Oversea-Chinese Banking Corporation is a multinational public limited company. It has been dealing in the financial and banking industry, offering a wide range of financial products and services in corporate, retail, commercial, private banking, and wealth management solutions. The institution was shaped in 1932 and having its Headquarters in OCBC Centre, Singapore. The distribution network is expanded over 5000 branches across the country.
As of 2018, the business holds a solid net profit figure, which is 4.49 billion Singapore dollars, and more than 29,700 persons are working under the firm’s umbrella (OCBC, 2018). Considering the global banking sector, a study of the Porter Five Powers will be instrumental in determining the company’s strategic role in the financial industry to cope with threats and discover opportunities.
Competitive Rivalry in The Market
The competitive rivalry in the banking sector is considered to be high because financial activities are the most influential division of the banking industry and play an essential part in the country’s economic growth. Not only restricted to the major known cities and reached the world’s remote areas, which is the key to growth. As a result of this shift, many banks and financial institutions have entered into the market to provide banking services to customers, resulting in stiff competition between major corporations.
The institution’s significant competitors are the DBS Bank and United Overseas Bank. OCBC is trying to lead the market with a revenue figure of 7.7 Billion dollars, while others have revenue of 11 and 6.9 Billion dollars (Owler, 2020). Hence, the presence of such big names in the industry makes the competition more challenging.
Threat of Substitutes
The threat of substitutes in the banking industry is considered to be low because of the number of banks and institutions operating in the industry and providing somewhat similar products and services. The finance sector is crucial for businesses in the current era, and no other source can replace them. Digitalization of services and goods has changed the essence of financial dealing and connection between clients and the market as a mode of alternative solution financing. Banking institutions have been flexible, and businesses are constantly changing and improving the process to serve the consumers via different beneficial products (Pratihari and Uzma, 2018). Still, banking and financial services are unlikely to be substituted in the projected expression. As a result, the threat of substitutes within the industry is low.
The Threat of New Entrants
In the Banking industry, the threat of new entrants is relatively low because of the availability of big firms in the market. The raised barriers in terms of services and reach set by them are difficult to achieve for new firms. People are more likely to stick their hands in big names, credible and significant institutions that they believe are worth more considering the nature of the sector. Furthermore, a considerable amount of capital is required to establish the firm and meet financial needs and other challenges such as developing communication networks, political involvement, and dealing with government regulations (Hoffman et al., 2015). Therefore, the threat of possible entrants is minimal in the banking sector.
Bargaining Power of Buyers
The bargaining power of buyers is considered to be high in the banking sector. In the banking industry, digital transformation has noticeably increased the consumer’s influence. Customers can now compare and differentiate the services and offer provided by different banks regarding costs and benefits. Customers who make payments expect to receive the best services possible. Because there are so many institutions, customers can switch to any of them if they are attracted to new services or a lower price. (Vyas and Raitani, 2014). In this process, there is a risk of the increased buying power of consumers in the banking industry.
Bargaining Power of Suppliers
The power of suppliers in bargaining is considered moderate to high in the banking sector because the institutions are majorly dependent on the suppliers to meet the demand. However, due to continuous growth in the industry and increased buyers, they play a vital role in setting suppliers’ terms to a moderate level. In addition, individuals’ savings, mortgages and loan repayments, securities, and financing from other investment banks keep the institutions afloat so they can continue to provide the necessary facilities in the sector while maintaining enough investment and withdrawal expectations enabling the suppliers to play their part when it comes to negotiation part (Tanskanen, 2015). In such a context, the bargaining power of suppliers can be considered moderate.
References:
Hoffman, P.T., Postel-Vinay, G. and Rosenthal, J.L., 2015. Entry, information, and financial development: A century of competition between French banks and notaries. Explorations in Economic History, 55, pp.39-57.
OCBC, 2018. annual-report. [online] www.ocbc.com. Available at: https://www.ocbc.com/group/investors/annual-report-and-agm.page.
Owler, 2020. competitors. [online] www.owler.com. Available at: https://www.owler.com/company/ocbc#competitors.
Pratihari, S.K. and Uzma, S.H., 2018. CSR and corporate branding effect on brand loyalty: A study on Indian banking industry. Journal of Product & Brand Management.
Tanskanen, K., 2015. Who wins in a complex buyer-supplier relationship? A social exchange theory based dyadic study. International Journal of Operations & Production Management.
Vyas, V. and Raitani, S., 2014. Drivers of customers’ switching behaviour in the Indian banking industry. International Journal of Bank Marketing.