HDFC Bank is a financial organization offering a wide range of financial products and services in credit, consumer, commercial, private banking, and wealth management solutions in the Indian Market. The institution was shaped in 1994 and having its Headquarters in Mumbai, Maharashtra. The distribution network is expanded over 5000 branches across the country. As of 2020, the business holds a strong figure of revenue which is 21 billion US dollars, and over 110,000 individuals are working under the firm’s umbrella (HDFC, 2020). Considering the Financial Sector, a study of the Porter Five Powers will be instrumental in determining the company’s strategic role in the financial industry to cope with threats and discover opportunities.
Competitive Rivalry in the Market
The competitive rivalry in the financial sector in the Indian market is high because the Banking sector in India is the most influential division of the finance industry and plays an essential part in the country’s economic growth. Not only restricted to the major known cities and reached the remote areas of the country, which is the key to growth. As a result of this shift, many banks and financial institutions have entered into the market to provide banking services to the customers, resulting in stiff competition between major corporations. According to Statista (2020), HDFC bank is the leading private sector bank in terms of net sales of almost a trillion Indian Rupees in the Indian Marketplace. The institution’s significant competitors are the ICICI Bank, Axis Bank, and Yes Bank, with net sales of 634, 549, and 296 billion Indian Rupees. Hence, creating an environment of high competition.
Threat of Substitutes
Financial institutions have been present since the beginning, but their design and framework have been developing and transforming over cycles, so the probability of substitutes is considered low. The finance sector is the essential need of businesses in the present era, and no other resource can replace them. As a mode of alternate solution finance, digital transformation of services and products has changed the essence of financial dealing and engagement among customers and the industry. There has been adaptability in financial institutions, and businesses are constantly shifting methods to serve the customers via different beneficial products (Pratihari and Uzma, 2018). Still, banking and financial services are unlikely to be substituted in the foreseeable term. As a result, the threat of substitutes within the industry is low.
The Threat of New Entrants
In the financial industry, the threat of new entrants is relatively low. Since the industry operates with other people’s payments and financial documents, it’s hard for new institutions to get off the ground. People are more likely to stick their hands in high-profile, well-known, large institutions that they believe are credible considering the nature of the sector. Streamlined banking system procedures require a significant amount of investment to produce commodities and meet industrial demand and other challenges such as developing communication networks, political barriers, and dealing with legislation and rules (Hoffman et al., 2015). Therefore, the threat of possible entrants is minimal in the financial sector.
Bargaining Power of Buyers
The bargaining power of buyers is considered to be high in the financial sector. In the banking industry, technology has dramatically increased the consumer’s influence. Consumers can now compare the costs of having the different accounts and the offers provided by different banks much more efficiently and at a lower cost due to the nature of doing business. Customers, who deposit their money, would expect to get the best of the services. Due to the availability of so many banks, consumers may switch to any other if they are attracted to the different services or a better cost. (Ngo and Pavelkova, 2017). In this process, there is a risk of the increased buying power of consumers in the financial industry.
Bargaining Power of Suppliers
The power of suppliers in bargaining is considered moderate to high in the financial sector because the suppliers’ control is primarily dependent on the demand. However, due to continuous growth in the industry and increased buyers, they play a crucial role in setting suppliers’ terms to a moderate level. Deposits of the customers, mortgages and loans, securities, and lending from other financial institutions maintain the needs of the banks so that they can smoothly provide the services as required in the industry while maintaining enough investment and withdrawal expectations enabling the suppliers to play their part (Xu, Zhao, and Wang, 2017). In such a context, the bargaining power of suppliers can be termed as moderate.
References
HDFC, 2020. Annual Report. [online] www.hdfcbank.com. Available at: https://www.hdfcbank.com/content/api/contentstream-id/723fb80a-2dde-42a3-9793-7ae1be57c87f/1bcf4f2c-17cc-4759-9081-dcc0f5beeb60?.
Hoffman, P.T., Postel-Vinay, G. and Rosenthal, J.L., 2015. Entry, information, and financial development: A century of competition between French banks and notaries. Explorations in Economic History, 55, pp.39-57.
Ngo, V.M. and Pavelková, D., 2017. Moderating and mediating effects of switching costs on the relationship between service value, customer satisfaction and customer loyalty: investigation of retail banking in Vietnam. Journal of International Studies.
Pratihari, S.K. and Uzma, S.H., 2018. CSR and corporate branding effect on brand loyalty: A study on Indian banking industry. Journal of Product & Brand Management.
Statista, 2020. India – leading private sector banks based on net sales 2020 | Statista. [online] Statista. Available at: https://www.statista.com/statistics/949750/india-leading-private-sector-banks-based-on-net-sales/.
Xu, Y.F., Zhao, X.K. and Wang, W.H., 2017. Effect of Supplier’s Market Power on Business Model Performance in B2B Market. Asian Business Research, 2(3), p.78.