Introduction All organizations have got a set of forces and conditions outside their own boundaries that have

the potential to affect the way the organization works. MoreMoney Banking Corporation Limited is no e ception to this as it has got forces that it has to operate within. Michael !orter came up with the "ive "orces Model commonly known as !orters# "ive "orces Model which is used for analyzing an industry by looking at five forces believed to be at play in an industry and affecting how that industry works and providing an indication of its attractiveness. $he five forces are% &ivalry among competing sellers in the industry Bargaining power of suppliers Bargaining power of customers $hreat of substitutes Barriers to entry $he following is an analysis on the business environment in which my organization' Intermarket Banking Corporation Limited is operating in. Intensity of rivalry &ivalry is the (ockeying for position and buyer favour that goes on among rival firms. Competition in the Banking sector has significantly increased over the years as there are more and more players coming into the field. $he customer base has not been increasing at the rate at which the financial institutions are increasing hence the stiff competition amongst the players. $his has been contributed by the fact that generally all banks offer a suite of products which are similar in nature and as far as the relevant market shares are concerned' there is really no difference between Bank A and Bank B. $here are very minimal costs that are incurred if clients decide to switch between banks. $his alone has increased the (ockeying for position amongst the "inancial Institutions. )igh fi ed costs are associated with opening a new Bank as minimum capital re*uired by the Central Bank is prohibitively high. $his is associated with the difficulties that Banks are found in once they commence operations as this acts as an e it barrier. $he Bank therefore is left with no option e cept to compete. $he intensity of rivalry had been made worse by the e istence of the international banks which are established in many other countries. $hese have huge capital bases and are highly regarded by clients because of their international presence. $his has made other banks including Intermarket to make sure they massively market themselves so that they can increase their market shares. $hreat of entry It is not only incumbent rivals that pose a threat to firms in an industry+ the possibility that new firms may enter the industry also affects competition. In theory' any firm should be able to enter and e it the market' and if free entry and e it e ists' then profits always should be nominal. In reality' however' industries possess characteristics that protect the high profit levels of firms in the market and inhibit additional rivals from entering the market. $hese are barriers to entry. In the banking sector it has been become increasingly difficult for new entrants to get in due to the fact that banking is a heavily regulated activity. $here are stiff re*uirements with regards to start,off capital for a banking concern to commence operations. A minimum level of both academic and professional skills must also be reflected in the management personnel of a bank as set out be the &egistrar of Banks. Certain criteria need to be satisfied before one can be issued with a license to carry on activities as a bank and the process of ac*uiring one can be a protracted one. -ther issues such as I$ systems which have to be imported have become very e pensive and these are prohibitively high for new entrants. $here appears to be significant barriers to entry and it is therefore not easy for new entrants to enter the industry. )owever due to the good profits that the e isting institutions have been en(oying' there appears to be more people keen to start a bank and also investors still with an keeness for investing in banks. !ower of .uppliers A producing industry re*uires raw materials , labour' components and other supplies. $his re*uirement leads to buyer,supplier relationships between the industry and the firms that provide it the raw materials used to create products. .uppliers' if powerful' can e ert an influence on the producing industry such as selling the raw materials at a high price to capture some of the industry#s profits. Bargaining power of suppliers tends to be high where there are a few large suppliers and the general purchase pattern is for huge

volume orders. In banking the supplier is the depositor and there are different segments of depositor. $here is the corporate depositor' and the individual depositor. /ithin these two categories one can still refine the segmentation further' into large0blue chip corporates and small and medium size corporates' while individuals can be further segmented into low income' high income and high net,worth individuals. $he bargaining power of each is different. $he large corporates that make larger deposits tend to wield more power. $his is reflected in the interest rates they can therefore negotiate. $hey are able to 1shop1 around for the best rate. )igh,net,worth clients also wield substantial power and are generally able to switch their business fairly easily if they can get better benefits elsewhere. $he small and medium size corporations tend to have lower bargaining power and banks appear to do business with them reluctantly. $his is the same for low,income individuals who have the least bargaining power and are provided with a take it or leave it service. $he other suppliers who have of late been causing serious service provision threats to Banks are the printers for various stationery used in the banks. $hese have cited foreign currency shortages as their ma(or problems and have slowed down production. $he Central bank which is the sole supplier for the local currency has been struggling to meet the overwhelming demand for the bank notes+ as a result this has caused *uite a stir on the market. !ower of customers0buyers $he power of buyers is the impact that customers have on a producing industry. In general' when buyer power is strong' the relationship to the producing industry is near to what an economist terms a monopsony , a market in which there are many suppliers and one buyer. 2nder such market conditions' the buyer sets the price. In reality few monopsonies e ist' but fre*uently there is some asymmetry between a producing industry and buyers. Banks are in the unusual position of having their suppliers also being their customers. .uppliers' when they deposit and customers' when they borrow or re*uire other services. -nce again the customers can be segmented as indicated above. $he large corporations wield a lot of power as they almost dictate to the banks the terms under which they will borrow and often the banks are compelled to accept their terms as they want them as customers. $he same is true of high net worth individuals. $he position of high,income earners tends to be the same as that for small and medium size corporates who do not wield as much power. As a result banks are then compelled to market set their charges and interest rates so that they can lure more customers to have business with them. More products are being introduced by the banks to ensure that clients are given e cellent convenient access to the service of their savings and investments. $hreat of substitutes In !orters# model' substitute products refer to products in other industries. $o the economist' a threat of substitutes e ists when a product#s demand is affected by the price change of a substitute product. A product#s price elasticity is affected by substitute products , as more substitutes become available' the demand becomes more elastic since customers have more alternatives. A close substitute product constraints the ability of firms in an industry to raise prices. .ome banks have managed to produce the smart cards which functionally replace overshadow the service of a debit card. As a result clients would want to go for such banks that are innovative. Most recently' all banks have geared in producing products that involve the use of the cell phones through the .hort Message .ervice 3.M.4. $hese products tend to overshadow the Auto $eller Machines 3A$M4 and banks are wary about the money that they had put into such investments. Although from a general point of view there does not appear to be any real direct substitute for the services provided by a bank' however' from within the financial services industry itself there are interesting developments that could challenge the position of banks. $he new banking act which is supposed to blur the line between the different financial institutions such as commercial banks and building societies making is possible for a bank to do mortgage finance and building societies to issue their customers with che*ue books. $his could lead to people marginalized by the commercial banks moving their business to building societies. Conclusion $he banking sector has seen a lot of changes lately. $here are a lot of things happening in the sector which is changing the landscape of the financial services sector in the country. $he above analysis seems to give a picture of a still fairly attractive sector. &ivalry is still low although competition has increased. It is interesting to note that most of the banks seem to target large corporates and high net,worth individuals as

the preferred client although it appears from the above analysis that these segments wield a lot of power and are therefore difficult to maintain as customers and demanding significant discounts for their custom. $he other segments can actually generate better margin business and are not as difficult to please. In conclusion' it can be seen that the banks are operating in an environment which is theoretically unpredictable. $he stronger the competitive forces are' the lower the profitability of the participant banks. It appears that for as long as the e isting institutions continue to post e cellent results there will be new entrants into the sector hoping for the piece of the pie. )owever the barriers to entry might become higher. "or e ample the authorities# criteria could become more difficult to meet' while other factors such as skills could become more difficult to obtain and therefore more e pensive.