Italian banking group Intesa Sanpaolo S.p.A. is a result of merger between Turin, Italy based Banca Intesa and Sanpaolo IMI. It is the largest bank of Italy in terms of market capitalization, and total assets in 2014 with substantial progress in the global market, more attention towards Central-Eastern Europe, the Middle East and North Africa. The corporation is a section of the stock market index of Euro Stoxx 50.
Porters five forces for:
Degree of Competition
When Intesa Sanpaolo was made in 2007 it acquired Unicredit Group as the leading bank in Italy with customer base of 13 million and assets worth of US$690 billion. As the number of competitors is very vast, who are almost equal in size and power, the growth rate of industry is slow and switching cost for customers is negligible. If rivalry is powerful in the business, then it becomes tough for standing performers such as Intesa Sanpaolo SpA PK to make justifiable revenues.
Negotiating Authority of Customers
The extent the company gets influences by the customer a force evaluates the bargaining power of the customers which also disturbs the sensitivity of customer’s to changes in prices. If the bargaining power of the customers is strong, then they habitually drive the prices of the whole industry down thus preventive the prospects of the Intesa Sanpaolo to make viable revenues. The customer’s impact is low as there is a large pool of customers. The bank therefore faces strong bargaining forces of buyers as they have multiple choices available, and this is the reason of their frequently driving the prices down thus restricting the prospective of the Intesa Sanpaolo to receive supportable returns.
Negotiating Authority of Suppliers
The degree of power and influence that a supplier can exert to the company or industry is measured from the control and prospect they have in hiking the prices or to lessening the superiority of resources, which sequentially would worsen the profitability and potential of conducting business in the industry. The suppliers do have their say in the trade and can impact the profitability of Intesa Sanpaolo, in which case they are providers of credit as their number is fixed and they have larger possibilities to invest their limited investment so they can bargain higher rates of returns and can affect the profitability and sustainability as well. Therefore, it is seen that suppliers have solid power of bargaining then and they extract greater amount from the Intesa Sanpaolo. It will influence the prospective of the bank to continue profits in that are above average in Local Banking business.
Threat of New Entrants
Fresh admission in any business means new capabilities and diverse product mix, as the banking industry in which Intesa Sanpaolo operates is very saturated so for any fresh entrant it is imperative to come up with products that provide extreme differentiation strategies or low cost or high return to the customers otherwise it is difficult to sustain. The entry barriers are very strong, and everyone can’t sustain the present pressure. Therefore, threat of new entries for Intesa Sanpaolo is moderate.
Threat of Substitutes
If the substitutes of goods that are presented by the bank are easily available and numerous it might increase the leaning of customers to adjust to substitutes outside the banks products that are alike and those are even branded in a different way by opponents. If the risk of substitutes is extraordinary then Intesa Sanpaolo will have to endlessly devote into research and development of new and improved products and services, or it face the dangers of losing out to disruptors in the trade. The threat of substitute is high, and it is very difficult for the industry to sustain the ever-changing products cycles.
Conclusion
In the conclusion we have seen that although the bank is a major player in the sector, the possibility of conducting business can be defined as strongly competitive with every increasing risk from substitutes and mounting powers and influences of buyers and suppliers, resulting in low or marginal profitability.
References:
Intesa Sanpaolo (2018), Annual Statement of Intesa Sanpaolo .
M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975)