Contents

Introduction: ........................................................................................................................ 2 Bank profile: ....................................................................................................................... 3 PORTER’S FIVE FORCES MODEL ................................................................................ 4 Application of porters in Andhra bank ............................................................................... 5 Conclusion: ....................................................................................................................... 12 Bibliography: .................................................................................................................... 12

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The essence of a business model is that it defines the manner by which the business enterprise delivers value to customers. 2 . Business model’ is a term often used to describe the key components of a given business. delivery.Introduction: The business model of a company is a simplified representation of its business logic. Whenever a business is established. and converts those payments to profit:. through which resources. it either explicitly or implicitly employs a particular business model that describes the design or architecture of the value creation. entices customers to pay for value. It describes what a company offers its customers. and capture mechanisms employed by the business enterprise. activities and partners it achieves this and finally. how it reaches them and relates to them. they are also used by managers inside companies to explore possibilities for future development. how it earns money.

Doha and Qatar. called indiaproperties. WLL. In 1987 AB had sponsored its third RRB under the name OF Godavari Grameena Bank. mainly on behalf of non-resident Indians (NRIs). 3 . Andhra Bank took over the Convenorship of SLBC from State Bank of India during the period of 1984. After two years. 1101 Branches. AB offering innovative and need based financial products and services using state-of -the art technology. 15 Service Centres networked under Cluster Banking Solution and providing 'Any Branch Banking (ABB)'. the bank made tie up with a real estate portal. Real Time Gross Settlement (RTGS) Facility and National Electronic Fund Transfer (NEFT) facility. for facilitating private remittances to India.. 1186 units' viz.Bank profile: Andhra Bank (AB) was founded by the eminent freedom fighter and a multifaceted genius. ADDED FACILITIES: Andhra Bank had introduced Credit Cards in the country during the year 1981. Andhra Bank made a multipartite agreement with Karnataka Power Corporation in the same year 2000 along with Karnataka Government. BRANCHES AND DIVISION: The Bank is rendering services through 2128 Business Delivery Channels consisting of 1366 branches. Dr.com in the year of 2001 and also in the same period AB had entered into a rupee drawing arrangement with the National Exchange Company. During the year 2000. 38 Satellite Offices and 656 ATMs spread over 21 States and 2 Union Territories as at the end of March 2008. 68 Extension Counters. the bank sponsored its second RRB as Chaitanya Grameena Bank in Guntur district. 68 Extension Counters. Andhra Bank had installed a request-transmitting machine at its Jubilee Hills Branch in association with the country's largest depository participant Stock Holding Corporation of India Limited. Infrastructure Development Finance Corporation and KPTCL for funding Raichur Thermal Power Station expansion project. All Branches are 100% computerized. the bank was nationalised. The Bank was registered in 20th November 1923 and commenced its business in 28th November 1923.Bhogaraju Pattabhi Sitaramayya. In 15th April 1980. For Provide housing loans through the Internet. in 1983.

AB has unveiled Credit Card namely Laghu Udyami. Threat of substitute products 4 . which comprises corporate tax. estate tax. and helps determine an industry's weaknesses and strengths. Power of customers 5. Power of suppliers 4.The Bank had signed Memorandum of Understanding (MoU) with United India Insurance Company Limited during the year 2002 for provide its products through various branches. gift tax etc. 1. The online ATM service was started under the banking service in the year 2002. Porter. which offer hassle-free loan facility upto 2 lakh to small scale entrepreneurs. Also in the identical year. Competition in the industry 2. The Bank had entered into an alliance with Western Union Financial Services International. The Bank had opened its representative office in Dubai during May of the year 2006 PORTER’S FIVE FORCES MODEL Porters five forces Named after Michael E. so as to make available inbound money transfer services at all its locations in India. this model identifies and analyzes 5 competitive forces that shape every industry. AB had started a new service called collection of Direct Taxes. Potential of new entrants into industry 3.

