Japan Post holdings is a multi-industry organization doing operations as public limited and offering financial product and services of mail and post delivery, courier, banking and life insurance services. The firm was founded in 2006 and having its headquarters in Kasumigaski, Chiyoda, Tokyo. The organization has over 254,472 employees attached with the operations and strong amount of revenue of 109.91 billion US dollars which shows the company’s strength in the industry (Fortune, 2020). Keeping in consideration the financial and insurance market in Japan, Porter’s five forces analysis can be a useful tool for sustaining prospect solutions to control threats and exploit new opportunities.
Competitive Rivalry in the Market
The competitive rivalry in the financial sector is high because the financial services industry is growing every due to the increasing urbanization and to meet ever changing demands by introducing competitive products. With the advent of digital transformation and financial technology, the industry is facing competition from various companies entering the market and offering consumers different services. The Japan Post Group, which is partially governed by the state, is a significant player in the financial and banking industries. Japan Post Bank has been one of the nation’s largest institutions, with over 20,000 branches nationwide, and Japan Post Insurance is also one of the country’s top life insurance firms. As of 2020 Japan post holdings is the top group within services region showing assets over 286 trillion Japanese Yen (Statista, 2020). Mitsubishi UFJ Financial Group, Sumitomo Mitsui Banking Corporation, and Mizuho Financial Group are major rivals in the industry, with some of the biggest banks and investment companies under their shield. Therefore, such capacity of firms makes the rivalry more complex.
Threat of Substitutes
As the financial sector already persisted, however, the danger of substitutes is small; however over the years their type and nature emerged and shifted. The financial industry is the main requirement of companies today, and it cannot be complemented by any other kind of commodity. Major financial institutions and even non-financial institutions that are already operating in the industry leave little to no space for the newcomers to bring some new services except to provide specific service at small or limited level. Progress in the use of technology by financial companies may alter the approach or use of products and services provided by a business (Gomber et al, 2018), but that cannot be called a replacement. Therefore, the risk of having substitutes is considered to be low in financial industry.
The Threat of New Entrants
The threat of new entries in the financial market is considered to be low. The individuals and the society expect stable and safe access to the services and products related to finance, financial institutions are therefore tightly regulated and strictly monitored. Such regulators and interference by the states imposes a high barrier to entry on new firms. Another challenge a new entrant may actually face, including a substantial amount of money from a beginning, effort to establish a trustworthy company reputation and the skilled staff required to run the systems and networks. (Hui et al, 2018). Such factors make the threat to penetrate the market by new entrant low.
Bargaining Power of Buyers
Buyers have the strong negotiating power in the financial services industry because of the identical or similar services being offered from the financial firms. Customers take benefit from the high competition prevailing in the industry. There is no significant difference between the costs of using financial products and services and the available alternatives. Customers have lower switching cost to select from one financial institute to other (Vyas and Raitani, 2014). Consumers can negotiate a better choice of service quality; otherwise they have a variety of choices. They can leverage all these indicators to bargain best price for the services. Following this approach, consumers bargain more seriously and negotiate to get the favorable deals.
Bargaining Power of Suppliers
The suppliers hold usually moderate bargaining power in context to financial industry. Like institutes or organizations that lend money have significant due diligence methods before they provide loans to any other institute by analyzing the credit repute and factors involved in risk premium. Customers usually have higher bargaining power because of the availability of many options at their disposal and reduced switching costs form one to another institute which helps to equate the suppliers bargaining power (Aral et al, 2018). Deposits from individuals, loans and investment securities are some sources of money supply in the industry to meet the economic life cycle. Thus, making the supplier’s bargaining power moderate in context to financial industry.
References
Aral, S., Bakos, Y. and Brynjolfsson, E., 2018. Information technology, repeated contracts, and the number of suppliers. Management Science, 64(2), pp.592-612.
Fortune, 2020. Japan Post Holdings | 2020 Global 500. [online] Fortune. Available at: https://fortune.com/company/japan-post-holdings/global500/.
Gomber, P., Kauffman, R.J., Parker, C. and Weber, B.W., 2018. On the fintech revolution: Interpreting the forces of innovation, disruption, and transformation in financial services. Journal of Management Information Systems, 35(1), pp.220-265.
Hui, X., Saeedi, M., Spagnolo, G. and Tadelis, S., 2018. Certification, reputation and entry: An empirical analysis (No. w24916). National Bureau of Economic Research.
Statista, 2020. Japan: leading companies services industry by total assets 2020 | Statista. [online] Statista. Available at: https://www.statista.com/statistics/894177/japan-leading-companies-service-industry-by-total-assets/.
Vyas, V. and Raitani, S., 2014. Drivers of customers’ switching behaviour in Indian banking industry. International Journal of Bank Marketing.