PORTER’s FIVE FORCE ANALYSIS

Threats of
new
entry

Supplier Commpetitive Buyer

Power Rivalry Power

Threats of
Substitute

STATE BANK OF INDIA

1. COMPETITIVE RIVALRY: High

Top Performing Public Sector Top Performing Private Top Performing Foreign
Banks Sector Banks Banks
Andhra Bank HDFC Bank Citibank
Allahabad Bank ICICI Bank Standard Chartered

The banking industry is highly competitive. The financial services industry has been around for
hundreds of years and just about everyone who needs banking services already has them.
Because of this, banks must attempt to lure clients’ away from competitor banks. They do this
by offering lower financing, preferred rates and investment services. The banking sector is in a
race to see who can offer both the best and fastest services.
2. Buyer Power: High
With the emergence of larger number of players in the Banking Industry, the switching cost of
the buyer has gone done significantly. The onus is now on the effectiveness and speed with
which the services are provided to the customers. Financial institutions - by offering better
exchange rates, more services, and exposure to foreign capital markets -work extremely hard to
get high-margin corporate clients. Options in the Auto Finance Sector also give the customers
more power to decide upon the kind of financing. Introduction of specialized products for
Women and Students etc. also show that the buyer power is high in this Industry.

3. Supplier Power: Low

Suppliers of capital do not pose a big threat, but the threat of supplier’s taking away the human
resource. If a talented individual is working in a smaller regional bank, there is the chance that
person will be enticed away by bigger banks, investment firms, etc.

4. Threats Of New Entrants

Starting a bank in a country like India is not as easy as any other industry, but if anew bank is
started that is mainly targeted on Niche Segments might pose a threat to SBI. The new entrants
from a different country are always discouraged to take part in the financial and banking sector
by regulatory reforms limiting foreign presence. Threat from other non-banking financial
services could also pose a threat especially equity investment, insurance etc. Entrant of a larger
player can cause drastic effect on the not so strong name in banking or the bank with low
income but would not cause any significant effect on SBI.

5. Threat from Substitutes: Low

As you can probably imagine, there are plenty of substitutes in the banking industry. Banks offer
a suite of services over and above taking deposits and lending money, but whether it is
insurance, mutual funds or fixed income securities, chances are there is a non-banking financial
services company that can offer similar services. On the lending side of the business, banks are
seeing competition rise from unconventional companies.

KOTAK MAHINDRA BANK

The biggest barrier of entry for the banking industry, trust. 

Because the industry deals with other people's money and financial information new banks find
it difficult to start up. Due to the nature of the industry people are more willing to place their

trust in big name, well known, major banks who they consider to be trustworthy . 
COMPETETIV BUYER SUPPLIER THREATS THREATS OF
E POWER POWER OF NEW SUBSTITUTE
RIVALRY ENTRANTS
Services industry has  Customer Most people Impossible for The bank’s largest threats of
been around for deposits. still prefer to new banks to substitution are not from rival
hundreds of years, and Mortgages stick with their enter the banks but from non-financial
just about everyone and loans. current bank.  industry offering competitors.
who needs banking Mortgage- the trust and full The industry does not suffer
services already has backed range of services any real threat of substitutes
them. Because of this, securities. as a major bank, as far as deposits or
banks must attempt to Loans from it is fairly easy to withdrawals, however
lure clients away from other open up a insurances, mutual funds,
competitor banks.  financial smaller bank and fixed income securities
institutions.   operating on the are some of the many
regional level. banking services that are also
offered by non-banking
companies.
More likely to see Financial  It is successful 215 new banks investment services, and
further consolidation in services in their opened greater conveniences than
the banking industry. industry has attempt their rival
Major banks tend to been around because they
prefer to acquire or for years, managed to
merge with other and just make switching
banks than to spend about costs very low
money marketing and everyone in terms of
advertising. who needs time and
banking capital.
services
already has
them.

INDUSLND BANK

COMPETETIVE BUYER SUPPLIE THREATS OF THRETS OF

RIVALRY POWER R NEW NEW
POWER SUBSTITUTE ENTRANTS
Intense competition, many High bargaining Low supplier Threats from -Low barriers to entry
private, public, co-operative, power -Low bargaining substitutes like mutual -Government policies
foreign banks switching cost power -Few funds, T-bills are supportive
 -Large no. of alternatives ,Government securities -Globalization are
alternatives available causes
-Homogeneous -Subject to RBI
service by banks Rules and
-Full information Regulations
available with
customers

AXIS BANK

COMPETITIVE BUYER SUPPLIER NEW NEW

RIVALRY POWER POWER SUBSTITUTE ENTRANT
 SBI Small number of  RBI
2.  Punjab National Bank buyers
allowed foreign
3.  ICICI Bank Purchases large
Highly competitive volumes banks to invest u
industries generally Switching to another to 74% in Indian
earn low returns (competitive) product
because the cost of banking
is simple
competition is high. The product is not  Governm
extremely important to nt schemes are
buyers; they can do most often
without the product
for a period of time serviced only by
Customers are price govern banks like
sensitive SBI, Indian Banks
Punjab National
Bank etc.
 ICICI
are imposing
strong threats i
terms of their
expansion in
customer base b
their aggressive
marketing
strategies