Banking industry analysis

Presented byUmar Javaid

Zain ul sadiqeen farhanWaqas wafeez

Jaleel khan

Threat of New Entrants/ Entry BarriersFactorsFactors HUFAHUFA MUFAMUFA NeutralNeutral MFAMFA HFAHFA commentcomment

Economies of scaleEconomies of scale

Capital requiredCapital required

Access to Access to distribution channelsdistribution channels

Expected retaliationExpected retaliation

DifferentiationDifferentiation

Brand LoyaltyBrand Loyalty

Experience CurveExperience Curve

Govt. ActionGovt. Action

22

22

33

44

44

55

55

55

As much branches bank starts in any As much branches bank starts in any region their over all cost will be region their over all cost will be minimizedminimized

To start a new bank a lot of capital is To start a new bank a lot of capital is required for getting the license and for required for getting the license and for maintaining statutory liquidity maintaining statutory liquidity reservesreserves

Almost all kinds of banking services Almost all kinds of banking services are available without any special are available without any special network of distribution channelsnetwork of distribution channels

Retaliation is lower coz of large Retaliation is lower coz of large number of competitors.number of competitors.

A new entrant have to adopt all A new entrant have to adopt all product & services with new product & services with new technology.technology.

There is no concept of brand loyalty in There is no concept of brand loyalty in banks it is very easy to redeem a bank banks it is very easy to redeem a bank client into your ownclient into your own

Experience labor available in the Experience labor available in the industryindustry

Currently government is not issuing Currently government is not issuing any more licenses to banks to operate any more licenses to banks to operate in Pakistan there are some legal in Pakistan there are some legal restrictionsrestrictions

44 33 88 15 15

Average 30/8 = 3.75Average 30/8 = 3.75

FactorsFactors HUAHUA MUAMUA NeutralNeutral MFAMFA HFAHFA CommentsComments

Specialized Specialized AssetsAssets

Fixed Cost of Fixed Cost of Exit Exit

Strategic Strategic interrelationshipinterrelationship

Government Government BarriersBarriers 11

44

44

55 Every firm have low Every firm have low specialized assets specialized assets initially initially

Firm cannot exit easily Firm cannot exit easily

Bank to bank Bank to bank financing/ mergers financing/ mergers and acquisitions are and acquisitions are common examplescommon examples

Strict government Strict government restrictions restrictions

11 00 00 88 55

Average 14/4 = 3.5Average 14/4 = 3.5

Competitive Rivalry

FactorsFactors HUFAHUFA MUFAMUFA NeutralNeutral MFAMFA HFAHFA CommentComment

Composition of Composition of CompetitorsCompetitors

Mkt. Growth rateMkt. Growth rate

Scope of Scope of competitioncompetition

Fixed storage Fixed storage CostCost

Capacity IncreaseCapacity Increase

Degree of Degree of differentiationdifferentiation

Strategic StakeStrategic Stake

11

33

33

44

44

44

55

All kind of specialization is All kind of specialization is available.available.

High Growth Rate High Growth Rate

Stiff & aggressive Stiff & aggressive competitioncompetition

Almost Same cost Almost Same cost

No restrictions on branch No restrictions on branch spreadingspreading

Similar products & Services Similar products & Services

All firm are interdependent All firm are interdependent

11 66 1212 55

Average 24/7 = 3.42Average 24/7 = 3.42

Power Of Buyer

FactorsFactors HUFAHUFA MUFAMUFA NN MFAMFA HFAHFA CommentComment

Number of Number of Important buyersImportant buyers

Threat of Backward Threat of Backward integrationintegration

Product suppliedProduct supplied

Switching costSwitching cost

% of buyer’s cost% of buyer’s cost

Profit earned by Profit earned by buyerbuyer

Importance to final Importance to final quality of buyers quality of buyers ProductProduct

11

11

22

33

55

55

Increasing in domestic Increasing in domestic industry.industry.

No or very limited chances that No or very limited chances that a client can purchase a bank a client can purchase a bank

Providing undifferentiated Providing undifferentiated products.products.

Customer can easily switch Customer can easily switch

As much profit a customer As much profit a customer earns it means the bank is earns it means the bank is paying it, banks expenses are paying it, banks expenses are there earningsthere earnings

Essential for the customer Essential for the customer

22 22 33 1010

Average 17/6 = 2.83Average 17/6 = 2.83

Threat Of Substitute ProductThreat Of Substitute ProductFactorsFactors HUFAHUFA MUFAMUFA NN MFAMFA HFAHFA CommentComment

Threat of Threat of Obsolescence of Obsolescence of Industry’s productIndustry’s product

Aggressiveness of Aggressiveness of substitute products substitute products in promotionin promotion

Switching CostSwitching Cost

Perceived price/ Perceived price/ value value

11

33

33

55

Customer will prefer always Customer will prefer always new facilities and servicesnew facilities and services

Almost all banks have Almost all banks have same services and there same services and there

are no close substitutes out are no close substitutes out of industryof industry

Customer cannot easily Customer cannot easily switch due to high cost switch due to high cost

(from national bank closest (from national bank closest to a city if a customer to a city if a customer

prefer askari bank outside prefer askari bank outside area its switching cost will area its switching cost will

be very high)be very high)

Depend upon customer Depend upon customer either they are price either they are price

conscious or notconscious or not

11 99 55

Average 15/4 = 3.75Average 15/4 = 3.75

Overall Industry attractiveness

FactorsFactors UnfavorableUnfavorable NeutralNeutral FavorableFavorable

Entry BarriersEntry Barriers

Exit BarriersExit Barriers

Rivalry among existing Rivalry among existing firmsfirms

Power of buyersPower of buyers

Power of SuppliersPower of Suppliers

Threat of substitutesThreat of substitutes

2.832.83

2.52.5

3.753.75

3.53.5

3.423.42

3.753.75

5.335.33 14.4214.42

Average 19.75/6 = 3.291Average 19.75/6 = 3.291