Porter's Five Basic Forces of Competition - Analysis of the Banking Industry

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Introduction
A number of the students in the class work in the banking industry and as such I have chosen to focus on the this industry for this discussion. I will analyses each of Porter's five basic forces of competition as described in Capon's book "Understanding Organisational Context" [1, pages 363 - 368] and apply these to the banking industry.

Over the last decade the way we bank has dramatically changed as banks move from a "bricks and mortar" operation to a "virtual on-line operation". Whilst most banks will probably never get rid of all their "brick and mortar" operations, there are some that have successfully started up with no shopfronts and yet they are successful. Banking is big business, everywhere in the world they are big and powerful, but as Keen observes "bank offers basically the same product to the same customer base"[2]. So what makes a consumer choose one bank over another? Not all banks make huge profits but banks position themselves to attract customers through product differentiation, pricing, marketing and promotion and this makes the difference and thus will be examined using Porter's five forces of competition.

Competitive Rivalry
The banking sector is well established and consequently rival is fierce to maintain market share. In order to gain a higher market share in such a competitive environment is through differentiation. The problem for the banking sector is that when technologies first get developed, for e.g. ATM's the bank that first adopts and promotes the product usually obtains a lion's share of the market, but this is usually very short term as market competitor's very quickly catch up. In fact, with by the internet banking came about most people didn't change banks because they knew it wouldn't be long before their bank adopted this technology as well. With the hassle of changing banks customers are usually reluctant to change to change so this didn't not change the market share all that much.

Threat of New...
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