CaixaBank (CB) is a financial services company offering a wide range of services, including commercial banking. The bank was established in 2011, and it has regional headquarters in Barcelona, Valencia, and Madrid, Spain. The bank has a massive presence in the Spanish financial services sector, and it holds 100% shares of Banco BPI of Portugal. Its foothold and customer base are a testament to banks’ quality services; CB offers banking services and contributes to society’s social well-being. The bank employs 51,000 individuals, and its customer base is comprised of 21 million people (CaixaBank, 2021). The bank operates through the motto of “people-first” and has integrated that social responsibility into its corporate culture. The analysis of Porter’s five forces from the perspective of the Spanish banking market would be a helpful tool for devising future strategies to overcome threat and realize any potential opportunities.
Competitive Rivalry in the Market
The Spanish banking market is highly competitive, and presence of multiple high-net worth bank made it saturated. The prospected growth and the decent return on investment invite competition; thus, there is stiff competition among the participants. CB’s major competitors are Banco Santander, Banco Bilbao Vizcaya (BBVA) and Bancao de Sabadell. Banco Santander is the largest bank and public company in Spain and is ranked at 93 at Fortune 500 companies, and it recorded a revenue of $ 88.25 billion in 2020 (Fortune, 2021). In 2020, CaxiaBank recorded $11.3 billion in revenue and earned a profit of $1.4 billion (Forbes, 2021). On the other hand, BBVA has reported total revenue of $38.8 billion (Forbes 2021), and Bancao de Sabadell has earned a total revenue of $7.6 billion in 2020 (Forbes, 2021). The presence of public banking companies and flag-bearer private financial services companies has increased the competition in the Spanish banking market
Threat of Substitutes
Financial services are an essential part of society for the past few centuries; they exited in one form or another in our community. Financial services have evolved with time and continue to be the vital fabric of society. The products offered by banks and other companies in the industries can be improved and is hard to be substituted as of today. These products and services are the bedrock of businesses of today. The products and services offered have changed in how these are presented to consumers; in essence, they remain the same and form an inevitable part of the progressive society (McWaters et al., 2015). Fintech companies are trying to disrupt the industry, but incumbents are well drenched are competing by adapting or acquiring their disruptors. Therefore, in the short term threat of substitutes remains low.
The Threat of New Entrants
The threat of new entrants in the banking sector is considered low because of the inherent barriers to entry associated with the industry. The primary reason for low entrants is the capital required to start and operate the banking company, and it does not seem viable to raise such money. Another major cause for concern is the products being offered, and they are similar at the core. All the changes are superficial; thus, undifferentiated offerings make it difficult to acquire new customers and generate revenue. The massive capital requirement, along with little room for differentiation and innovation, are some of the unavoidable hurdles for new entrants (BSA, 2017). The last but another major deterrent is the presence of the well-established incumbents in the Spanish banking sector, thus leaves little room for any other entrant. Therefore, the threat of new entrants remains low.
Bargaining Power of Buyers
The bargaining power of buyers is high in the financial services industry. It is ought to the standardized products and services and low switching cost. Consumers are the most critical source of supply for the bank; thus, they are highly valued. The products and prices among banks are the same, and there is virtually no switching cost. Consumers are aware of the value they bring, and they do negotiate for the best services and prices. The leading banks provide the services above all; it’s more about customer services and satisfaction than the product. The customers also believe that their deposits are significant sources of the bank’s supply of money (Fejza et al., 2017). A loss of a customer can trigger social exodus as the lost customer can pursue its known socialites to switch the banking company. Thus, consumers can drive down profit and hold high bargaining power.
Bargaining Power of Suppliers
Suppliers’ bargaining power depends on the various underlying factors; usually, suppliers hold moderate bargaining power. The significant sources of supply are customer deposits, loans from financial institutions, and fixed income securities, including bonds. Lending institutes only lend money after strict due diligence, thus, can exert higher bargaining power. When buyer’s inputs are essential for the success of the buyer’s manufacturing process or product quality, the bargaining power of suppliers is high (Dess et al.,2005). Customer also poses higher bargaining power due to intense competition. Another source of supply is the human resources required to run a competitive financial operation. Enough aspirants are willing to work in the high technology financial sector, increasing competition for places in the financial industry. Employers have high barraging power due to the excess availability of human resources. Therefore, the bargaining power of suppliers overall is moderate.
References
CaixaBank. (2021). About Us. Available at: https://www.caixabank.com/en/about-us.html
Fortune 500 Global. (2021). Banco Santander. Available at: https://fortune.com/company/banco-santander/global500/
Forbes. (2021). CaixaBank. Available at: https://www.forbes.com/companies/caixabank/?sh=21f05acf3c98
Forbes. (2021). BBVA-Banco Bilbao Vizcaya. Available at: https://www.forbes.com/companies/bbva-banco-bilbao-vizcaya/?sh=78000bdf738e
Forbes. (2021). Banco de Sabadell. Available at: https://www.forbes.com/companies/banco-de-sabadell/?sh=7cf16b994d2a
McWaters, J., Bruno, G., Lee, A., & Blake, M. (2015). The Future of Financial Services-How disruptive innovations is reshaping the way financial services are structured, provisioned and consumed. In the World Economic Forum. Junio de (Vol. 2105).
BSA. (2017).Review Of Barriers to Entry, Expansion, and Exit in Retail Banking. Available at: https://www.bsa.org.uk/BSA/files/97/97d78dbb-e8aa-4f8c-8b26-8c7ea7d95ce9.pdf
Fejza, V., Livoreka, R., & Bajrami, H. (2017). Analyzing Consumer Behavior In Banking Sector Of Kosovo. Eurasian Journal of Business and Management, 5(4), 33-48.
Dess, G. G., Lumpkin, G. T. and Eisher, A. B (2006). Strategic Management. Text and cases. Internationaledition. London: McGraw-Hill.
Bateman, T. S. and Snell, S. A. (2004). Management. The new competitive landscape. Sixth edition. New York:McGraw-Hill.