Nomura is a Japanese financial conglomerate and holding company; it is headquartered in Tokyo, Japan. The company is one of the oldest financial institutes, and it was founded in 1925. Company currently employs approximately 28,000 individuals across its group. Nomura deals in investment and financing services to individuals, corporate clients, and governments; the company started in Japan now has a global reach. The securities business is the mainstay of the company, and it is the most emphasized segment. Nomura has a corporate culture that promotes inclusion and diversity and is an equal opportunity employer; the company has a separate line of sustainable products. It believes in achieving sustainability by solving social issues (Nomura Holdings, 2021). The company has many accolades and awards; it was rated by the investors as the best access provider in Japan. Porter’s five forces analysis is a valuable tool to assess the business and financial risk Nomura is exposed to in the global financial services sector.
Competitive Rivalry in the Market
The financial services industry is highly competitive globally, and big corporations compete for every aspect of the market. Nomura is an almost a century-old company and is one of the important market players in Japan; its influence is evident through its presence in Asian and global markets. The company’s main competitors are Mizuho Financial, Concordia Financial Group, and Mitsubishi UFJ Financial. In 2020, Nomura ranked 467 among Fortune 500 global companies, and it reported revenue of $ 25,047 million and profit of $1,291 million (Fortune, 2021). On the other hand, Mizuho Financial reported revenue of $35.9 billion and earned a profit of $831.1 million (Forbes, 2021). Concordia Financial Group has its fair share of the market with a market cap of $3.6 billion, and it has reported $2.8 billion in revenue (Forbes, 2021). Mitsubishi UFJ Financial is a massive financial powerhouse of Japan, with a market cap of $51.6 billion; it has reported $60 billion in revenue and earned a profit of $5.4 billion (Forbes, 2021). The presence of all these high net worth companies makes the industry highly competitive.
Threat of Substitutes
The financial services sector has evolved a lot since its inception, and it’s been a part of society for centuries. The implosion of technology and the public’s acceptance of it have made the industry progress fast. Specifically for the securities market, the availability of data and the processing power changed the face of analysis. Due to the availability of smart devices, companies have access to an enormous amount of data points to sift through. Despite all that, there is no natural substitute for the financial services industry. The industry is an important part of the society that is going to be so in the future, its existence is inevitable (McWaters et al., 2015). There are better services, customized and tailored to consumer needs, but there is no natural alternative. The traditional companies are evolving with the time, they do not have the option, or they will be left behind in the dynamic market. There is a low to moderate threat to traditional financial services institutes.
The Threat of New Entrants
The threat is perceived to be high when there is less capital required and the regulatory environment fosters growth. In Japan, the regulatory environment is inflexible, and the state has strict oversight on every industry. Even there are regulatory clusters to sift through for organizations to work effectively, and it is both challenging to comply with and have high compliance costs. The layers of regulations for the financial services sector and lack of opportunity for corporate reorganization cause the real problem for the companies (Hoshi & Takatoshi. 2004). Another factor that impacts the new entrants is the high capital requirements, there is considerable capital required at initiation and the necessity of steady working capital to smooth operations. However, in the short term, companies in the sector face moderate to a low threat.
Bargaining Power of Buyers
The bargaining power of customers is moderate to high in the banking sector. The Japanese Financial services sector is already saturated, and the same is the case globally. There are mega financial institutions present in the market and competing for their market share. The products are similar at the core and cannot be differentiated from one another; this increases consumers buying power. Moreover, there is no brand loyalty, and there is meager, almost no switching cost; this gives consumers further options to choose from. Banking products are usually the same and offer no additional value to consumers compared to products offered by other competitors (Vyas and Raitani, 2014). Therefore, banks with the best customer service will garner more business and lead the market. In this situation, consumers have high bargaining power.
Bargaining Power of Supplier
The bargaining power of the supplier depends upon the underlying factors defining supplies. The significant sources of supply to financial services institutes, especially securities firms, are the investments from customers or traders, assets of financial institutes, and the inform human resources the expert analyst and traders. The customers are aware of that their value for the business and therefore command higher bargaining power. Institutional investors invest after conduction a proper review; if their investment goals are met, they invest. . In the situation where the buyer’s input is high for the business’s success, they can exert high bargaining power (Dess et al.,2005). There are relatively good financial analysts are available, and they want to get exposure at good firms and therefore command less bargaining power. Thus, the bargaining power of suppliers overall is moderate.
References
Dess, G. G., Lumpkin, G. T. and Eisher, A. B (2006). Strategic Management. Text and cases. International edition. London: McGraw-Hill.
Forbes. (2021). Concordia Financial Group. Available at: https://www.forbes.com/companies/concordia-financial-group/?sh=5d5e69337e27
Forbes. (2021). Mitsubishi UFJ Financial. Available at: https://www.forbes.com/companies/mitsubishi-ufj-financial/?sh=622e79e1738b
Forbes. (2021). Mizuho Financial. Available at: https://www.forbes.com/companies/mizuho-financial/?sh=69cec1603db8
Fortune. (2021). Nomura Holdings, Inc. Available at: https://fortune.com/global500/2013/nomura-holdings-inc/
Hoshi, Takeo & Ito, Takatoshi. (2004). Financial regulation in Japan: A sixth year review of the Financial Services Agency. Journal of Financial Stability. 1. 229-243. 10.1016/j.jfs.2004.09.007.
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).
Nomura Holdings. (2021). Sustainable products and Solutions. Available at: https://www.nomuraholdings.com/csr/sustainable/finance/products.html
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.