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Porter 5 Forces Analysis of Internet Banking

Essay by   •  July 19, 2011  •  Case Study  •  691 Words (3 Pages)  •  1,764 Views

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Porter 5 forces analysis

Bargaining power of Customer:

Buyer concentration to firm concentration ratio: Bank industry is a high buyer concentration industry, many people use bank service, such as deposit money, mortgage, loan, investment, insurance and currency exchange (HIGH). The concentration ratio of international bank industry is medium, many large bank exist in the world, such as Standard Chartered, CitiBank, HSBC, Fortis, and Deutsche Bank (Medium).

Buyer information availability (HIGH): When Internet becomes changing people's life, customer can easily obtain information through Internet, they can easily compare the price and service.

Buyer price sensitivity (HIGH): Interest Rate and service charge is sensitive indicator for customer in bank industry, customer may due to those indicators to draw out all or a lot amount of capital from bank to bank/ other financial institution. The switching cost of this action is low.

Availability of existing substitute products (HIGH): Many substitute product or service present in recent year, such as currency exchange, insurance and loan. They mainly provided by other financial institution.

Bargaining power of Supplier (Low):

Bank capital supplier (Low): Depositor also is capital supplier of bank, they will compare with other financial product to see whether draw out capital or not.

Computer equipment supplier (Low): The concentration ratio of computer is high, many companies use IBM, but it doesn't mean other computer companies are not good, such as Sun Microsystems, Fujitsu and Hewlett-Pack also provide similar computer equipment and solution.

Credit Card supplier (Medium):

Credit Card industry is a high concentration ratio industry, VISA, Master Card and American Express is the most popular credit card in the world. Although other organization also release credit card system, such as JCB, there market share in the world is much less than these three organizations. Moreover, these three organizations brand name is louder than other organizations, so the switching cost from these organizations to others may be too large.

Threats of new entrants (High):

When many countries and cities join WTO and the Internet effect, the barrier of bank become disappear. Many financial even non-financial organizations can easily entry to bank industry. They can use more little money to build a website; they can also integrate with other organizations. The switching cost of this behavior become smaller than before and the advantage is larger than before also.

Threats of substitute product

Internet makes many organizations can use smaller amount of money relatively to provide similar even same service, and the service charge become

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