Mitsubishi UFJ Financial Group, Inc. is a Japanese bank holding / financial services company headquartered in Chiyoda, Tokyo, Japan and incorporated on 2nd April 2001. MUFG holds assets of around 2,141 billion yen in 2018, making it the world’s fifth largest bank by total assets. The company is listed in Tokyo, Nagoya, and New York stock exchanges. One of the major strength of the company is its top leadership with a vision to become the best in the business. To achieve this vision, it is necessary for the company to stay updated with the latest and ever-changing business and industry environment. Porter’s five forces model with respect to banking and financial services industry in China is presented to have an overview of industry attractiveness.
Competitive Rivalry
The competition in the industry of bank in Japan is intense due to the presence of multiple large local banks as well as American banks. The major local banks of Japan that are competing at the top level are MUFG, Mizuho, Sumitomo Mitsui Banking Corporation, Resona Bank, Aozora Bank, and Shinsei Bank. Mizuho Bank, MUFG and Sumitomo Mitsui Banking Corporation have almost 50 % share of lending the capital in the banking industry of Japan. This shows their dominance along with the presence of 190 banks in total. Even the smaller banks are posing challenges for the major players by offering effective services (Piece of Japan, 2016). The presence of 190 banks has penetrated the market that intensifies the competitive rivalry in the industry.
Threat of Substitutes
Financial and banking services have become a basic need for businesses all around the globe. Without these financial and banking services, it has become impossible for companies to operate (A.T.Kearny, 2009). The importance of consumer banking at an individual level can also never be ignored due to the massive interest of individual consumers for saving, investing and earning from banks and financial services. There has been development in the type of banking and financial services but the reliance of the world has been increasing on the banking services. This increase is reliance on the level of making it a necessity, especially for the businesses, have reduced the chances to almost zero for developing a substitute for the banking and financial services. Currently, there are no substitutes that pose any level of threat to banking and financial services. The innovation and evolution of banking service are significant for the success but the threat of substitute is extremely low.
The Threat of New Entrants
The banking industry creates several hurdles for the investors or company that are willing to operate the banking business in Japan. The government and business environment of Japan is supportive of conducting financial and any type of business in the country. But the banking and financial industry involves businesses that require a massive amount of capital and strict regulations to comply with. The financial services are high involvement decision for the customers and it requires massive efforts and expertise to convince the customers to shift to a new entrant. But the exceptional business environment and banking potential of the Japanese industry still make it attractive (Marie, 2019). These hurdles with a positive sign have made the threat of new entrants to moderate level
Barraging Power of Buyer
The bargaining power of the buyer increases when there are multiple options with little differentiation. This is the case in the banking industry of Japan where there are multiple exceptional local and international options for customers with limited differentiation among the offerings of each other. This makes it easy for customers to switch from one bank to another bank with strong bargaining power (Fejza et al, 2017). Due to this situation of the banking industry, the bargaining power of buyers in the banking industry of Japan is high
Bargaining Power of Supplier
The bargaining power of suppliers in the banking industry is moderate as customers are one of the major suppliers of capital for the banks. Customers do understand their importance for banks and set better terms with a dominant position. The other financial institutions or state banks are the other options for supply the capital for the bank that also bargains with strength as they are less in numbers. The factors in the favor of suppliers increase their bargaining power in the banking industry of Japan.
References
A.T.Kearny (2009). The five forces shaping the banking industry. Available at: https://www.atkearney.com/documents/10192/296636/Five_Forces_Shaping_Banking.pdf/9a0bcd47-8572-4dba-9aa1-8ec204ffbeac
Fejza, V., Livoreka, R., & Bajrami, H. (2017). Analyzing Consumer Behavior In Banking Sector Of Kosovo. Eurasian Journal of Business and Management, 5(4), 33-48.
Marie, A. (2019). The Japanese Banking Systems in Transition. The National Bureau of Economic Research. Available at: https://www.nber.org/digest/nov99/w7250.html
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).
Piece of Japan. (2016).Market Share of Bank. Mega-Banks occupy Japanese bank market! Available at: https://piece-of-japan.com/investing/bank/market-share.html