Where these interactions are intense. especially business level strategy . The objective of corporate strategy should be to modify these competitive forces in a way that improves the position of the organization. Porter’s model is based on the insight that a corporate strategy should meet the opportunities and threats in the organizations external environment. competitive strategy should base on and understanding of industry structures and the way they change.Application of porters in Andhra bank The nature of competition in the industry in large part determines the content of strategy. profit tends to be whittled away by the activities of competing. management can decide how to influence or to exploit particular characteristics of their industry. Porter’s model supports analysis of the driving forces in an industry.based it is on the fundamental economics of the industry. Especially. 5 . Porter has identified five competitive forces that shape every industry and every market. the very profit potential of an industry is determine by competition interaction. These forces determine the intensity of competition and hence the profitability and attractiveness of an industry. Based on the information derived from the Five Forces Analysis.

Bargaining power of suppliers is very low      Nature of suppliers Few alternatives RBI rules and regulations Suppliers are not concentrated forward integration Threat of competitors Barriers to entry   Product differentiation very difficult Licensing requirement Large no of banks High market growth rate  Low switching costs  Undifferentiated services  High fixed cost  High exit barriers Rivalry among Competing Firms   Threat of substitute  Non banking financial sector increasing rapidly Deposits in posts Stock Market   Bargaining power of consumer very high     Large no. of alternatives Low switching costs Undifferentiated services Full information about the market 6 .

4. High fixed cost 7. which has intensified competition? 2. High exit barriers High exit barriers humiliate banks to earn profit and retain customers by providing world class services. Hence the intensity of rivalry is very high. The services banks offer is more of homogeneous which makes the Company to offer the same service at a lower rate and eat their competitor market’s share. 1. 5. Low switching cost Costumers switching cost is very low. A large no of banks There is so many banks and non financial institution fighting for same pie . Even consumer switch from one bank to another. Market Players use all sorts of aggressive selling strategies and activities from intensive advertisement campaigns to promotional stuff. 7 . Undifferanciated services Almost every bank provides similar services. 3. 6. Homogegeous product and services The services banks offer is more of homogeneous which makes the company to the same service at a lower rate and eat their competitor market’s share. if there is a wide spread in the interest. High market growth rate India is seen as one of the biggest market place and growth rate in Indian banking industry is also very high.Rivalry among competitors is very fierce in Indian Banking Industry. This has ignited the competition. Every bank tries to copy each other services and technology which increase level of competition. they can easily switch from one bank to another bank and very little loyalty exist . The no of factors has contributed to increase rivalry those are.

Banks best place for them to deposits theirs surplus money. Rbi rules and regulations Banks are subject to rbi rules and regulations . Few alternatives 2. Nature of suppliers Suppliers of banks are those people who prefer low risk and those who need regular income and safety as well. 1. Suppliers not concentrated Banking industry suppliers sure not concentrated. So rbi takes all decisions related to interest rates . 8 .so this reduce their bargaining power . The rules and regulation lay down by RBI. BARGAINING POWER OF SUPPLIERS Banking industry is governed by Reserve Bank of India. There are numerous with negligible portion of offer . Reserve Bank of India is the authority to take monetary action which leads to direct impact on circulation of money in the Economy. Suppliers of banks are depositors .these are those people who have excess money and prefer regular income and safety. 2. Low government regulations There are low regulations exist to start a new business due lpg policy adopted by India.8. this reduce bargaining power of suppliers .bank have to behave in a way that rbi wants. 3. In banking industry suppliers have low bargaining power.

BARGAINING POWER OF CONSUMERS In today world. co-operative banks and development banks together with specialized financial companies that provides finance to customers . They are free to select any banks service. bargaining power of customers increase.they are aware with each market condition so banks have to be more competive and customer friendly to serve them. which fight for same pie. 2. 9 . 3. Undiffenciated service Bank provide merely similar service there are no much diffracted in service provides by different banks so. Banks are also providing zero balance account and another types of facilities. Large no of alternatives Customers have large no of alternatives. there are so many banks. Customers of banks are those who take loans and uses services of banks. They can not be charged for differentiation. They offer loans at Prime Lending Rate (PLR) to their trust worthy clients and higher rate to others clients.these all increase preference for customers. There are many non financial institutions like icici.there are foreign banks . Banks offers different services According to clients need and requirement. Customer is the King. hdfc. etc. 4. Customers have high bargaining power. and ifci. which has also jump into these business . Switching cost are becoming lower with internet banking gaining momentum and a result customers loyalties are harder to retain. privet banks. These are 1. Full information about the market Customers have full information about the market due to globalization and digitalization Consumers have become advance and sophisticated . Low switching cost Cost of switching from one bank to another is low.

