Rivalry Among Established Companies
This force is strong due to high competition among established firms. The banking industry in the United States is becoming more consolidated then ever due to fierce competition of market leadership. For example, SunTrust bank as of 2010 has grown to“1700 branches and $118.8 billion in deposits. (1) Also, the low switching cost of consumers switching bank poses another threat to banks. If a customer is not happy with their current bank they can simply move their assets to another at no cost. In addition, the Federal and state agencies regulation has made major effects on business profit margins resulting in further pressure on maintaining and increasing market share. STI expects Regulation E, which requires banks to allow consumer to opt out at the time of the transaction in order to protect consumers from overdraft charges will “reduce the deposit services income by 10% to 20%”(2). Also the Dodd-Frank Bill will “lead to more bank costs.” (3)Therefore, the intensive rivalry amongst banks has threatened industry profits.
The Bargaining Power of Suppliers
This force is neutral in the banking industry. The supply that banks need in order to operate is capital (money) from its customers and the interest rate set by the FED (Federal Reserve Bank) therefore “set targets for money supply growth”(4). This supply is vital to banks since there are no substitutes. However, the bank industry is just as important to customers. Costumers need banks in order to provide protection in securing money and investments. The FDIC “standard insurance amount is $250,000 per depositor.”(5) In addition, suppliers pose little threat to enter the industry and the banking industry can’t supply its own product (money) so both are industry.
Works Cited
(1,2)Company, T. M. (2011). (T. M.-H. companies, Editor) Retrieved from Standard & Poor's: