PorterпÑ--Ð...S Five Basic Forces Of Competition - Analysis Of The Banking Industry

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 PorterпÑ--Ð...s five basic forces of competition as described in CaponпÑ--Ð...s book пÑ--Ð...Understanding Organisational ContextпÑ--Ð... [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 пÑ--Ð...bricks and mortarпÑ--Ð... operation to a пÑ--Ð...virtual on-line operationпÑ--Ð.... Whilst most banks will probably never get rid of all their пÑ--Ð...brick and mortarпÑ--Ð... 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 пÑ--Ð...bank offers basically the same product to the same customer baseпÑ--Ð...[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 PorterпÑ--Ð...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. ATMпÑ--Ð...s the bank that first adopts and promotes the product usually obtains a lionпÑ--Ð...s share of the market, but this is usually very short term as market competitorпÑ--Ð...s very quickly catch up. In fact, with by the internet banking came