Question

Assess whether using PEST, SWOT or Five Forces Analysis is more effective in the case of Barclays Bank Justify your answer (500 words)

Answer 1

I think Porters five forces analysis is suitable for Barclays Bank. Because this analysis will give you complete picture about the external forces.

Barclays PLC Porter Five (5) Forces Analysis for Financial Industry

Threats of New Entrants

New entrants in Foreign Money Center Banks brings innovation, new ways of doing things and put pressure on Barclays PLC through lower pricing strategy, reducing costs, and providing new value propositions to the customers. Barclays PLC has to manage all these challenges and build effective barriers to safeguard its competitive edge.

How Barclays PLC can tackle the Threats of New Entrants

• By innovating new products and services. New products not only brings new customers to the fold but also give old customer a reason to buy Barclays PLC ‘s products.
• By building economies of scale so that it can lower the fixed cost per unit.
• Building capacities and spending money on research and development. New entrants are less likely to enter a dynamic industry where the established players such as Barclays PLC keep defining the standards regularly. It significantly reduces the window of extraordinary profits for the new firms thus discourage new players in the industry

Bargaining Power of Suppliers

All most all the companies in the Foreign Money Center Banks industry buy their raw material from numerous suppliers. Suppliers in dominant position can decrease the margins Barclays PLC can earn in the market. Powerful suppliers in Financial sector use their negotiating power to extract higher prices from the firms in Foreign Money Center Banks field. The overall impact of higher supplier bargaining power is that it lowers the overall profitability of Foreign Money Center Banks.

How Barclays PLC can tackle Bargaining Power of the Suppliers

• By building efficient supply chain with multiple suppliers.
• By experimenting with product designs using different materials so that if the prices go up of one raw material then company can shift to another.
• Developing dedicated suppliers whose business depends upon the firm. One of the lessons Barclays PLC can learn from Wal-Mart and Nike is how these companies developed third party manufacturers whose business solely depends on them thus creating a scenario where these third party manufacturers have significantly less bargaining power compare to Wal-Mart and Nike.

Bargaining Power of Buyers

Buyers are often a demanding lot. They want to buy the best offerings available by paying the minimum price as possible. This put pressure on Barclays PLC profitability in the long run. The smaller and more powerful the customer base is of Barclays PLC the higher the bargaining power of the customers and higher their ability to seek increasing discounts and offers.

How Barclays PLC can tackle the Bargaining Power of Buyers

• By building a large base of customers. This will be helpful in two ways. It will reduce the bargaining power of the buyers plus it will provide an opportunity to the firm to streamline its sales and production process.
• By rapidly innovating new products. Customers often seek discounts and offerings on established products so if Barclays PLC keep on coming up with new products then it can limit the bargaining power of buyers.
• New products will also reduce the defection of existing customers of Barclays PLC to its competitors.

Threats of Substitute Products or Services

When a new product or service meets a similar customer needs in different ways, industry profitability suffers. For example services like Dropbox and Google Drive are substitute to storage hardware drives. The threat of a substitute product or service is high if it offers a value proposition that is uniquely different from present offerings of the industry.

How Barclays PLC can tackle the Treat of Substitute Products / Services

• By being service oriented rather than just product oriented.
• By understanding the core need of the customer rather than what the customer is buying.
• By increasing the switching cost for the customers.

Rivalry among the Existing Competitors

If the rivalry among the existing players in an industry is intense then it will drive down prices and decrease the overall profitability of the industry. Barclays PLC operates in a very competitive Foreign Money Center Banks industry. This competition does take toll on the overall long term profitability of the organization.

How Barclays PLC can tackle Intense Rivalry among the Existing Competitors in Foreign Money Center Banks industry

• By building a sustainable differentiation
• By building scale so that it can compete better
• Collaborating with competitors to increase the market size rather than just competing for small market.

Implications of Porter Five Forces on Barclays PLC

By analyzing all the five competitive forces Barclays PLC strategists can gain a complete picture of what impacts the profitability of the organization in Foreign Money Center Banks industry. They can identify game changing trends early on and can swiftly respond to exploit the emerging opportunity. By understanding the Porter Five Forces in great detail Barclays PLC 's managers can shape those forces in their favor

Hope this will help you. Please rate my answer.