Impact of Social Programs and Poverty on Latin American Societies
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Table of Contents
This section provides a critical analysis of Regions bank using the porters five forces model. The objective is to give a clear understanding of both the strength of Regions Bank current competition position and the strength of the environment under which the bank expects to operate.
Threat of New Entrants
The threat of new entrants is relatively low. Regions Bank operates across the states of Alabama, Texas and several others, with more than 280 branches in Florida alone. The bank is currently considered to be the 148th largest bank in the entire USA (McDade, 2016). There are several banks that enter the market every year, but this is no threat to a bank so big and already established. The threat is low because there is currently a lot of bank failures and mergers which lead to an average decline in the number of banks in the USA.
Consumer preference is a major factor impacting on new entrants. Trust is, therefore, one of the primary barriers to entry into the banking sector in the region. The customers have lower customer reliability over the new banks.
There are very stiff rules and regulations in the United States, especially for the new entrants. It is not an easy affair to secure a banking license. The new entrants have to undergo and pass certain limits and criteria like capital, landing norms and fit and proper. The FDIC, Federal Reserve Board and the Office of the Comptroller of the Currency are some of the bank’s regulators (Porter and Kramer, 2011).
Supplier Bargaining Power
The bargaining power of the supplier is high on the market. The power of the supplier is based on the United States market. The primary source of bargaining power is capital. The main capital suppliers include loans and mortgage, customer deposits, other financial institutions and the mortgage banked-securities.
Buyer Bargaining Power
In Regions Bank market, there is high bargaining power of the buyer. The main factors influencing the buyer bargaining power include:
- Availability of numerous options to choose from
- Needs of every customer/ individual.
- Customer loyalty
- Switching cost
The Threat of Substitute
The threat of substitute can be considered to be medium. From Regions Bank report, the greatest threats of a substitute are from the non-financial competitor, insurance firms, fixed income security, and mutual funds (McGeer, 2015).
Here are the main threats of a substitute:
- Methods of payment
- The customer has a high appetite for taking risks. The millennial generation needs are highly demanding, and they love technology.
- The loan interest rates. The loans being issued have been on the rise with a 5.1% experienced in 2015. The credit industry is recovering, and this will bring more competition.
Power of Competitive Rivalry
The banking industry in the UnitedStates is very competitive. Competition is generally about the bank that offers the best and fast services. Banks that thrive are the banks that are in a position to form mergers and acquisitions with the already existing financial services players.
For banks like Regions Bank to remain competitive, it has to lure and retain clients from the stiff competition by offering;
- Greater convenience to the customers. Regions Bank President and CEO have adopted Regions360 which is the needs-based approach for relationship banking.
- Higher interest rates by the Federal Reserve (2015-2016 Federal Reserve increased interest rate
- Investment services
- Lower financing rates
- McDade, S. (2016). Millennials and Banking: What the Data Reveals about Delivering a Great Customer Experience. https://www.salesforce.com/blog/2016/08/millennials-banking-data-greatcustomer-experience.html
- McGeer, B. (2015). Bank Reputations on the Rise, Our 2015 Rankings Show. American Banker, 26 June.
- Porter, M. and Kramer, M. (2011). Creating shared value. Harvard Business Review, January: 62-77.
Offered for reference purposes only.