Page 3 - Banking Industry analysis (H)

“didn’t really have different strategies”. Tight
regulation had traditionally limited their scope

for experimentation, but in the helter-skelter
years leading up to 2007-08 banks grew

indiscriminately, spreading into as many

countries and areas of business as they could.

After the fall, “they didn’t have a strategy then,

either: they were just firefighting.” As the dust

settled, they had to decide what strategy to

adopt and how to put it into effect—often by

retreating from unprofitable markets and

activities.” (7)

ln trying to understand the environment the banks are

competing in, it is necessary to understand the forces

that are driving its competitiveness. Michael Porter

identified five forces Industry Rivalry, Buyer Power,

Supplier Power, Threat of Entry and Substitutes that exist
in the competitive environment which requires banks to:

• Assess the profitability of the industry.

• Develop a position to secure competitive

advantage and

• Influence forces to secure long-term gains.

These forces establish an understanding of the influence

of the competition rooted in the underlying economics of

the industry and the competitive forces that go beyond

the established competitors in an industry.

Pre-2007 banks had grown by aggressive acquisition e.g.

RBS and ABN Amro, Barclays and Lehman Brothers which