• Author / Uploaded
• Najafova Narmin

Citation preview

Case study

Subject: Strategic Management Teacher: Rasul Hajiyev Student: Narmin Najafova

Busted banking barriers? 1. Evaluate the strengths of the banking industry’s entry barriers according to Porter’s criteria. However, as with five force generally, it is important they carefully justify their analysis and provide clear conclusion. They should clearly motivate why a particular entry barrier is of importance and how. A common mistake in five force analysis is to make more or less thoughtful lists of five force sub-factors without carefully analyzing their impact on the industry and its various competitors. Banks have grown, often by acquisitions, into mega entities and today huge scale and experience barriers protect banks from new entrants. The market structure in many markets is categorized by an oligopoly situation with reduced competition. Banks have also vertically integrated to take control over not only distribution, but also supply channels, for example of mutual funds. They have fiercely retaliated when new entrants have managed to enter often by acquiring them. Although government action lately has aimed at increasing competition as indicated in the illustration this has been preceded by several years of legislation that rather have increased entry barriers by increasing capital requirements, which has implied even larger bank entities. Finally, banks often have incumbency advantages based on their brands, government relations and IT infrastructure.

2. How would you evaluate the ethical behavior of banks trying to keep competition out? The strategic barriers mentioned in the illustration include competitors deliberately trying to reduce competition by different means. To what extend can this kind of strategic behavior be defended in the pursuit of an improved competitive position? This question especially pertinent in the banking industry as its ethical standards have been questioned repeatedly during the last few years. It should also be considered that higher standards of ethical behavior and more significant contribution to society are increasingly expected from companies

Case study

today. It’s simply no longer enough to supply products and make money for shareholders, companies, including banks, need also to have high ethical and sustainability standards and contribute to society more broadly. In fact, this is increasingly expected by large institutional shareholders like government retirement funds and the like.