Bank of America Five Force Analysis
Bank of America
Five Forces Analysis
Threat of new entrance
The sector offers a considerable barrier to new entrants due to the high capital required to establish a new bank. As banking is professional services type required high creditability, strong brand presence is the key obstacle for newcomers.
However, in line of Global consumer & small business banking especially payment service the entrepreneur or new company could compete in this segments e.g. internet bill payment. Additionally, the trend of other company offers other financial services like insurance company starts offering mortgage and loan services, etc. Importantly, most of these financial and payment services is good source of fee-based revenue.
Power of Suppliers
Products and services suppliers like capital suppliers are usually many and do not have strong bargain power. Nonetheless, as financial and banking industry requires specialized knowledge and skills, high potential employees or talented staffs could be enticed away by other bigger banks or investment firms.
Power of Buyers
There are two major types of customer in banking industry. Firstly, individual customers do not pose a very big threat as there is “medium-high switching cost” like if a person has mortgage, car loan, credit card, saving account and particular mutual funds, there is quite hard for them to switch all product to another banks.
In an attempt to convince individual customer to switching bank, each bank tries to lower switching cost for clients for example special promotion (discount) in credit card segment.
As for corporate clients, although they are large portion of banking, they face very high switching cost in certain aspects especially mega project funding by large bank. It is extremely difficult for them to find another bank to approve the same huge amount of money. Although financial institutions try to offers better exchange rate, more services support and exposure to foreign capital market, it is
Five Forces Analysis
Threat of new entrance
The sector offers a considerable barrier to new entrants due to the high capital required to establish a new bank. As banking is professional services type required high creditability, strong brand presence is the key obstacle for newcomers.
However, in line of Global consumer & small business banking especially payment service the entrepreneur or new company could compete in this segments e.g. internet bill payment. Additionally, the trend of other company offers other financial services like insurance company starts offering mortgage and loan services, etc. Importantly, most of these financial and payment services is good source of fee-based revenue.
Power of Suppliers
Products and services suppliers like capital suppliers are usually many and do not have strong bargain power. Nonetheless, as financial and banking industry requires specialized knowledge and skills, high potential employees or talented staffs could be enticed away by other bigger banks or investment firms.
Power of Buyers
There are two major types of customer in banking industry. Firstly, individual customers do not pose a very big threat as there is “medium-high switching cost” like if a person has mortgage, car loan, credit card, saving account and particular mutual funds, there is quite hard for them to switch all product to another banks.
In an attempt to convince individual customer to switching bank, each bank tries to lower switching cost for clients for example special promotion (discount) in credit card segment.
As for corporate clients, although they are large portion of banking, they face very high switching cost in certain aspects especially mega project funding by large bank. It is extremely difficult for them to find another bank to approve the same huge amount of money. Although financial institutions try to offers better exchange rate, more services support and exposure to foreign capital market, it is