Porter’s 5 Forces & the Russian Commercial Banking Sector and Wealth Management Industry

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PORTER’S 5 FORCES & THE RUSSIAN COMMERCIAL BANKING SECTOR AND WEALTH MANAGEMENT INDUSTRY

Today’s Russian Federation is characterized by low competitiveness in the context of firm strategy and rivalry, a supportive infrastructure for industries, a mixed bag when factor or input conditions are assessed (human resources, capital resources physical infrastructure, etc.…), and a polarized consumer base, where some hold most of the wealth, while the rest are quite average or below the poverty line. It is an overachieving country, with high income compared to low competitive index. In Porter’s Diamond-E Framework, Russia is in the Efficiency-Driven Stage; it is an investment-driven economy.

This is not congruent with the general analysis of the banking industry worldwide, when looking at it through Porter’s Five Forces Model. Applying the model to this sector yields high barriers of entry, a moderate power of suppliers in terms of their ability to lure away human capital, increased power of buyers in terms of switching costs, many substitutes, and a high competitive rivalry.

To better assess the entry of The Royal Bank of Canada (RBC) into the Russian market, one must also consider Canada-Russian relations. Being the two largest Artic countries, Canada and Russia share many common opportunities and challenges. The countries have a long history of cooperation on issues such as science, energy and environmental protection, and in 2012, promising areas of cooperation include energy, mining, transport, communication technologies and the aerospace industry. Russia’s key industries include agriculture, forestry, oil & gas to name a few. In regards to the banking sector, there are numerous opportunities in the country to boost Canada-Russia cooperation in the due to the latters need for more financial services. RBC would help greatly in terms of the management of new businesses in the aforementioned industries, both those entering from Canada and...
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