Hence. today banks offers loans for all products. The wide range of choices and needs give a sufficient room for new product development and product enhancement. There is less statutory requirement needed to start a new venture? Every bank to tries to achieve economics of scale through use of technology and selecting and training manpower . which are different but satisfy the same set of customers. Banks are not limited to tradition banking which just offers deposit and lending. In private banking industry following are the substitutes: 10 . So lots of privet and foreign banks are entering in the market. Competitors can come from an industry to ‘disinter mediate‘bank product differentiation is very difficult for banks and exit is difficult. So every bank strives to survive in highly competitive market so we see intense competitive can mergers and acquisitions.Substitute products or services are those. derivatives. We expect merger and acquisition in the banking industry in near future. Demit account to name a few. the industry is less porn of new competitor. In addition. ForEx. There are public sector banks.For good creditworthy borrowers bargaining power is high due to the availability of large number of banks POTENTIAL ENTRY OF NEW COMPETITORS Reserve Bank of India has laid out a stagnant rules and regulation for new entrant in Banking Industry. Barriers to an entry in banking industry no longer exist. Mutual Fund. POTENTIAL DEVELOPMENT OF SUBSTITUTE PRODUCTS Every day there is one or the other new product in financial sector. private sector and foreign banks along with non banking finance companies competing in similar business segments. Government policies are supportive to start new bank. Insurance.

So now stock market has proved as a big competitor for baking sector. recurring account etc.  Post Office Products: Post office is also providing some service like fixed deposit facility. Bond also attracts savings from the general public.  Stock Market: People who are ready to bear risk and wants a high return on their investment. Investment in Mutual funds is more flexible than investment in banks. saving account. NBFC: Non-banking financial Institutions play an important role in giving financial assistance. which attract various classes of investors. Borrower can easily raise funds from NBFC because it requires less formal procedure for getting funds compare to private banks. 11 .  Mutual Funds: Mutual funds are also now proving as good substitutes for banks.  Government Bond: Govt. It is fully secured by the government so people who do not want to take risk for them post office saving is good substitute. precious metals.  Debentures: Debentures is also proved as a good substitute of bank’s fixed deposit as return on debenture is fixed and high. Mobilization of financial resources outside the traditional banking system has witnessed a tremendous growth in recent years in the India. They assure for providing high return with less time in comparison of banks. The interest rate of saving account is higher than private banks. NBFC is a close substitute of banking in respect of raising funds. As we can see the growing trend in these alternatives in comparison of decreasing interest rates in banks. small savings etc. The administrative expenses are also very low as compared to banks. stock market is a good substitute for them. It is less risky and more secured as compare to savings in private banks. land. There are different types of debentures.  Other Investment Alternatives: Now common people’s attraction is shifting from banks to other various alternatives such as gold. Day by day investors are moving towards stock market as interest rate in banks are decreasing.

Based on the information derived from the Five Forces Analysis. competitive strategy should base on and understanding of industry structures and the way they change. Especially.it helps the bank to know the what are nitty gritty of the banking sector. Marcel van Assen.Conclusion: Andhra bank for that matter any bank by using this model can see the direction in which they are moving forward. Porter’s model supports analysis of the driving forces in an industry. Gerben van den Berg and Paul Pietersma. . management can decide how to influence or to exploit particular characteristics of their industry. Bibliography:  Key Management Models – the 60+ models that every manager needs to know” (2nd edition) By. And also see the reaction of the competitors and customers. 12 . Porter’s model is based on the insight that a corporate strategy should meet the opportunities and threats in the organizations external environment.

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