Bank of Montreal is one of a multinational and investment leading banks and ranked among top five banks of Canada. The company believe in growing boldly in life and business. The bank is continuously growing and set the standards high to achieve the objectives. The bank believes in finding new opportunities and avail them for future expansion and growth. The bank of Montreal is serving to more than 12million consumers on both commercial and personal banking investment services, and wealth management. As being ranked as 8th biggest North American bank, it helps its consumers in making their money to most level (BOM, 2019).
Porter five forces analysis helps the Bank in identifying the strategic position of the company. The model helps in determining the competition level of the company, which helps the bank in availing the opportunities. Here is the detailed Porter five forces analysis of Bank of Montreal;
Bargaining Power of Buyers
The customers of the banks are usually their suppliers. Thus, bank is facing the challenge to set the prices in a way, which does not restrict their funding supplies. This gives the power to consumers to some extent over prices, as bank has to charge prices to retaining clients. However, in Canada, banks are offering undifferentiated services and products, which allow the consumers to switch banks at any point. Still, banks do not engage in price wars, as this will reduce the profitability level of the banks. It is important for the bank of Montreal, to increase its customer base, in order to maintain its position (Eggert, 2012).
Bargaining Power of Suppliers
The bargaining power of the suppliers for Bank of Montreal is moderate to high. This is mainly because the main item for running bank is cash, which is generated by the consumers. Banks also generate cash by issuing services, bonds, etc. Other suppliers for the banks are budgetary foundation, financial specialists, and national banks. They are considered as additional consumers. For bank of Montreal, bartering force of suppliers is restricted except National bank. The bargaining power of the suppliers is greatly depending on market, and this fluctuates between medium to high. Bank of Montreal maintains good relationship with its suppliers and work efficiently (Google site, 2019).
Threats of New Entrants
The threats from the new entrants in the Canadian banking industry is medium to low. This is because the industry is occupied by five main banks of Canada, which are; Bank of Montreal, Toronto bank, Royal bank of Canada, Scotia bank, and Canadian Imperial Bank. These five banks own the 85% of market share. These banks also control distribution channels by networks of national branches and provide mobile apps services. It is very difficult for the new entrants to compete in highly competitive market. The rules and regulations of banking industry is tough which makes it difficult for new firms to survive in industry (Eggert, 2012).
Threats from the Substitute Products
Bank of Montreal is facing threats of substitution not from the rivals but from the non-financial provider. The banking industry does not have any major substitution threats as withdrawals r deposits. However, insurance companies can be threats for providing insurance services. There other non-banking institutions who offer fixed-income securities, mutual funds, mortgages etc. The bank of Montreal is also facing a payment and loan threats. For instance, car companies, electronics, etc. offer financing on items. Hence, it is necessary for bank to increase its consumer base and offer best services for retaining the market position and consumer base (Google site, 2019).
Rivalry of Existing Players
The Canadian banking industry is highly competitive. The five big banks of Canada have captured 85% of the industry. However, the banks do not compete over prices, but on services and products. All the banks, work for the innovation and technology to provide best services to consumers before the rival banks. However other financial institutions like insurance company are increasing the competition in the market. It is important for the Bank of Montreal to offer services in all the areas to protect itself. Bank of Montreal should provide more services in deposits and withdrawal to get a competitive edge over others (Eggert, 2012).
References
BOM, 2019. About the bank. [Online], Available at: https://www.bmo.com/main/about-bmo/, [Accessed on: 29th November, 2019].
Eggert, C. 2012. A Strategy Analysis Of The “Big Five” Canadian Banks. [Online], Available at: file:///C:/Users/CC/Dropbox/Business%20Law/eggertclaudioProject.pdf, [Accessed on: 29th November, 2019].
Google site, 2019. Porter’s 5 Forces and the Banking Industry. [Online], Available at: https://sites.google.com/site/bankingindustryandtheinternet/home/5-forces, [Accessed on: 29th November, 2019].