Evaluation of banks using porters 5

Maverick Updated October 20, — 3: JPM reveals that the strongest forces that the company must take into account are competition from rivals in the industry, the bargaining power of consumers and the threat of substitute products. Bargaining power of suppliers is a lesser force, and the threat of new entrants to the industry is minimal.

Evaluation of banks using porters 5

This question has occurred through recent research into market structure and has highlighted its significance in the current market place by introducing more competition to traditional banks, supermarkets and other businesses.

The plan should include the additional four factors; customers, suppliers, potential entrants and substitute products. Barriers to entering the banking industry include regulators such as the Financial Services Authority. Banks have a number of regulations they have to meet in order to get a banking licence.

The UK financial system: Thompson Thus it is very costly. Likewise this is not the only cost, when banks start-up they need a wide range of specialist contractors, buildings, and I.

For example Tesco Bank recently built a new building in Glasgow creating new jobs, thus it is pricey. T, it can be turned into another asset, so if you are an established firm like Tesco that could put these assets to other use, this is an attractive opportunity.

To conclude, the set up costs of setting up a bank are enormous, therefore the chance of new banks entering the market is low, unless they are an already accomplished business with the finance to support them.

Analyzing Porter's Five Forces on JPMorgan (JPM) | Investopedia

Every industry requires suppliers and in banks they would supply I. T-computers, printers, telephony equipment and software. They would also need supplies of stationary-paper, pens etc.

For example the Glasgow and Newcastle insurance and banking customer services in Tesco Bank signed a deal with Cable and Wireless for their managed data centres and hosted telephony King, Although the service is for businesses instead of homes, there are now many competitors in the cable industry, so the suppliers do not have as much power.

However, in products like software, because of the specialist, patented, technology that has developed, they can charge high prices.

Nevertheless in Tesco Finance they have managed to take control over some software suppliers because they are a reputable company and suppliers want to be associated with them. This leads on to the factor buyer power.

Tesco are a great example of having high buyer power through a whole range of strengths. Their brand identity gives them bargaining leverage when they need supplies. Suppliers would find Tesco or Virgin Money attractive to supply for because they own a large per cent of the market share in their industries, Tesco dominating with By supplying to a market leader, it could open doors to other contacts who want to use their product, and because Tesco supermarket has already proven their successfulness, it would be true to say that the bank will expand too.

This gives the chance to supplier to supply more to Tesco as the company grows, increasing their profits. Moreover they have the power of economies of scale.Essay Question: Critically discuss Porter's 5 forces model and argue whether the model still has relevance for today's modern business environment.

Introduction "Strategy is defined as the act of establishing a business direction that will successfully lead . 5. Threat of substitute products or services This force studies how easy it is for consumers to switch from a business's product or service to that of a competitor.

A.T. Kearney | FIve ForceS ShApIng The BAnKIng InduSTry 1 A fter months of turmoil, the banking industry is starting to show signs of stability. In their struggle to survive, however, many insti-. Abstract, Porter’s Five Forces model is a powerful management tool for analysing the current industry profitability and attractiveness by using the outside-in perspective.

Within the. Porter’s Five Forces model is used to analyze the long-term attractiveness of an industry. Understanding the interaction of these forces with the existing competing organizations helps explain the differences in profitability amongst industries.

It also helps a company decide whether or not to enter an industry.

Evaluation of banks using porters 5

The five forces model, developed by Michael Porter, is a business analysis tool that examines the relative strength of five primary forces that govern competition within virtually any industry.

Porter's Five Forces Model: Tips and Examples