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Porter’s Five Forces Analysis of DNB

Den Norske Bank is a financial services group providing commercial banking and insurance-related services in the country and other regions of Northern Europe. The headquarter of the bank is based in Oslo, Norway, and the group was founded in the year of 1822. The business involved more than 11,000 staff with a revenue of NOK 53.993 billion in 2015 that reflects the company’s financial strength. It is Norway’s most prominent online bank with 1.5 million users and out of which 70,000 are corporate clients. (DNB, 2021). From the perception of the global financial market, the examination of Porter’s five forces would help realize the trends and position in the competitive industry.

Competitive Rivalry in the Market

The competitive rivalry in the financial sector is high because the financial services industry is growing every year and is expected to grow more due to the increased demand in community and bossiness activities. As a result of this expansion, several companies and investors have entered the market to provide financial solutions to customers, resulting in fierce competition among established players.  According to Statista (2020), DNB bank was among the leading bank in Norway with total assets worth 2.1 Trillion NOK as of 2018. There was a total number of 136 banks in Norway, out of which 95 were Norwegian Saving Banks. There is no other bank comparable to DNB when it comes to the size of banks in the region. Major competitors are Danske bank, Swedbank, and SpareBanks. Therefore, such attitudes of firms make the competition more complex.

Threat of Substitutes

The threat of substitutes is considered to be low in the financial sector as the industry is highly regulated. After the collapse of the financial industry in 2008, there came strict compliance frameworks. Despite this fact, the financial sector is of prime importance for every business and individual matter. There is no possibility or potential to replace financial services like banking and insurance. Financial sector goods and services have been revolutionized by unprecedented levels of innovation and premium services, but no product or service is capable of posing a challenge to financial institutions (Zalan and Toufaily, 2017). Hence, posing a low threat of substitutes in context to the industry.

The Threat of New Entrants

The volume of new entrants into the financial sector is relatively low. It is complicated for a fresh firm to penetrate the marketplace and contend on an equal balance with established companies. In actual, a new contestant would face several significant hurdles, consisting the large sums of money required to launch a venture, the time needed to build a reputable public reputation, and the stringent federal rules that affect monetary operations (Nayak, 2021). Consumers usually do not want to move towards a new firm as they consider it involves highly risky. The behavior patterns set by the existing firms are the cause of the entry barriers. Therefore, becoming the reasons for low threat for a new entry.

Bargaining Power of Buyers

The Bargaining power of users is high in the financial services industry because of the similar and limited business solutions from financial firms, and customers have a lot of negotiating power in the financial services sector. The costs of using banking products and services, as well as the choices available, are common. Potential customers can bargain for improved customer service solutions; however, they have a wide range of choices. Clients benefit from lower switching costs which help in increasing their bargaining power (Chen, 2016). Customers nowadays are well aware that their funding fuels the source and profit of financial institutions. Such behavior tactics lead to the high bargaining power of buyers in the industry.

Bargaining Power of Suppliers

In the financial services sector, suppliers have moderate bargaining power. There are few contributors to the money supply in a financial market are lending institutes in the form of loans, securities, leases, and deposits from the customers. Institutes that lend money have maintained a framework before extending loans to any other institute, and they evaluate the reputation and risk premium. Another criterion is that suppliers are influential if their products are well-known or if the supplier group has established consumer switching costs. They do, however, play a critical role in keeping supplier parameters moderate due to the sector’s continued development and increased buyers (Obal, 2014). Thus, in context to the financial industry services, the bargaining power of suppliers is moderate.

References

Chen, J., 2016. How do switching costs affect market concentration and prices in network industries?. The Journal of Industrial Economics, 64(2), pp.226-254.
DNB, 2021. About us. [online] Dnb.no. Available at: https://www.dnb.no/om-oss/om-dnb.html.
Nayak, R., 2021. Banking regulations: do they matter for performance?. Journal of Banking Regulation, pp.1-14.
Obal, M.W., 2014. Analyzing the roles of buyers, suppliers, and employees on the adoption of disruptive technology (Doctoral dissertation, Temple University. Libraries
Statista, 2020. Norway: leading banks by total assets 2019 | Statista. [online] Statista. Available at: https://www.statista.com/statistics/1049900/leading-banks-in-norway-by-total-assets/.
Zalan, T. and Toufaily, E., 2017. The promise of fintech in emerging markets: Not as disruptive. Contemporary Economics, 11(4), pp.415-431.

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