Use o 5 Forces model in Banking and Financial industry

1. Porters Five Forces ….
In Perspective with Banking Industry

2. Name Roll Numbers
Prashant Mirgule 52
Rinki Haldar 14
Karunakar Niwate 53

3. What is Porters Five forces…
Competitiv
e 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.

4. Threat of New Entrant : Low
New banks entering the market each year the threat of new entrants
should be extremely high However, due to mergers and bank
failures 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.

5.  Rules, Regulations and Licensing
In India as per RBI’s guidelines securing licenses is not very easy
New entrant has to undergo criteria :
Fit and proper
Paid-up capital
Lending 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

6. 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

7. The 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

8. Threat of Substitute : Medium
 Largest threats of substitution are not from rival banks but from non-
Financial competitors
Banking Services
Insurance
Mutual funds
Fixed Income Securities
 Risk Taking Customer Attitude
 Interest Rate of Loans
 Payment Methods

9. Power 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 Financing
Higher Interest Rates
Investment and other services
Greater Convenience
e.g. Yes Bank 7%

10. Thank You…