China Construction Bank is considered as one of the biggest Australian corporation in Not-Applic sector. It is leading as the commercial Bank of China by providing the broad range of services and products. The business is consisting of mainly three principles; treasury operations, personal banking and corporate banking. It is a market leader in terms of services and products and bank cards, residential mortgage, infrastructure and loans. It is also listed on ASX- Australian Securities Exchange and have “CCB” Stock Market ticker (CCB, 2019). The managers of China Construction Bank use the five forces analysis for understanding the five main competitive forces that influence the profitability level and assist in developing the strategy to increase the competitive advantage. Porter analysis is the strategic management instrument for analyzing the industry and understanding the profitability levers in the industry. This tool has major impact on the profitability and operations level. The Five forces are;
• Supplier’s bargaining power
• Buyer’s bargaining power
• Threats of the new entrants
• Threats from the substitute products
• Rivalry of existing players in market (Martin, 2018).
Supplier’s Bargaining Power
All the companies in the banking industry usually buy their resources from different suppliers. The suppliers are dominating the market which decreases the margins for China Construction Bank’s earning. The powerful suppliers in the banking sector uses the negotiating strategies for extracting the higher prices from other firms. This has great impact on lowering the profitability of the Not-Applic firms. CBC tackles the situation through operating the effective supply chain. It experiments the different designs of the products and use different materials for coping up the situation of high raw material crisis. It builds the strong relationship with dependent suppliers and rely on the third-party manufacturers (Fernfort University, 2019).
Buyer’s Bargaining Power
In every market, buyers are demanding, and want the best things available in the offered prices or minimum prices. China Construction Bank has the pressure on its profit level in long run. The powerful and smaller consumer base, the higher is the bargaining power of them and higher the chances of them availing the offerings and discounts. China Construction Bank develop the huge customer base and gain the benefits by reducing bargaining power and providing the opportunity to companies for streamlining the production and sales process. The offerings of new services and products also decrease the defection of consumers to competitors (Blue Ocean, 2019).
Threats of the New Entrants
China Construction Bank faces the threat from the new entrants as they bring new technology, innovation or new ways for tasks and operations. Competitors also feel pressure because of the low pricing strategy, value propositions and cost reduction to customers. It is necessary for the bank to manage the challenges and building the efficient barriers for safeguarding the competitive edge. China Construction Bank tackle the situation by attracting new customers through innovation and products. It also builds the economies of scale to gain more advantage by lowering the fixed cost. It also builds the capacity to invest in R&D to understand the changing dynamics of the industry (Fernfort university, 2019) .
Threats from the Substitute Products
Whenever any services or products satisfies the similar consumer needs in numerous ways, the industry’s profitability level suffers. For instance, the services like Google drive or Dropbox are the alternatives of storage hard drives. China Construction Bank faces the threat from the substitute services or products because of value propositions in competitors’ products which are unique and attractive. The CCB bank manages the situation well by being more service oriented instead of product orientation. It also understands the basic needs of consumers. It also increases the switching costs (Blue Ocean, 2019).
Rivalry of Existing Players
In case of intense rivalry among the players in the industry, the profitability level decreases and they need to lower down their prices. The China Construction Bank operates in very competitive market. But it manages the situation by developing the strong sustainable differentiation. It also builds the scale for competing better in the market. It collaborates with rivals for increasing the market share and size instead of competing on small level (Fernfort University, 2019).
References
Blue Ocean University, 2019. China Construction Bank Porter Five (5) Forces Analysis. [Online], Available at: http://blueoceanuniversity.com/frontpage/portercoanalysis/26299-china-construction-bank, [Accessed on: 14th March, 2019].
CCB, 2019. Overview of China Construction Bank. [Online], Available at: http://en.ccb.com/en/investor/overview.html, [Accessed on: 14th March 2019].
Fernfort university, 2019. China Construction Bank Corporation Porter Five forces analysis. [Online], Available at: http://fernfortuniversity.com/term-papers/porter5/asx/1542-china-construction-bank-corporation.php, [Accessed on: 14th March 2019].
Martin, M. 2018. Porter’s five forces: Analysing the competition. [Online], Available at: https://www.businessnewsdaily.com/5446-porters-five-forces.html, [Accessed on: 14th March 2019].