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<p align="justify">Bank of Shanghai (BOS) is an urban commercial bank based in Shanghai, China. It was founded in 1996. The bank&#8217;s primary operations are related to retail clients and managing corporate clients. BOS was listed on the Honk Kong Stock exchange in 2015, and since then, it forms part of the lucrative blue-chip stocks index. BOS has a widespread network of branches across the country with 294 outlets in Shanghai, Ningbo, Nanjing, Hangzhou, Tianjin, Chengdu, Shenzhen, Beijing, and Suzhou. Apart from that, BOS has set up rural banks as subsidiaries. In addition, BOS has an investment management arm, which deals with assets management. The bank ranks No.158 in 2013 in the &#8220;Top 1,000 Banks in the world&#8221; released by the British magazine The Banker (Bank of Shanghai, 2021). Porter&#8217;s five forces model is a helpful tool to analyze the business and financial risk BOS is exposed to and opportunities it can potentially exploit.</p>
<h2 align="justify">Competitive Rivalry in the Market</h2>
<p align="justify">The financial services industry is highly competitive globally, and a similar situation is prevalent in China. According to Bloomberg (2020), as of 2019, 19 of the top 100 banks were based in China, and they reportedly have $25 trillion in assets. China has a massive banking industry, and megabanks are operating in a public and private capacity. Its main rivals are the Bank of China (BOC), China Everbright Bank (CEB), and China Merchants Bank (CMB). BOS has a significant market share valued at $16.5 billion; the bank has reported $12.9 billion and a profit of $2.7 billion (Forbes, 2021). In the same fiscal year, BOC posted $27.2 billion after earning $135.4 billion (Forbes, 2021). Whereas CEB made revenue of $35.6 billion (Forbes, 2021), and CMB earned revenue of $58.4 billion while earning a profit of $13.7 billion (Forbes, 2021). Owing to the massive banking infrastructure in mainland China, there is stiff competition in the financial services sector.</p>
<h2 align="justify">Threat of Substitutes</h2>
<p align="justify">The banking and financial services sector has been part of society for centuries. This industry forms a virtual network for businesses to exist and perform. The banking sector has evolved with time and forms an important part of society. The industry existed in one form or another and a critical pillar to perform business. For now, the industry&#8217;s existence seems inevitable, as it will evolve but exist in the future. The financial services industry is going through a digital transformation, backed by the digital age and access to intelligent appliances; banks need to reposition themselves to progress (Alt &; Puschmann, 2012). Fintech startups are spurring up trying to shake the industry and disrupt the banking sphere. The incumbents are pushed to change or threatened of being left behind. Traditional banks respond to the threat seriously and are pursuing growth either by acquisition or by research and development. As of now, there are no natural substitutes in the short term.</p>
<h2 align="justify">Threats of New Entrants</h2>
<p align="justify">There are inherent caveats attached with the industry that deter the new business from starting. There are a couple of factors that prevent most newcomers. One crucial obstacle for the newcomer is the stiff regulatory requirements, and the other is the high initial capital requirement. The sector is one of the highly regulated sectors in the world due to the fear of significant public loss if any misdeed occurs. The 2008 financial crisis is a testament to that approach. In China, the regulatory environment is pretty stringent, and the state has strict oversight on every industry. Moreover, there are rules to deter foreign investments in the banking sector. The high return on investments attracts more investments and competition in the industry. The other obstacle for the new business operator is the high initial capital requirement. However, the high capital investment to compete and the risk of sunken cost poses a barrier to entry (Bateman &; Snell, 2004). With the factors described above, the threat remains moderate to low.</p>
<h2 align="justify">Bargaining Power of Buyers</h2>
<p align="justify">Buyer&#8217;s bargaining power depends on the underlying factors such as buyer&#8217;s concentration, buyer&#8217;s ability to substitute, buyer&#8217;s switching costs, buyer&#8217;s information availability, and price sensitivity. Despite being the largest consumer market, the country has its fair share of megabanks operating. The products offered by the banks are undifferentiated and pretty similar at the core. Usually, banks are offering the same products with no differentiation (Vyas and Raitani, 2014). There is a lack of customer loyalty due to similar services on offer. In addition, clients are susceptible to price changes; a minor price change would cause them to change the bank. There is virtually no switching cost. Therefore, banks with the best customer service will garner more business and lead the market. Customer service and convenience take the priority for every financial services company. Therefore, the consumer can exert high bargaining power.</p>
<h2 align="justify">Bargaining Power of Supplier</h2>
<p align="justify">In the industry, bargaining power depends on the availability of alternatives, competition in the market, supplier concentration, and switching cost. Generally, suppliers can exercise moderately to low bargaining power. The primary source of supplies for the banking corporations are loans from lenders, deposits from customers, and expert financial professionals. Lenders make deposits on their terms after vetting the client and if their desired rate of return is matched, which usually higher than the benchmarking rate. Consumers are aware of their importance as they know it’s important for the business to operate. When suppliers are aware of their importance to the company, they can exercise high bargaining power (Dess et al., 2006). According to the demand-supply theory, there are more financial experts than available vacancies; they do not possess higher bargaining power. Overall, suppliers have moderate to increased bargaining power.</p>
<h2 align="justify">References</h2>
<p align="left">Alt, R., &; Puschmann, T. (2012). The rise of customer-oriented banking-electronic markets are paving the way for change in the financial industry. Electronic Markets, 22(4), 203-215.<br />
Bank of Shanghai. (2021). About. Available at: https://www.bankofshanghai.com.hk/en/About/<br />
Bateman, T. S. and Snell, S. A. (2004). Management. The new competitive landscape. Sixth edition. New York:McGraw-Hill.<br />
Bloomberg. 2020. Chinese Banks Remain World&#8217;s Largest in Latest Global Bank Rankings. Available at: https://www.bloomberg.com/press-releases/2020-04-17/chinese-banks-remain-world-s-largest-in-latest-global-bank-rankings<br />
Dess, G. G., Lumpkin, G. T. and Eisher, A. B (2006). Strategic Management. Text and cases. Internationaledition. London: McGraw-Hill.<br />
Forbes. (2021). Bank of China. Available at: https://www.forbes.com/companies/bank-of-china/?sh=1ff260d49ad4<br />
Forbes. (2021). Bank Of Shanghai. Available at: https://www.forbes.com/companies/bank-of-shanghai/?sh=6d1d737d3339<br />
Forbes. (2021). China Everbright Bank. Available at: https://www.forbes.com/companies/china-everbright-bank/?sh=48af9fee7afd<br />
Forbes. (2021). China Merchants Bank. Available at: https://www.forbes.com/companies/china-merchants-bank/?sh=268f4a986263<br />
Vyas, V. and Raitani, S. (2014). Drivers of customers’ switching behaviour in Indian banking industry. International Journal of Bank Marketing Vol. 32 No. 4, 2014 pp. 321-34.</p>
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