Westpac banking group is Australian bank headquartered in Sydney from 1817. It is ranked one of the biggest Australian banks. This bank is successfully offering diversified portfolio of services to two major segments; institution and consumer oriented. The advisory services and wealth management forms the major part of the services portfolio. Westpac Business and retail banking, BT financial group, St. George banking group, Westpac New Zealand and Westpac Institutional bank are the group’s consumer centered division. The Bank has successfully established its reputation in Australia and also in New Zealand. The bank itself has collaborated with other foreign banks as being the member of Global ATM Alliance (Westpac, 2019).
As the banking operations of Westpac is quite efficient, the group needs to analyze the industrial strengths in order to re-examine its marketing approaches and operations. The Porter five forces model can help the group to increase the profitability in the long term. Here is the detailed porter five forces analysis of the Westpac;
Bargaining Power of Buyers
Westpac Bank does not have any impact form the individual consumers, and because of this they have low bargaining power. The switching cost is also high, and consumers prefer to stay with one bank that offers all services. Moreover, the quality of the services along with the service portfolio matters the most to consumers, which Westpac provides with devotion. The bank has to strive hard to attract consumers and retain the consumer base in order to compete with other banks (Murphy, 2018).
Bargaining Power of Suppliers
The power of the suppliers in the banking industry is medium or sometimes high. The major sources of the capital for banks are four suppliers; loans and mortgage, customer deposits, loans from financial institutions, and mortgage baked securities. These suppliers help banks to operate its function and fulfil the consumer need with expectations. Hence, the suppliers of Westpac have bargaining power (Site, 2019).
Threats of New Entrants
Threats of the new entrants in the Australian banking industry is quite low because of the economies of scales mostly from supply side. The rules and regulations are strict and government guarantee favors to existent domestic banks. High capitalization is required in order to compete with the big four banks of Australia; Commonwealth bank of Australia, Westpac Bank, National Australia bank, and Australia and New Zealand bank. Grabbing the market share from them is a difficult task for a new entrant. It is necessary for the new entrant to be highly capitalized and have strong product differentiation in order to survive in the market (Brien M com, 2011).
Threats from the Substitute Products
Westpac Bank has more threat from non-financial rivals of substitution rather than rival banks. As non-financial companies diversify itself in financial industry with different and innovative services and bring cheaper alternatives. However, the bank does not have strong threats of substitution in withdrawal and deposit services. But, payment methods or insurance, fixed securities have threats from the non-financial groups. Westpac has been able to build strong image and huge consumer base which helps it to retain the profitability level but still the bank has to face competition and also take initiatives to improve itself (Sites, 2019).
Rivalry of Existing Players
The competition among the existing firms in the banking industry of Australia is great, as Westpac is one of the four biggest banks of Australia, other three are Commonwealth bank of Australia, National Australia bank, and Australia and New Zealand bank. Westpac face immense competition from other three big banks and has to continuously strive hard to have product differentiation. Moreover, Westpac also face competition from domestic banks, as they provide services to consumers in low prices, and attract consumers. However, Westpac is financially strong that it can merge or takeover with small banks to avoid the rivalry (Brien M com, 2011).
References
Brien, M, Com. 2011. Competition within the Australian Banking Sector – Comment to Terms of Reference. [Online], Available at: file:///C:/Users/CC/Dropbox/Business%20Law/sub117.pdf, [Accessed on: 18th November, 2019].
Murphy, E. 2018. Westpac Banking Corporation Porter Five Forces Analysis. [Online], Available at: https://www.essay48.com/term-paper/3187-Westpac-Banking-Corporation-Porter-Five-Forces, [Accessed on: 18th November, 2019].
Site, 2019. Porter’s 5 Forces and the Banking Industry. [Online], Available at: https://sites.google.com/site/bankingindustryandtheinternet/home/5-forces, [Accessed on: 18th November, 2019].
Westpac, 2019. About us. [Online], Available at: https://www.westpac.com.au/about-westpac/westpac-group/, [Accessed on: 18th November, 2019].