Who is your competition? How are their actions in the marketplace going to affect your current bottom line and future planning? To answer those questions, you must analyze the competition. Porter inthe five forces model looks at five specific factors that help determine whether or not a business can be profitable, based on other businesses in the industry.
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. The Porter's Five Forces Model 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 Evaluation of banks using porters 5 forces analysis considers the competition level among the leading companies in an industry, and then considers four other factors that affect the industry and the success of companies within it: It is a universal banking company that provides commercial, retail and investment banking services.
The company operates as a bank holding company with a number of subsidiaries engaged in the company's four main areas of financial enterprise: One of the industry elements that intensifies the importance of competition is the relatively low switching costs that consumers face, especially in the retail and commercial banking areas.
The major banks, much like the principal cell phone companies, are continually extending offers to draw customers away from other banks. JPMorgan deals with industry competition in three main ways.
It attempts to distinguish itself in the marketplace primarily on the basis of its long, recognized heritage and experience. It aims to stay on the cutting edge of offering customer convenience and low-cost and cutting-edge services.
It has a history of acquiring smaller banks, removing some potential competition from the marketplace.
The Bargaining Power of Consumers Consumers' overall bargaining power is an important factor influencing the industry. Individual consumers, especially in the retail banking marketplace, have relatively little bargaining power since the loss of any one account has a minimal impact on JPMorgan's bottom line.
However, in the aggregate, the bargaining power of consumers is greater, since the bank cannot afford to suffer mass defections of depositors. Corporate and high net worth individual HNWI clients have relatively greater bargaining power since the loss of sizable accounts and sources of revenue can more substantially affect the bank's profitability.
JPMorgan addresses the issue of customer bargaining power primarily by extending attractive offers to potential new clients. It also continually makes efforts to get existing clients to open additional accounts and sign up for additional services, which effectively increases the switching cost for consumers by making it more troublesome for them to transfer their finances to another bank.
The Threat of Substitute Products The threat of substitute products has increased in the banking industry, as companies outside the industry have begun to offer specialized financial services that were traditionally only available from banks.
Examples of such substitute products include payment processing and transfer services such as PayPal and Apple Pay, prepaid debit cards and online peer-to-peer lenders such as Prosper. The intrusion of these substitute services has cost both JPMorgan and the other major banks considerable revenue.
JPMorgan has responded with initiatives that include a division focusing on small business lending, and establishing its own digital wallet service, Chase Pay.
Topics: Bank, Tesco, Royal Bank of Scotland Group Pages: 5 ( words) Published: May 5, This report will investigate how Porter’s five forces might be used to evaluate the future potential of modern banks, such as Tesco Bank and Virgin Money. 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-. 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.
The Bargaining Power of Suppliers The two main suppliers for a bank are the depositors, who supply the primary resource of capital, and employees, who supply the resource of labor. In regard to depositors, the situation is essentially the same as that delineated under the bargaining power of consumers.
Individual depositors, other than major corporate or HNWI depositors, have relatively little bargaining power but taken as a whole, their bargaining power is considerable.
JPMorgan's approach to dealing with this market force is, again, to work diligently to attract new clients and to increase the extent to which existing depositors hold funds and access services through JPMorgan.
In regard to the bargaining power of suppliers of labor, individual suppliers have little bargaining power other than major executive employees. JPMorgan must address its overall bargaining power by offering an attractive salary and benefit packages to retain the best employees.
The Threat of New Entrants to the Industry The threat of new entrants as a significant force within the industry is relatively small.Analysis of Intel Corporation using the Porter’s 5 forces Model Intel Corp is an American company famed for making semiconductor chips, microprocessors, network interface controllers, flash memories, graphic chips and other components found in many computers and mobile phones.
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. This report will investigate how Porter’s five forces might be used to evaluate the future potential of modern banks, such as Tesco Bank and Virgin Money.
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.
Vol. 5. No. 3. September Issue. Pp – 36 An Evaluation of the Nigerian Telecommunication Industry Competitiveness: Application of Porter’s Five Forces Model Bongo Adi1 Porters five forces model which offers the framework we employ as methodology of research. Industry analysis—also known as Porter’s Five Forces Analysis—is a very useful tool for business strategists.
It is based on the observation that profit margins vary between industries, which can be explained by the structure of an industry.