The Brokerage Industry For years, only professional stockbrokers with open ware could trade online. An individual in wanted to buy or sell s stock had to call a stockbroker and place an order, for which the stockbroker ould charge a co on. At full-service stockbrokers wich as Merrill Lynch, which offer clients detailed search reports, stock recon he value of the order, Thus, an order worth $10,000 could generate $250 in com The situation began to change in 19%4 when a smail discount broker. K. Aufhauser & Co. took advantage of new technology to become the first to offer its client the ability to trade online over and the cost saving wi atted on to customers In the form of lowe ural things changed this. First, the Int started to make rapid inreach Into the homes of indiv ricans. Second, within a short space of time, a mount of tion was being of the Internet Individual Investors soon found that they could go to sites such as the Motley Fool at America Online or Yahoo's finance site and get much of the Inform that they needed to make informed invest on. No berger did they have so all there ation. Third, a number of small compania quickly ledowed Aufurr er's lead and tock advanta for clients online trading for to are spillcantly below those offered by full-service stockbrokers in the physical world. Frully, the mar Individuals into the stock market, particularly young people, who were drawn to Inwriting in order to build up funds for retirement set up online trading accounts. The effects of these trends were before. The arrival of the internet had lowe dustry and con brokers. As the compet ion for the bus only 193%, online brokerage such as E"Trade were charging deep discount Is or 1,000 shares of stock trading at $20 a shure could cost the client of a full service broker in much as $500 In would be per E"Trade for $14 951 Attracted by Rich low prices, from little more than a trickle in 1914, the vo ades by individuals as of mid-2000 Discount broker Charles Schwab emerged as the leader of this new segment. At Brit ful-service brokers derided online trading as danger thing that They offered their dients sound financial advice and proprietary research reports. Home er, with as many as 40%% of all stock bro king much in the way of experience and with the rapid increase in the amount of Investment information that could be socease rent that full- service brokers needed to adapt to the new technol erred In June 1990 wh broker wed to the its clients the ability to trade online for a fee of $23.95 for E tion, Memil Lynch changed its pricing structure for many individual dierty, replacing a fee structure that was based o stock trades by individuals wou ted numbers of trades. Forecasts suggested that more than 50 hervice, account transfers to rival firms dried Me trail did the right thing, Soon sher the introduction of Merril's online In research and online trading made it a better value prop In Lite 2000, the online trading re to be a 60% decline in value over the next tecive months. As the stock market imploded, the volu as drop over 50% in the finit she months of 2001, which decimated the company's bottom line, leading to a 6Of fall in net carnet Moribrokers, Including "Trade, which but money in 2001 on a 40% decline in online trading volume temporary setback in the rise of online trading, or the end of the bop Case Questions 1 How did the rise of the Internet alter on Rtive forces in the brokerage Industry? How did the rise of online brok itability of the brokerage industry How did the change in com industry change the strategies requir What was Merril Lynch's strategy for paining nternet era? What is the strategy today (an of the time of the case)? What should be the strategy in the i ture