Question

- Choose an industry (Telecommunication, banking, airlines, education, transport, restaurant, retail, textile, electronics, etc.)

- Evaluate the strength of each of Porter’s five forces for the chosen industry. You must support your evaluation/rating.

Porter’s Five Forces	Low	Team Rating	High	Reasons & Issues	Initiatives to address issues
Threat of New Entrants	1		10
Intensity of Rivalry	1		10
Threat of Substitutes	1		10
Bargaining Power of Buyers	1		10
Bargaining Power of Suppliers	1		10

- Based on the analysis report, what initiatives/actions would you take as a leader to address the issues related to each force?

- If you were a strategic adviser, would you recommend entrepreneurs to invest in this industry? Explain?

Answer 1

In this analysis we would like to evaluate the Porter's five forces as they apply to the banking industry.
The banking industry is one which is highly regulated and starting a banks needs good amount of capital. Moreover, there is a fairly high degree of competition among the banks to garner deposits from the public and also, they compete among themselves to sell loans and other products to the customer. With regards to substitutes, there are few non-banking financial companies or leasing companies which can offer similar products as banks but the reach of the bank is much more and due to stricter regulations governing banks, they are generally considered safer from the perspective of depositors. For customers, it is usually difficult to bargain with large banks as these specialises in products and customizes them according to the industry or the needs of the customer.

So with regards to Porter's 5 forces, one can conclude that:
1) Threat of New Entrants is low. Rating would be 2. This is because of entry barriers in the form of need to have large capital base and regulated structure of the industry.
2) Intensity of Rivalry is medium. Rating would be 6. This is because while banks do compete among themselves but they have segregated their business according to geographies and market segments.
3) Threat of substitutes- This threat is low. Rating would be 3. Because banks do the important task of financial intermediation, there is very little alternative for consumers ho require financial products or credit.
4) Bargaining power of buyers - The bargaining power of buyers is low. Rating would be 3. The banks usually customizes solution or products for the customers. So it is difficult for consumers to switch.
5) Bargaining power of suppliers - High bargaining power for suppliers. Rating would be 7. This is because suppliers of funds or depositors have multiple options to deposit money in any bank or other financial institutions.

As a business leader, one would not do much on the aspects of new entrants, substitutes or buyers because threat level is already low. However, one can start leveraging more and more technology and reduce operating costs to provide better yield to depositors to lure them. This can also be differentiator and can help in competing better against other incumbent players.

As a strategic adviser, I would advise entrepreneurs to invest in this industry as most of the forces are favorable and thus there is a scope to earn good profit margin in this industry.