Essay on Maximizing Performance in Banking & Financial Sector: A Porter's Model Analysis

The banking and financial sector has evolved in the past decade to include numerous securities, pricing, and other customer-centered features. However, with the increasing number of banks and competition, the money keeping industry has to consider new and aggressive approaches. By applying Porter’s model, the five critical dimensions of the industry can be appreciated. Moreover, by accurately assessing the market, the information collected can maximize organizational performance (McCord & Prescott, 2015). The model plays an essential role in the banking sector, where banks today have a low bargaining power of buyers and suppliers. The notion is further stressed by a study by McCord and Prescott (2015), which states that ten of the largest banks in the country held approximately 20% of industry assets. However, by the mid-2000s, the percentage was about 60% (McCord & Prescott, 2015). It is essential to assess both internal and external factors that can either develop or degrade the organization to navigate the banking industry.

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The information collected has identified numerous opportunities for the organization as well as numerous threats. The main threats facing the organization are the increasing number of banks opening and offering competitive services. Additionally, organizations are operating outside the banking industry and offering banking services. For the organization to be competitive, it has to find the perfect balance in the services offered (Alt & Puschmann, 2012). Incorporating or consolidating the numerous other banking services such as insurance and offering competitive rates may have the potential of growing. However, the organization's success is also limited by the bargaining power of the suppliers and buyers (Alt & Puschmann, 2012). All banks require capital resources to operate; they are mostly provided in deposits, loans, and mortgages, among others. It is critical to note that banking fees contribute a lesser percentage to the overall revenue (Alt & Puschmann, 2012). Nevertheless, already recognized brands might increase competitive rivalry, thereby affecting organizational performance. Applying the information collected in the banking industry can be instrumental in evaluating the organization's performance.

References

Alt, R., & Puschmann, T. (2012). The rise of customer-oriented banking - electronic markets are paving the way for change in the financial industry. Electronic Markets, 22(4), 203-215. https://doi.org/10.1007/s12525-012-0106-2/

McCord, R., & Prescott, E. (2015). The Financial Crisis, the Collapse of Bank Entry, and Changes in the Size Distribution of Banks. FRB Richmond Economic Quarterly, 100(1), 23-50. Retrieved 29 July 2020, from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2637426/.