The Industrial and Commercial Bank of China-ICBC offers the different consumer financial services. It operates across the whole globe. It is ranked as the seventh biggest public company in Forbes 2011. It contains numerous Business Developmental departments like corporate banking, investment banking, e-banking, and personal banking, etc. that can easily fulfil the customer satisfactions and needs (ICBC, 2019). ICBC is growing rapidly and competing aggressively in the large international market, however it needs to consider different points like competitors, buyers etc., which Porter’s five force analysis can help. There are five forces that shapes the industry and the market. They help in assisting the competition intensity with the attractiveness and profitability level of the industry. The framework of Porter’s five forces in the banking industry specifically in China will give the suitable instrument for depicting the position of the ICBC in banking sector of China. As being the leader of the banking sector, ICBC deals with all the five forces contains by Porter for sustaining the top position. The five forces are; rivalry, risk of the new entrants, supplier’s bargaining power, threats of the substitutes, and the bargain power of buyers (Mindtools, 2019). Here is the five forces analysis of ICBC:
Threat of New Entrants
Operating in the banking sector in China is risky as the barriers to entry are high, which brings difficulties for competitors and bring positive impact on the profitability level of ICBC. Building strong distribution network in China is expensive, and ICBC is successful in developing the strong network so that goods can easily be move around and reach to the final consumers. ICBC is operating in China market from a long time, and has strong customer base, which is difficult for the new entrants to build in short period (UKEssays, 2018).
Competitive Rivalry
There are four main banks in China, ICBC, Bank of China, Agricultural Bank of China and China Construction Bank. Besides them, many commercial banks like Bank of Communications, China Merchant Bank etc. are operating there and playing major role in intensifying the competition level. The ICBC is also facing tough competition from international banks like HSBC. However, government of China has put strict rules and regulations that helps in limiting the competition level and a positive sign for the ICBC. The fast industry growth has positively affected ICBC in the long run by adding value as the qualitative factor and deceases the costs of the banks (Wikiwealth, 2019).
Threat of Substitutes
The internet has made the big difference in various organizations mainly in dealing with money. They do not require banks to transfer huge sum of money but can be able to do this with the help of low service chargers and they find it more convenient. Services like Transfer through real-time money- western union, real-time payment- PayPal, insurance-Insweb.com, and currency exchange- Xe.com, via internet and provides the good quality in less price. However, because of the strong customer base, ICBC is not effected negatively that much but still many consumers switched to easy ways (UKEssays, 2018).
Bargaining power of suppliers
The industry of credit card is concentrated highly and the ICBC had received several awards from big companies like MasterCard Worldwide, and VISA. Although there are several other companies who also provides the credit cards like American Express and JCB, but the market share they have is less as compare to giants. If ICBC switch to them, the cost will be high. The critical production of the inputs is same and easy to match and mix the inputs that reduces the bargaining power of the suppliers and the positive point for ICBC. This has the long-term impact on the bank and adds value to the company. It is the qualitative factor and hence one of the most important factors (Wikiwealth, 2019).
Bargaining power of buyers:
The banking industry is the highest buyer concentrated market, and as being the largest country in terms of population, China needs to have banks, because major population use bank services like money deposits, loan, mortgage, investment, currency exchange, insurance, etc. Internet is now changing the life of the consumers and helps in easily obtaining the information. In banking sector, the service charges and interest rates are the sensitive indicators for consumers. In the recent years, many substitutes are available like loans, insurance and currency exchange and provides by the financial institutions. ICBC provides the services as per the buyer customization which positively affects the bank. However it provides limited bargaining leverage, which makes the consumers stick to the bank (UKEssays, 2018).
References
ICBC, 2019. About us. [Online]. Available at: http://www.icbc.com.cn/ICBC/EN/AboutUs/BriefIntroduction/, [Accessed on: 8th March, 2019].
Mindtools, 2019. Porter five force analysis. [Online], Available at: https://www.mindtools.com/pages/article/newTMC_08.htm, [Accessed on: 8th March, 2019].
UKEssays, 2018. The Industrial and Commercial Bank Of China. [Online], Available at:https://www.ukessays.com/essays/commerce/the-industrial-and-commercial-bank-of-china-commerce-essay.php?vref=1, [Accessed on: 8th March, 2019].
Wikiwealth, 2019. ICBC limited- five forces analysis. [Online], Available at: http://www.wikiwealth.com/five-forces:icbc-limited, [Accessed on: 8th March, 2019].