The literature suggested that “Rapid changes in the external environment of organisations have been accompanied by calls for accountants to change the nature of information they provide, the skills they possess and the role they play in the organisation. The proposed changes, which are encapsulated under the phrase accounting for strategic positioning or strategic management accounting are two pronged. On one hand accountants are required to reposition themselves in the organisation hierarchy where they will be involved in the formulation, implementation and choice of strategies. Accountants are also being urged to adopt a range of techniques whose emphasis is futuristic and external to the firm especially emphasizing the importance of monitoring customers and competitors.” (Nyarnori, 2000). Based on my studies on the industry of stock brokerage, I agree with the statement that “The tools and techniques that were covered in the Strategic Cost Management and Strategic Business Analysis courses are very useful in providing decision oriented information to senior management in my organisation and such information will ultimately enhance its corporate value.” The essay (How Porter’s Five Forces Model shapes strategy for a new and small-size stockbroker) may be one of applications of those techniques learnt from the Strategic Cost Management and Strategic Business Analysis .
The industry of securities brokerage (or named stockbroker) may be divided into three categories: the multinational financial giants, the traditional adviser-based stockbrokers and the internet-based stockbrokers.
The large-scale multinational financial giants are probably represented by the renowned investment banks such as Goldman Sachs, UBS, Deutsche Bank, JPMorgan, and Merrill Lynch etc. They may mainly focus on advising for large institutional and high-net worth clients.
The traditional adviser-based stockbrokers are generally represented by the well known local broker houses, such as Sun Hung Kai Financial in Hong Kong, KGI Asia in Taiwan and HaiTong Securities in China. They may concentrate on their own local market or region retailer and institutional clients.
The internet-base stockbrokers were initially occurred on dotcom boom of around year 1996 and the typical representatives are eTrade, Charles Schwab and Scottrade. They provide speed securities tradings and low commission to the public.
2. Review of the Literature
The classical papers of Michael Porter will be largely used in this essay. “Understanding the forces that shape industry competition is the starting point for developing strategy” (Porter, 2008). The
Porter (2008) Five Forces Model are shown as below:
This diagram is clearly shown what kind of forces determine the profitability of an industry. The model is used as a framework for analyzing the competition of different categories of stockbrokers. The degree of competition within the stockbroker industry depends on those five forces:...