Bank of America Five Force Analysis

861 Words Nov 18th, 2010 4 Pages
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
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Normally banks offer a suite of services over and above taking deposits and lending money, but Non-banking financial Services Company could offer similar service in some extent like insurance, mutual funds or fixed income securities. In the case of lending sides, bank also faces unconventional companies like General Motor, Sony or Microsoft offer preferred financing to customers who buy big items with relatively low cost.
Thus, each bank needs to differentiate their product offers to customer, strengthen their portfolio, and improve services, etc depending on its strategies.
Competitive Rivalry
Banking industry is highly competitive as there is high exit barrier. Moreover, competitors are large and quite equally balanced. Additionally, as banking industry has emerged for hundred years, just about everyone who needs banking services already has them.
Normally, each bank tries to attract competitors clients by lower financing, preferred rate and investment services. This market is in the stage who could offer the best product with fastest service at reasonable price however this also causes bank to experience lower margin or return on asset (ROA).
Generally, larger banks would prefer to grow inorganically by taking over or merge with another bank rather than spend money to market and advertise to clients.
PEST (EL/R) Analysis
Political (P)
As Bank of America Corporation operated throughout the United

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