in 2021, 2020 and 2019 respectively. It has not declared a loss since 2009, and its profit for 2021 is US$21.55 billion.
Charles Schwab Corporation Threat of New Entrants
- High Capital Investment: To run a banking company, requirement of capital is very high that discourage new players to enter the market, JP Morgan Chase, Charles Schwab, Citigroup,Bank of America , Morgan Stanley and Wells Fargo owns total assets amounting to US$3,740 billion, US$ 681 billion, US$2,394.11 billion, US$3,288.22 billion,US$1,222.23 billion,US$1,939.71billion.
- Acquisitions in particular niche:If we look at the asset management specialty in the banking industry, Charles Schwab is in the top three. Charles Schwab joined with TD Ameritrade to become one of the world’s largest asset management organizations. With Schwab now worth US$4.05 trillion and Fidelity at US$8.30 trillion, Morgan Stanley is attempting to play catch-up in terms of asset size.
Charles Schwab Corporation Bargaining Power of Suppliers
- Major players in the market: Charles Schwab Bank has a high bargaining power when it comes to suppliers because it is a large and established financial company with a strong reputation. It has a large customer base, and it can use its size and reputation to negotiate better deals with suppliers. Additionally, it has a long history of successful business relationships with suppliers, which gives it additional leverage.
- Diversified Pool of Securities:Charles Schwab maintains a highly diversified pool of securities including mortgage backed securities and backed by institutions like Bank of America so it is highly supplied and backed by Financial Institutions and Investors.
- Strong Research Department:Charles Schwab has a strong research department which is managing it’s fund like Charles Schwab also has subsidiaries like CSIM (Charles Schwab Investment Management) for a better specialized wing to manage it’s funds and over edge on others in the industry.
So Over all Charles Schwab is managing a control over it’s fund supplies and management side.
Charles Schwab Corporation Bargaining Power of Buyers
- Assets under management:From 2016, the share of Charles Schwab’s assets under management (AUM) dedicated to exchange traded funds has increased more than 400%, reaching US$1.57 trillion in 2021. In 2021, mutual funds will get US$2.3 trillion, while stock and other securities will receive US$3.3 trillion.
- Number of New Accounts opened:From 2013 and 2021, the number of accounts established at Charles Schwab Company rose considerably. More than 7.3 million new accounts established with Charles Schwab by 2021. This shows customer satisfaction with the bank.
- Fastest growing Charles Schwab funds:The Schwab Fundamental US Small Business Index Fund was the fastest growing investment fund run by Charles Schwab, a US asset management firm. The mutual fund earned an annual return of 62.35% in the year ending September 1, 2021. The Schwab Fundamental US Small Co. Index ETF was also the fastest rising exchange traded fund (ETF) at 55.23%.
Charles Schwab Corporation Threat of Substitute Products or Services
- Digital Payments:In 2023, the total transaction value in the digital payments industry is expected to reach US$9.47 trillion. Overall transaction value is estimated to rise at an 11.79% annual rate (CAGR 2023-2027), culminating in a total amount of US$14.79 trillion by 2027. Digital commerce is the market’s largest category, with a total transaction value of US$5.99 trillion predicted in 2023.
- Growth of Credit Card Giants:Visa is the indisputable global payment processor leader, processing more than US$10 trillion in payments each year. According to the data, Apple Pay and Alipay are the world’s 2nd and 3rdlargest payment providers, with each exceeding US$6 trillion in payments handled every year.
References
- Charles Schwab Corp., profile, Forbes
- Charles Schwab Corp., profile, Forbesglobal2000
- Charles Schwab Corp., profile, Fortune500
- Net revenue of Charles Schwab from 2013 to 2021(in million U.S. dollars) at statista
- Charles Schwab annual report 2021 at officialweb
- Net income of Morgan Stanley from 2010 to 2021(in billion U.S. dollars) at Statist
- Net revenues of Morgan Stanley from 2010 to 2021(in billion U.S. dollars) at Statista
- Largest Investment Firms by Assets Managed at statista
- Number of new client accounts opened at Charles Schwab from 2013 to 2021(in 1,000s) atstatista
- Assets under management (AUM) of Charles Schwab Corporation from 2016 to 2021, by asset class(in trillion U.S. dollars) atstatista
- Investment funds owned by Charles Schwab globally which grew the fastest over the year through September 1, 2021, by one year return atstatista
- Digital Payments Catch up to Credit Card Giants at statista
- Digital Payments – Worldwide at Statista
- Net revenue of JPMorgan Chase from 2006 to 2021(in billion U.S. dollars) at Statista
- Net income of JPMorgan Chase from 2005 to 2021(in billion U.S. dollars) at Statista
- Bank of America Annual reports,1998 to 2021 Annualreports.com
- Total assets of Bank of America from 2009 to 2021(in billion U.S. dollars) at Statista
- Revenue of Citigroup from 2011 to 2021(in billion U.S. dollars) at Statista
- Total revenue of Wells Fargo from 2009 to 2021(in billion U.S. dollars) at Statista
- Largest commercial banks in the United States in 2021, by revenue(in billion U.S. dollars) at Statista
- Annual report 2021, JP Morgan
- Largest commercial banks in the United States in 2021, by revenue(in billion U.S. dollars) at Statista
- Total assets of JPMorgan Chase from 2006 to 2021(in billion U.S. dollars) at Statista
- Net income of Bank of America from 2009 to 2021(in billion U.S. dollars) at Statista
- Net income of Citigroup from 2005 to 2021(in billion U.S. dollars) At Statista
- Net income of Wells Fargo 2009 to 2021(in billion U.S. dollars) atStatista
- Charles Schwab, Company History