National Australia Bank is one of the largest financial institutions in Australia. Based on Market capitalism, it is the 21st largest bank in the world. It was found in 1982 as National Commercial Banking Corporation of Australia Limited with headquarters in Melbourne. The bank has more than 1590 branches in Australia, New Zealand, and Asia and serves more than 12.7 million customers (NAB, 2019). Standards & Poor’s rating for National Australia Bank is AA- which is an indicator of the excellent services it offers. In 2018, the bank generated revenue of 19.101 billion Australian Dollars. The bank has more than 35000 employees (NAB, 2019).
Following is a detailed Porter Five Forces Model Analysis of National Australia Bank:
Competitive Rivalry – High
There are several rivals of National Australia Bank including First Bank, Lakeshore Savings, and Choice One. The industry is not growing as well. The fixed costs of doing business are also high such as the salary of the employees, rents of buildings, utility charges, and so on. Various competitors offer similar products. Once a bank is established, it is not easy to get out of the business as the bank has various forms of long-term commitments with its customers. The costs of switching to another competitor are also low. An important aspect is that customers require a high level of information about the products to understand them. All of these factors indicate a high competitive rivalry in the banking industry.
Threat of New Entrants – Low
National Australia Bank has been in the business for years. It has developed efficiency in its products and performance that provide it with a cost advantage. Also, the products the bank offers are not proprietary and similar products are offered by other financial institutes. Also, the bank has established a wide array of branches and itself as a brand that helps it stand out. A new organization intending to enter the banking industry would need to invest a significant amount of capital to establish numerous branches and market itself before it is capable of attracting customers and earning a profit. Also, government licenses and regulations have their costs as well. Thus, the threat of new entrants is low for National Australia Bank.
Bargaining Power of Suppliers – Low
The bank requires various office supplies, equipment, and other items through its suppliers. These are standard materials and not differentiated in any manner. If a supplier attempts to influence the National Australia Bank to increase its prices, the bank can go to any other supplier as the switching cost is low for the bank (FFU, 2019). Also, the bank provides the suppliers with large businesses that would make it difficult for them to enter the market if they lose their work with the bank. There are numerous suppliers willing to supply the bank with the required products. As a result, they cannot influence the bank in any way.
Bargaining Power of Buyers – High
The number of buyers in the banking industry is large and the number of banks is small. The consumers vary in size from those earning a small monthly salary to millionaires. The cost of switching for a buyer is also low as they can easily withdraw their funds and take them to another bank. The buyer does need additional information to understand the various products. Customers cannot produce the same services on their own. The products the different banks offer are similar. Also, all banks offer similar interest rates on the various products they offer. They cannot influence buyers to retain their money with them as well. As a result, buyers have high bargaining power.
Threat of Substitutes – Moderate
The National Australia Bank can provide various services that have little to no substitute. Customers can also avail loans from their friends and families to purchase various products such as a car or an educational loan. However, various savings accounts that offer a certain interest over the principal amount can only be offered by a bank. Thus, substitutes have performance limitations. Also, the costs of the alternative may be higher if customers switch to them (FFU, 2019). The factor of trust is also important as customers may not trust their family or friends for their financial needs. They are not likely to go for substitutes.
References
FFU, 2019. National Australia Bank Limited Porter Five Forces Analysis. [Online] Available at: http://fernfortuniversity.com/term-papers/porter5/asx/25-national-australia-bank-limited.php [Accessed 07 Dec. 2019].
NAB, 2019. Full year Results 2018. [Online] Available at: https://www.nab.com.au/content/dam/nabrwd/documents/reports/financial/2018-full-year-results-announcement.pdf [Accessed 07 Dec. 2019].