Porters Five Forces ….In Perspective with Banking

Industry

Group Members

 Name Roll Numbers

Prashant Mirgule 52

Rinki Haldar 14

Karunakar Niwate 53

What is Porters Five forces…

Competitive

Rivalry

Threat of New Entry

Buyer

Power

Threat of

Substitution

Supplier

Power

This is useful Analysis, because it helps you understand both the strength of your current competitive position, and the strength of a position you're considering moving into. 

Threat of New EntrantsThreat of New Entrant : Low

New banks entering the market each year the threat of new entrantsshould be extremely high However, due to mergers and bankfailures the average number of total banks decreases.

Factors Affecting New Entrants

Customer Preferences

The biggest barrier of entry for the banking industry is trust

Low Customer Reliability on New Banks

It is nearly impossible for new banks to enter the industry offering the trust and full range of services as a major bank.

Threat of New Entrants (Contd.) Rules, Regulations and Licensing

In India as per RBI’s guidelines securing licenses is not very easyNew entrant has to undergo criteria :

Fit and proper Paid-up capitalLending norms

Eg. IDFC and Bandhan

Other Threat of New Entrants

If new entrant offering Very good banking services with higher interest rates

If offer its services with Expanded network in reachable as well as non reachable areas

Bargaining Power of Supplier

The Bargaining power of supplier : High

The power of supplier is based on market

The capital is the primary resource.

The four major suppliers of capital is,

Customer Deposit

Mortgage and Loans

Mortgage baked securities

Loans and other financial institutions

Bargaining Power of BuyerThe Bargaining Power of Buyer : High

Factor Influencing Bargaining Power of buyers

Technology Influence on Individual Customer

Individual Need

Multiple Options

Switching Cost

Loyalty of Customers

Threat of SubstitutesThreat of Substitute : Medium

Largest threats of substitution are not from rival banks but from non-Financial competitorsBanking ServicesInsuranceMutual fundsFixed Income Securities

Risk Taking Customer Attitude

Interest Rate of Loans

Payment Methods

Competitive RivalryPower of Competitive Rivalry : High

Banking Industry Is Highly competitive

Competition about Best and Quick Services

Acquisition and Merger with Existing Banking Players

New Banks must attempt to lure clients away from competitor banks by offering,

Lower FinancingHigher Interest RatesInvestment and other servicesGreater Convenience

e.g. Yes Bank 7%

Thank You…