Use Michael Porter's Five Forces Model To Analyse The Business Environment In Which Your Organization Operates: Victor Chids

1691 words - 7 pages

IntroductionAll organizations have got a set of forces and conditions outside their own boundaries that have the potential to affect the way the organization works. MoreMoney Banking Corporation Limited is no exception to this as it has got forces that it has to operate within. Michael Porter came up with the Five Forces Model commonly known as Porters' Five Forces Model which is used for analyzing an industry by looking at five forces believed to be at play in an industry and affecting how that industry works and providing an indication of its attractiveness. The five forces are:Rivalry among competing sellers in the industryBargaining power of suppliersBargaining power of customersThreat of substitutesBarriers to entryThe following is an analysis on the business environment in which my organization, Intermarket Banking Corporation Limited is operating in.Intensity of rivalryRivalry is the jockeying for position and buyer favour that goes on among rival firms. Competition in the Banking sector has significantly increased over the years as there are more and more players coming into the field. The customer base has not been increasing at the rate at which the financial institutions are increasing hence the stiff competition amongst the players. This has been contributed by the fact that generally all banks offer a suite of products which are similar in nature and as far as the relevant market shares are concerned, there is really no difference between Bank A and Bank B. There are very minimal costs that are incurred if clients decide to switch between banks. This alone has increased the jockeying for position amongst the Financial Institutions. High fixed costs are associated with opening a new Bank as minimum capital required by the Central Bank is prohibitively high. This is associated with the difficulties that Banks are found in once they commence operations as this acts as an exit barrier. The Bank therefore is left with no option except to compete. The intensity of rivalry had been made worse by the existence of the international banks which are established in many other countries. These have huge capital bases and are highly regarded by clients because of their international presence. This has made other banks including Intermarket to make sure they massively market themselves so that they can increase their market shares.Threat of entryIt is not only incumbent rivals that pose a threat to firms in an industry; the possibility that new firms may enter the industry also affects competition. In theory, any firm should be able to enter and exit the market, and if free entry and exit exists, then profits always should be nominal. In reality, however, industries possess characteristics that protect the high profit levels of firms in the market and inhibit additional rivals from entering the market. These are barriers to entry. In the banking sector it has been become increasingly difficult for new entrants to get in due to the fact that banking...

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