Bank of America Five Force Analysis

The banking industry has undergone major upheaval in recent years, largely due to the lingering recessionary environment and increased regulatory environment. Many banks have failed in the face of such tough environmental conditions. These conditions

The industry that I have chosen to analyze for this paper in the banking industry. The companies which I have selected to analyze are Bank of America & Southeastern Bank. Bank of America will represent as the example for the company who has acquired and merged with other banks, and Fresno Southeastern Bank will act as the example for the bank who has never merged with a larger bank in any form or has been acquired. Both these banks offer similar products to their customers, for checking and savings accounts to home and car loans. They both offer investment products as well. Bank of America has a lot more products on a larger scale due to the size of their company, and the mergers they have made over their history. They operate worldwide

The bank sells service in the industrial, commercial and real estates. It also offer services in the retail banking and manage treasury for its clients. The services offered by the bank are a commodity because the clients sort these services to satisfy a need that they have.

Banks that can offer a multitude of consumer products and acquire customers through branches will continue to own customer acquisition and product distribution advantage over the coming years

In contrast with the past, banking industry is also popular sector due to its high profitability. Therefore, attracts many entrepreneurs

Whenever new firms can easily enter a particular industry, the intensity of competitiveness among firm increases. New Entrants are companies that are not currently competing in an industry but have the capability to do so if they choose. The banking industry in our country is still in its growth stage. So, the threat of potential New Entrants is quite high. Usually the existing companies try to deter potential competitors by setting certain entry barriers. Barriers to entry are factors that make it costly for companies to enter an industry. The common barriers to entry are Brand Loyalty, Absolute Cost Advantage, Learning Curve Effect, Economies of Scale and Government Regulations. In Bangladesh, the question of Brand Loyalty is somewhat evident in the banking industry. A person who is a loyal customer of a local or government owned bank usually does not prefer an account in a multinational bank, whatever lucrative the benefits seem. This creates barriers for new entrants. No bank enjoys an absolute cost advantage, due to the fragmented nature of the industry. Most of the government banks and some local banks enjoy learning curve effect as well as the scale of economy; due to the fact that they have been doing business for quite a long time, they have gathered a long-time experience of operating in Bangladeshi environment, and they have branches all over the country. The multinational banks are also on the process of achieving scale of economy. The

All the banks are attempting to lure clients away from competitor banks which increase the competition are, offering lower rates for loans, higher rates for deposits, services enabled by technology, initiatives for insurance, investment services, and grater conveniences than their rivals. The problem of the banking sector is that when a technology first developed, the bank that first adopt and promotes the product will earn a higher market share until another one capture the same technology and it happens very quickly. And another major factor is the development of sustainable competitive advantage through innovation and technology and powerful competitive strategy followed by rivals. The Seylan bank is consisting with the core advantage from customer loyalty and friendliness, but not having many of the technologies and innovative products may create a disadvantage for the bank. Another issue posed by the current competitive banks like Sampath Bank, Commercial Bank and HNB is required to open certain amount of accounts every month which makes competition really fierce to the bank. The Seylan bank dependability upon enhancement of the customer base, the technology and innovations have gone to the secondary level which will be increasing the threat of competition with leading banks. Therefore the fierce current competition will be the most affecting force that has to be answered

level of competition and prove a potential threat for the market share of SBI bank.

The financial services industry is rapidly changing. Factors such as globalization, deregulation, mergers and acquisitions, competition from nonfinancial institutions, and technological innovation, have forced companies to re-think their business.

An overview of the principal types of deposits offered by TD Bank personal, small business, commercial banking and investing and competitiveness of these offerings are the strategic weapons or differentiating product features (quality, price, service), which allow some companies within an industry to perform better than others. Industry standards and regulation often set minimum requirements for the industry an as key inputs to the industry, plays a significant role in determining the success of individual companies within the industry. It is not divergent to the use and adoption of rapidly technological advances, which are keys to every firm’s competitive positioning. In fact TD Bank indicates competitiveness of these offerings is terms of price, quality and service, tracking the competitor’s strengths and weakness. By comparing their strengths to its own clearly see where the threats future business may lie. By examining weaknesses, find direct opportunities capitalize on.

This analysis developed by Michael Porter. The Porter’s Five Forces Model are buyer power, supplier power, threat of substitute products and services, threat of new entrants and rivalry among existing competitors.

Traditional banks should realise that a bank-fintech startup connection has immense potential for creating value for both sides. Banks gain innovation and technological flexibility, and startups are given the chance of leveraging the banks’ knowhow and infrastructures to create suitable markets.

Private banking industry has changed in a very basic way, driven by many key factors such as: free competition systems, modern developments in information technology (in particular, developments of the internet), and changing demographics. Private banks now operate in an environment shaped by increasing and shifting regulations, and in markets influenced by the uncontrolled situations of the world economy and geopolitical issues.

Consolidation means that the two firms agreed to play together in a single entity. One firm merges with another house to increase strengthen of market power helps to grow the profitability of the two houses has been dealt. All the same, one firm is acquiring to take another firm due to regulatory perceptions, declining shareholder value and ``too big to fail” (the depository financial institution is starting to fail) conditions government force this bank to merge with healthier banks are carrying this small or weaker banks through acquisitions. Although small banks cannot compete with large and foreign banks, because of scarcity of resources are determined such as size, capital of the banks, bank assets, liquidity ratio, special services to the customer, technology, economics environmental changes to involve the low banks.

Except being alert to those highly explored risks, what commercial banks concern about is the profit. Today, in order to make business more efficient, it is a wise choice for both banks and other kinds of companies to do financing and list practice. With this important step, banks acquire more powerful support to develop branches into a wider scale market: running global business, like HSBC. From the other hand, this can be a unprecedent challenge to the local banks. The main reason why big companies are successful is they do know how to function the business skillful. Works are separated into small pieces and more professional staff are hired to solve special problems. This can be an advantage that local banks lack. Competition makes it clear that local banks have to find their own advantage to survive in the crucial game.