212020241 Finlatios FMEP Program 2021 - Google Docs Finlatics ENABLING INSIGHTS Finlatics FMEP Program 2021 Sector 1 analysis : Banking and financial sector Porter's five forces analysis on banking/financial sector: Porter’s five forces analysis (By Michael porter, a professor of strategy at harvard school of business) e Bargaining power of buyers « Bargaining power of suppliers e Rivalry among existing competitors e Threat of substitute products ¢ Threat of new entrants Let us analyse these five forces in context of indian banking and financial sector... ¢ Bargaining power of buyers (Positive impact) : (This broadly refers to the extent buyers are able to put pressure on the company, which is broadly a factor of the customer's ability to react to price changes) In Indian context the banks are the most vital part of the economy and a slight disruption can cause a havoc to the economy. In the recent past the government has shown keen interest to make people to move on to the cashless transaction and to open bank accounts in form of “Jan dhan yojana” of those in rural areas mainly who usually do not get the benefits of our financial system. In this industry the major threat which a buyer can pose to a bank is that of the high transaction charges levied be it in opening of bank accounts,broking business, transacting by card etc. But as there is a massive competition among banks to attract new customers and now with help of Al and technology we are seeing that bank accounts can be opened at home too and that at too at near zero cost. And because of the hitps/idocs.google.comidocumentdl13441PKOg-xZwD YOv25DFASRA-RE-EovqW7IPZIb3IAledt 1“212020241 Finlatios FMEP Program 2021 - Google Docs nascent stage of debt market, too volatile stock market and low financial literacy amongst people they generally prefer to keep their money in savings account, FDs etc. so it becomes essential for the banks to improve their technology and services provided and reduce their costs to attract customers. Bargaining power of suppliers (Neutral impact) : (This broadly refers to the extent suppliers are able to put pressure on the company, when charging for the raw materials or products that they give to it) In the context of banks the customers prefer banks because of their high reliability and now the customers have also hedged their risk of inflation by investing in other riskier avenues which can be a negative news as it will mean a net outflow of money. There are primary four ways in which a bank can increase its cashflow 1. Customer's deposits 2. Mortgages and loans 3. Securities which are pledged 4. Loans by other financial institutions. Therefore the bank has to make an efficient usage of these resources and make profit by not compromising the risks and short term withdrawal by customers. Rivalry among existing competitors (Negative impact) : (Industry with high rivalry among existing competitors is one which is characterized by consistent price wars, high degrees of innovation, increased marketing attempts and service improvements) The banking sector is said to be very competitive as it is leveraged by the trust factor and management skills. Banking as a sector constitutes a major portion of a developing economy. In the banking sector the experience, history, cost efficiency, relationship with customers, technology plays major role in a bank's success. Major banks like HDFC Bank,Kotak mahindra Bank, SBI bank etc usually acquire banks rather than investing heavily on marketing and advertising. And now with the switching costs too low therefore it becomes essential for the banks to meet all the demands of their customers either they will loose them. hitps/idocs.google.comidocumentdl13441PKOg-xZwD YOv25DFASRA-RE-EovqW7IPZIb3IAledt 218212020241 Finlatics FMEP Program 2021 - Google Docs e Threat of substitute products (Positive impact) : (A company operating in an industry with high threat of substitute products suffers as they have to put a price ceiling to their offering) The major threat which banks face is that of the ease of technology that the people are getting at their finger tips. We can see such a thing taking place in the broking industry where the costs were so much high 10 years before but now because of the discount brokers like zerodha, upstox,5 paisa even the traditional broking firms cum banks like SBI securities, ICICI securities, HDFC securities were shaken and had to reduce their costs drastically. Even during the lockdown as people got more time to spend to explore new avenues we saw a surge in demat account opening numbers and retail participation increased and moved to discount broking firms. The threat also now can be that people as become more financial literate they will see for other investment avenues available to them such as IPOs, FPOs, OFS, gold, Commodity etc. Threat of new entrants (Positive impact) : (Industry where the barriers to entry are low) In the indian context for the banking industry the entry barrier is much high because the RBI our central bank controls the issuance of licences and even by providing licences to the private sector players may reduce the market share of public sector banks. Because the banks also has a trust factor upon by their customers so it becomes nearly impossible for a new player in market to become a major bank in short time and that's why we see many co-operative and regional banks in india. And as the world has moved on technology the banks are able to consolidate their different businesses like of lending, borrowing, consulting, broking etc. under one roof and cater to the financial needs of their customers and hold them for long time. Resources used: 1. https://www. ibef.org/download/Banking-July-2017.pdf /iwww.investe ia.com/articles/markets/020916/analyzing-t hitpsiIdocs google. comidocumentdit3461PKOg-xZwD YOv250FASRA-RE-EpwqWTIPZIbStAledt 38212020241 Finlaties FMEP Program 2021 - Google Docs 3. http://ijecm.co.uk/wp-content/uploads/2018/08/682.pdf hitpsfidocs.qoogle.comidocumenalt34a1PKOg-xZwDYOvzSDFASRA-RE-EpvqW7IPZIb3Aledt ais