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• Nature of suppliers
• Few alternatives
• RBI rules and
regulations
• Suppliers are not
concentrated
• forward integration
Threat of competitors
Threat of
Barriers to entry
• Large no of banks substitute
• Product • High market growth
differentiation rate • Non banking
very difficult • Low switching costs financial sector
• Licensing • Undifferentiated increasing
requirement services rapidly
• High fixed cost • Deposits in
• High exit barriers posts
• Stock Market
Bargaining power of
consumer very high
• Large no. of
alternatives
• Low switching costs
• Undifferentiated
services
• Full information about
the market
Rivalry among Competing Firms
1. A large no of banks
There is so many banks and non financial institution fighting for same pie ,
which has intensified competition?
2. 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. This has ignited the competition.
3. Homogegeous product and services
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.
4. Low switching cost
Costumers switching cost is very low, they can easily switch from one
bank to another bank and very little loyalty exist .
5. Undifferanciated services
Almost every bank provides similar services. Every bank tries to copy
each other services and technology which increase level of competition.
6. High fixed cost
7. High exit barriers
High exit barriers humiliate banks to earn profit and retain customers by
providing world class services.
8. Low government regulations
There are low regulations exist to start a new business due lpg policy
adopted by India.
1. Nature of suppliers
Suppliers of banks are those people who prefer low risk and those who
need regular income and safety as well. Banks best place for them to deposits
theirs surplus money.
2. Few alternatives
Reserve Bank of India has laid out a stagnant rules and regulation for new
entrant in Banking Industry. We expect merger and acquisition in the banking
industry in near future. Hence, the industry is less porn of new competitor.
Barriers to an entry in banking industry no longer exist. 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. Government
policies are supportive to start new bank. 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 .
There are public sector banks, private sector and foreign banks along with
non banking finance companies competing in similar business segments.
Every day there is one or the other new product in financial sector.
Banks are not limited to tradition banking which just offers deposit and lending.
In addition, today banks offers loans for all products, derivatives, ForEx,
Insurance, Mutual Fund, Demit account to name a few. The wide range of
choices and needs give a sufficient room for new product development and
product enhancement.
Substitute products or services are those, which are different but satisfy
the same set of customers. In private banking industry following are the
substitutes:
NBFC: Non-banking financial Institutions play an important role in giving
financial assistance. Mobilization of financial resources outside the traditional
banking system has witnessed a tremendous growth in recent years in the
India. NBFC is a close substitute of banking in respect of raising funds.
Borrower can easily raise funds from NBFC because it requires less formal
procedure for getting funds compare to private banks.
Post Office Products: Post office is also providing some service like fixed
deposit facility, saving account, recurring account etc. The interest rate of
saving account is higher than private banks. It is fully secured by the
government so people who do not want to take risk for them post office
saving is good substitute.
Government Bond: Govt. Bond also attracts savings from the general
public. It is less risky and more secured as compare to savings in private
banks.
Mutual Funds: Mutual funds are also now proving as good substitutes for
banks. They assure for providing high return with less time in comparison of
banks. The administrative expenses are also very low as compared to banks.
Investment in Mutual funds is more flexible than investment in banks.
Stock Market: People who are ready to bear risk and wants a high return on
their investment, stock market is a good substitute for them. Day by day
investors are moving towards stock market as interest rate in banks are
decreasing. So now stock market has proved as a big competitor for baking
sector.
Debentures: Debentures is also proved as a good substitute of bank’s fixed
deposit as return on debenture is fixed and high. There are different types of
debentures, which attract various classes of investors.
Other Investment Alternatives: Now common people’s attraction is shifting
from banks to other various alternatives such as gold, precious metals, land,
small savings etc. As we can see the growing trend in these alternatives in
comparison of decreasing interest rates in banks.