The Business Model for Charles Schwab Corporation and Comparison of Celltech and PPL Therapeutics - Assignment Example

Two cases write up Table of Contents Case 3 Question 3 Question: 2 4 Question: 3 4 Question: 4 5 Case 2 7 Question 7 Question: 2 8 Question: 3 9 Question: 4 9 Case 1 Question: 1 Who are the different customer groups for Schwab and what are their customer needs? Charles Schwab Corporation is one of the most popular brokerage houses of United States having a large number of customers. The customer group for Schwab can be categorised according to its area of operation. First group belongs to retail individual investors. The second group of customers includes independent investment managers. The mutual fund investors constitute another group. The last one belongs to the broker dealer and institutional investors who are also the customers of Schwab. However, Leemon has divided 30 million of US investors into three groups according to their investment behaviour. The first group comprising of 12 million investors want to pass on investment decision burden on other. The next group consisting of 3 million investors are able to take their own investment decisions. The leftover 15 million investors need proper advice and education for investment proposes. The primary requirement of the customers of Schwab is price and the corresponding security of their invested money. Trust is the most important component that builds customers’ confidence, which can be achieved by providing quality services. Therefore, the customers want lower price from Schwab for the services, information and advice it provides regarding the investment. Question: 2 What have been the business models and the revenue models for Schwab? The business model for Charles Schwab Corporation is based on transaction. The core operation area of the company is to provide services to the investors. The services provided by Schwab can be termed as financial services for investment purposes. Specifically, it provides financial services related to security brokerage. In order to develop conventional business model, it has introduced several innovative technology in service model to cater to its customers. This has lead to significant growth of the company. For convenient services, it has developed ‘telebroker’, ‘Schwablink’, ‘eSchwab’ and ‘onesource’. Schwab generates its revenue from the brokerage commission paid by its client for investment transitions. With the help of its conventional business model, it has been able to offer services like brokerages at a lower commission. In 1991, it became famous as low-cost broker. It made forward integration by purchasing Mayer and Schweitzer which helped the company to reduce bid-ask spreads. The company earns around 50% of its revenue from its commissions, 13% from principle transaction and rest from mutual fund services and interest revenue. Question: 3 How will Charles Schwab make money for the firm with eSchwab? During the late 1990s, the popularity of the internet increased significantly which revolutionised the world of business. Charles Schwab Corporation realized the utility of internet for the purpose of online trading. Schwab then attempted to develop an internet business model called eSchwab. Another primary reason for developing eSchwab was to compete with other small online brokerage companies. eSchwab mainly focuses on the computer savvy investors who find online trading more convenient. eSchwab is very important for self-guided investors as they can easily access research information with the help of internet. eSchwab was actually not initiated for online trading. However, during 1996 the company included online trading system with eSchwab. Apart from online trading facility, it also provides other important services. eSchwab offers several internet tools that help the client to sort and rank the valuable information. For example, it guides the investors to pick the best mutual fund or to select the best company to invest in. It helps Schwab’s customers to make their own investment decisions. Question: 4 What lessons do you draw from this case for the path of development of fast moving firms – especially with respect to customers Schwab experienced a rapid growth during 1990s, when it became one of the leading brokerage houses of United State. The success of Schwab is primarily indebted to the customers’ trust and their high satisfaction level. The business model of the company aims at providing value to the customers’ money. The service strategy of the company is the most important factor that has helped the company to grow in leaps and bounds. The company is able to cater to its client with lower commission charge than its customers as it seeks to implement new technology for establishing customer centred service strategies. Schwab has been successful in understanding the behaviour and needs of its customers. Case 2 Question: 1 Which firm is more successful scientifically? By this I mean which firm has had more break-through innovations and successes how they have been achieved. Celltech and PPL Therapeutics both were pharmaceutical companies famous for their innovative drugs and biological research & development. The technology used in PPL Therapeutics for developing the animal clones was more complex. PPL Therapeutics’ technology was primarily based on pronuclear injection for creating cloned animal producing proteins for human. Whereas, Celltech’s prime concern was to develop drugs for human consumption. The bio-technology they used was based on the production of animal cells and hybridomas that was important in producing monoclonal antibodies. Both the companies were known for the vast array of drugs they produced. In this respect, Celltech seemed to more successful in innovating, developing and marketing the products. Initially, Celltech used to produce drugs for clinical trials. The management of Celltech then realised that contract research was the major factor that was hindering the growth of the company and hence from 1990, it started conducting its own research for product development. PPL Therapeutics developed a joint team of scientists along with various strategies for developing new technologies. However, poor management and lack of proper funds led to abrupt abortion of some of these projects. Question: 2 Which firm is more successful financially? Here I ask you to carefully compare cash flows, profits and losses as well as stock market valuations The financial success of both companies was dependent on the success of the products and the sources of funding that it managed to congregate. Celltech was more financially stable than PPL Therapeutics. Milestone payments, vital skills and shared resources are some of the sources of funding necessary for research & development activities to be conducted. Most of its research costs were incurred from its collaborator; whereas PPL Therapeutics had to struggle for raising the necessary funds. The financial report of Celltech revealed a better position than PPL Therapeutics. In the initial days both companies were loss making units. With time, there had been significant increase in their gross profit or profit before tax. Celltech was a bigger company than PPL Therapeutics in terms of operation, turnover and total asset. Therefore, the scale of operation in terms of money was higher in Celltech. The stock price of Celltech was traded at a higher rate in exchanges than the stock price of PPL Therapeutics. After the success of cloning process of ‘Dolly’, the sheep; the share price of PPL Therapeutics reached 460p which was also its highest value; whereas, the average trading price of Celltech’s share was around 500p. Question: 3 Which firm has intellectual property rights and do they differ? Celltech and PPL Therapeutics were involved in the innovation of biotechnological production of various types of drugs. Both the companies developed their research & development team for this purpose. Most of projects initiated by Celltech were done in collaboration with other companies. The specific rights of producing the drugs jointly with its collaborators were used by both the companies. Celltech used to receive large amount of royalties for its rights used by the collaborators. However, PPL Therapeutics also had a US patent for using beta-lactoglobulin (BLG) gene promoter for producing protein in the milk. In 1999, to produce ‘Fibrin Sealant’, it had to acquire rights from Bristol-Myers Squibb. Question: 4 Why is there a difference between these measures? Celltech and PPL Therapeutics both were pharmaceutical companies and they both operated during the same period i.e. 1990s. Though both of them operated in the same sector, yet their mode of operation was vastly different. The overall structure and position of Celltech seemed to be more stable than PPL Therapeutics. The reason for which can be attributed to the successful production of necessary drug according to the demand of the market. The collaboration with other companies was another important step that paved the way for necessary funds. PPL Therapeutics received inadequate royalties as it didn’t develop its own rights. Therefore, it can be concluded that the management of PPL did not focus on product development. Thereby R&D team of the company was not able to develop the required rights for producing drugs that could have generated royalties. Read More