Ameritrade Case

Problem Statement
Louis-Henri Jardins is considering opening a European online brokerage. He is evaluating the economic factors of such a business using Ameritrade as a model.
Analysis of Economic Model
The short-term economic model for an online brokerage relies on heavy upfront advertising, earned interest, and the management of revenues and costs per trade. Advertising is used to build brand awareness and to bring customers to the website. The brokerage’s value proposition of “convenience, cost, choice”, or other services is expected to convince the customer to open an account. The firm then earns money from interest on that balance and from customer trades. In the long-run, the brokerage hopes to create enough switching costs and loyalty so that the customer deposits more money and continues to trade.

SENSITIVITY ANALYSIS
The following sensitivity analysis is based on Henri’s Ameritrade analysis. The account profit and customer lifetime value calculations can...