Itaú Unibanco Holding is a multinational bank based in Sao Paulo, Brazil and it is the largest bank in the country. The bank places a high value for ethical considerations for conducting business activities. The bank has total assets of US $ 88.3 billion in 2018 according to the central bank of Brazil. The bank employs 100,335 people in the bank with 4,940 agencies and PABs in the country and foreign. There is a total of 49.7 million customers of the bank and 48,476ATM’s provided by the bank for its customers. The bank has won the award for The Best Company in People Management in 2017 by Valor Carriera Magazine. To continue this level of success, Porter’s five forces model is presented for Itaú Unibanco Holding
Competitive Rivalry
The competitive rivalry in the Brazilian banking sector is intense due to the presence of multiple competitors. The major competitors in the sector with respect to total deposits in 2017 are Caixa Economica Federal, Banco Do Brasil, Itaú Unibanco Holding, Bradesco, and Santander Brasil with a deposit collection of USD 160.67, 136.01, 120.2, 79.63 and 54.82 billion respectively. There are several other players like Banrissul, Bancoob, Citibank Brasil, Safra, and Ssicredi that are providing tough competition to the market leaders in the Brazilian banking sector (Statista, 2018). The number of competitors is high and the competitors have enough strength to compete with each other forms the basis for intense competition in the industry.
Threat of Substitutes
The personal and corporate banking is on the rise and no household and organizations are working without banking services. The banking services not only in Brazil but all over the world are injected in personal and corporate lives. Without banking and financial services, the business and households cannot serve in this over dependant era on banking. By looking at the history of banking, the form and innovation of banking products have been improving but the industry and the service got further penetration (McWaters et al, 2015). This extreme penetration of banking in the personal and corporate lives have made it impossible for banking service in the near future to be replaced by a substitute.
The Threat of New Entrants
The capital intensive nature and high regulations by the government on any business are the biggest hurdles for the investors to enter a particular industry especially in the banking sector (BSA, 2017). The case of the Brazilian banking sector is not different as banking setup, in general, requires a massive amount of capital to start a business. The legislation is also strict in Brazil and in general for banking business as the probability of fraud in the banking sector is highest. The degree of competition is another factor that creates hurdles for new entrants as existing players are performing exceptionally well and the new entrants do not have anything extraordinary to offer for Brazilian customers (van den Broek, 2012). The presences of multiple hurdles that are difficult to avoid are the major contributing factors towards the low threat of new entrants in the Brazilian Banking sector.
Bargaining Power of Buyer
In the presence of multiple banks at large and small levels, the buyers enjoy the luxury of choosing one from multiple options. The banks also do not have anything extraordinary innovative from another that becomes the major attraction for the customers. The core product of all banks is same with a high level of service among all top banks and the banks lack creativity and innovation when it comes to competition (Vinhal Nepomuceno, & Barreiros Porto, 2010). These two factors add to the power of buyers when it comes to bargaining. Therefore, the bargaining power of buyers in the Brazilian banking sector is high.
Bargaining Power of Suppliers
The deposits of customers and the lending financial institutions are the major supplier of capital in the banking industry in Brazil and all across the world. The power of bargaining for customers is already high as they have an idea about the importance of their deposits. Banks are dependent on their deposits and customers bargain with further strength. The lending institutions also have enough knowledge about their importance and the institutions do not give any easy lending to banks. Therefore, the bargaining power of the supplier in the banking industry is high.
References
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
Itaú Unibanco Holding . (2019). About Itaú Unibanco. Available at: https://www.itau.com.br/relacoes-com-investidores/show.aspx?idCanal=6ux26n5A/3drFAuLCRilEw==
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).
Statista. (2018). Leading banks in Brazil in 2017, based on the value of deposits (in billion U.S. dollars). Available at: https://www.statista.com/statistics/857499/leading-banks-brazil-deposits/
Vinhal Nepomuceno, M., & Barreiros Porto, J. (2010). Human values and attitudes toward bank services in Brazil. International Journal of Bank Marketing, 28(3), 168-192.
Van den Broek, A. (2012). Brazilian financial industry – a booming and interesting market. Available at: https://banknxt.com/785/the-brazilian-financial-industry-a-booming-and-interesting-market/