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<p align="justify">Huaxia Bank (HXB) is a publicly-traded commercial bank founded in 1992 and is based in Beijing, China. The bank is the fifth bank of Chinese origin to be listed on the stock exchange. The bank has vast outreach in China and supports the consumers and small and medium enterprises throughout the country. Its robust network and exemplary customer service have put the bank on the pedestal of high-performing banks in the country. The bank has lots of accolades to its name; Huaxia Bank ranked 97th by asset in 2012 according to The Banker&#8217;s Top 1000 World Banks ranking published in July. The bank was ranked 306th among the top 500 Chinese enterprises and was ranked at 67th spot in the top 200 Chinese Enterprise Performance (Huxaia Bank, 2021). Porter&#8217;s five forces model is a helpful tool to analyze the business and financial risk HXB is exposed to and opportunities it can potentially exploit.</p>
<h2 align="justify">Competitive Rivalry in the Market</h2>
<p align="justify">The financial services industry is highly competitive globally, and a similar situation is prevalent in China. According to (Bloomberg, 2020), as of 2019, 19 of the top 100 banks were based in China, and they reportedly have $25 trillion in assets. The major competitors of HXB are the Bank of China (BOC), China Everbright Bank (CEB), and China Merchants Bank (CMB). In 2020, HXB posted 21.3 billion and a profit of $3.1 billion (Forbes, 2021). In the same fiscal year, BOC posted $27.2 billion after earning revenue of $135.4 billion (Forbes, 2021). Whereas CEB made revenue of $35.6 billion (Forbes, 2021), and CMB earned revenue of $58.4 billion while earning a profit of $13.7 billion (Forbes, 2021). Due to the massive banking infrastructure in mainland China, there is stiff competition in the financial services sector.</p>
<h2 align="justify">Threat of Substitutes</h2>
<p align="justify">The banking and financial services sector has been part of society for centuries. This industry forms a virtual network for businesses to exist and perform. The ways banking services exist today are after the long evolutionary process. Financial services form an essential part of society, they will evolve with time, but their existence is inevitable (McWaters et al., 2015). However, the consumer banking landscape is going through a dynamic revolution; many new startups are emerging in the space and are trying to disrupt the industry. There are challenging incumbents and forcing change, the way foreword is either innovate or left behind. Banks are using different strategies to stay ahead of this; some banks invest in research and development while pursuing growth by acquisitions. The banks in the Chinese industry have the resources to follow the digital transformation and adapt to the change, and they are showing a willingness to do so. There is potential for innovation and radical transformation, but there are no natural substitutes in the short-term.</p>
<h2 align="justify">The Threat of New Entrants</h2>
<p align="justify">The threat is perceived to be high when there is less capital required, and the regulatory environment fosters growth. In China, the regulatory environment is pretty stringent, and the state has strict oversight on every industry. The financial services sector attracts more scrutiny as it forms the backbone of the business sector and many industries depend upon it. With the stiff regime at the top, there are rules to deter foreign investments in the banking sector. The acquisition by the state-owned company for the shares held by Deutsche Bank in HXB is a testament to that. The financial industry offers rich returns, thus attract more competition. However, the high capital investment to compete and the risk of sunken cost pose a barrier to entry (Bateman &; Snell, 2004). It is a capital-intensive business, and significant initial capital is required. Therefore, the threat remains moderate to low.</p>
<h2 align="justify">Bargaining Power of Buyers</h2>
<p align="justify">The bargaining power of customers is moderate to high in the banking sector. The Chinese banking sector is already saturated. Even though China is the most populous country, it still has its fair share of mega consumer banks. The products offered by banks are similar at the core, and lack of differentiation increases the consumer&#8217;s power. These, coupled with the available option to one consumer and the low switching cost, means that the consumer can bargain for the best services. Usually, banks are offering the same products with no differentiation (Vyas and Raitani, 2014). Therefore, banks with the best customer service will garner more business and lead the market. Considering the above, the consumer can exert high bargaining power.</p>
<h2 align="justify">Bargaining Power of Supplier</h2>
<p align="justify">The significant sources of supply to retail banks are deposits from customers, financial experts, and lender deposits. In China, consumers hold high bargaining power. Another primary source of supply is financial experts, those who work in the industry. There are many aspirants available to work in the industry and matching job opportunities; thus, they can exert moderate to low bargaining power. The last source is the institutional lender, they only offer loans after strict due diligence, and they set hefty risk premiums and caveats for loaned amounts. They hold high bargaining power as a supplier. In the situation where buyer&#8217;s input is high for the business&#8217;s success, they can exert high bargaining power (Dess et al.,2005). Therefore, the bargaining power of suppliers overall is moderate.</p>
<h2 align="left">References</h2>
<p align="left">Huaxia Bank. (2021). About Hua Xia Bank. Available at. https://www.hxb.com.cn/en/about-hua-xia-bank/general-description/bank-profile/index.shtml<br />
Dess, G. G., Lumpkin, G. T. and Eisher, A. B (2006). Strategic Management. Text and cases. International edition. London: McGraw-Hill.<br />
Vyas, V. and Raitani, S. (2014). Drivers of customers’ switching behaviour in Indian banking industry. International Journal of Bank Marketing Vol. 32 No. 4, 2014 pp. 321-34.<br />
Bateman, T. S. and Snell, S. A. (2004). Management. The new competitive landscape. Sixth edition. New York:McGraw-Hill.<br />
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).<br />
Bloomberg. 2020. Chinese Banks Remain World&#8217;s Largest in Latest Global Bank Rankings. Available at: https://www.bloomberg.com/press-releases/2020-04-17/chinese-banks-remain-world-s-largest-in-latest-global-bank-rankings<br />
Forbes. (2021). Huaxia Bank. Available at: https://www.forbes.com/companies/huaxia-bank/?sh=3cb159665418<br />
Forbes. (2021). Bank of China. Available at: https://www.forbes.com/companies/bank-of-china/?sh=1ff260d49ad4<br />
Forbes. (2021). China Everbright Bank. Available at: https://www.forbes.com/companies/china-everbright-bank/?sh=48af9fee7afd<br />
Forbes. (2021). China Merchants Bank. Available at: https://www.forbes.com/companies/china-merchants-bank/?sh=268f4a986263</p>
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