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Identified five competitive forces that shape banking industry . These forces determine the intensity of competition and hence profitability and attractiveness of industry. Banking , being a service industry has several peculiar properties.
Regulatory e.g RBI , SEBI etc creates heavy entry and exit costs. Banking is all about trust , hence market penitration is difficult. People have Repeat Passive to ward existing banks. Possibility of regulation ease (as present proposal in RBI and Central Govt on further liberalization) may be treated as threat.
2. Threat of Substitutes
Availability of alternative products with lower offer differentiations of equivalent performance parameters for the same purpose.
In case of suppliers , there are monopolistic suppliers e.g. VISA , MasterCard , where bargening power lies with Supplier. From Human Capital , Technology provider Dependency on banking industry with money regulators / suppliers is also high hence in notability this force is moderately high.
Industry is highly efficient in delivering and greatly less transaction fee, hence till specific reasons of cognitive assertion or dissonance arrive customer is dependent.
5. Competitive Rivalry
Synonymous products and services on marginal profits from all banks. Lower information asymmetry. Continuous Innovation.
GENERIC STRATEGY