Porter’s 5 forces with Hdfc.
Threats of New Entrants
New entrants in Foreign Regional Banks brings innovation, new ways of doing things and
put pressure on HDFC Bank Limited through lower pricing strategy, reducing costs, and
providing new value propositions to the customers. HDFC Bank Limited has to manage all
these challenges and build effective barriers to safeguard its competitive edge.
How HDFC Bank Limited can tackle the Threats of New Entrants
By innovating new products and services. New products not only brings new
customers to the fold but also give old customer a reason to buy HDFC Bank Limited
‘s products.
By building economies of scale so that it can lower the fixed cost per unit.
Building capacities and spending money on research and development. New
entrants are less likely to enter a dynamic industry where the established players
such as HDFC Bank Limited keep defining the standards regularly. It significantly
reduces the window of extraordinary profits for the new firms thus discourage new
players in the industry.
Bargaining Power of Suppliers
All most all the companies in the Foreign Regional Banks industry buy their raw material
from numerous suppliers. Suppliers in dominant position can decrease the margins HDFC
Bank Limited can earn in the market. Powerful suppliers in Financial sector use their
negotiating power to extract higher prices from the firms in Foreign Regional Banks field.
The overall impact of higher supplier bargaining power is that it lowers the overall profitability
of Foreign Regional Banks.
How HDFC Bank Limited can tackle Bargaining Power of the Suppliers
By building efficient supply chain with multiple suppliers.
By experimenting with product designs using different materials so that if the prices
go up of one raw material then company can shift to another.
Developing dedicated suppliers whose business depends upon the firm. One of the
lessons HDFC Bank Limited can learn from Wal-Mart and Nike is how these
companies developed third party manufacturers whose business solely depends on
them thus creating a scenario where these third party manufacturers have
significantly less bargaining power compare to Wal-Mart and Nike.
Bargaining Power of Buyers
Buyers are often a demanding lot. They want to buy the best offerings available by paying
the minimum price as possible. This put pressure on HDFC Bank Limited profitability in the
long run. The smaller and more powerful the customer base is of HDFC Bank Limited the
higher the bargaining power of the customers and higher their ability to seek increasing
discounts and offers.
How HDFC Bank Limited can tackle the Bargaining Power of Buyers
By building a large base of customers. This will be helpful in two ways. It will reduce
the bargaining power of the buyers plus it will provide an opportunity to the firm to
streamline its sales and production process.
By rapidly innovating new products. Customers often seek discounts and offerings on
established products so if HDFC Bank Limited keep on coming up with new products
then it can limit the bargaining power of buyers.
New products will also reduce the defection of existing customers of HDFC Bank
Limited to its competitors.
Threats of Substitute Products or Services
When a new product or service meets a similar customer need in different ways, industry
profitability suffers. For example, services like Dropbox and Google Drive are substitute to
storage hardware drives. The threat of a substitute product or service is high if it offers a
value proposition that is uniquely different from present offerings of the industry.
How HDFC Bank Limited can tackle the Treat of Substitute Products / Services
By being service oriented rather than just product oriented.
By understanding the core need of the customer rather than what the customer is
buying.
By increasing the switching cost for the customers.
Rivalry among the Existing Competitors
If the rivalry among the existing players in an industry is intense then it will drive down prices
and decrease the overall profitability of the industry. HDFC Bank Limited operates in a very
competitive Foreign Regional Banks industry. This competition does take toll on the overall
long term profitability of the organization.
How HDFC Bank Limited can tackle Intense Rivalry among the Existing Competitors
in Foreign Regional Banks industry
By building a sustainable differentiation
By building scale so that it can compete better
Collaborating with competitors to increase the market size rather than just competing
for small market.
Implications of Porter Five Forces on HDFC Bank Limited
By analyzing all the five competitive forces HDFC Bank Limited strategists can gain a
complete picture of what impacts the profitability of the organization in Foreign Regional
Banks industry. They can identify game changing trends early on and can swiftly respond to
exploit the emerging opportunity. By understanding the Porter Five Forces in great detail
HDFC Bank Limited 's managers can shape those forces in their favour.
Porter’s 5 Forces with CRISIL LTD.
Porter Five Forces that Determine Industry Structure
Porter Five Forces model is heavily borrowed from the traditional field of micro economics.
The five forces that determine the industry structure of organization in case study are -
1. Bargaining power of suppliers of Crisil Ratings - If suppliers have strong bargaining
power then they will extract higher price from the Crisil Ratings.
2. Threat of new entrants - if there is strong threat of new entrants then current players will
be willing to earn less profits to reduce the threats.
3. Rivalry among existing players – If competition is intense then it becomes difficult for
existing players such as Crisil Ratings to earn sustainable profits.
4. Threat of substitute products and services - If the threat of substitute is high then Crisil
Ratings has to either continuously invest into R&D or it risks losing out to disruptors in the
industry.
5. Bargaining power of buyers of Crisil Ratings – If the buyers have strong bargaining
power then they usually tend to drive price down thus limiting the potential of the Crisil
Ratings to earn sustainable profits.
Why Porter's five forces analysis is important?
You can use Porter Five Forces model to analyze the competitiveness faced by protagonist.
Porter five forces analysis of case study will help you in understanding and providing solution
to – nature & level of competition, and how Crisil Ratings can cope with competition.
Even though from outside various industries seem extremely different but analyzed closely
these five forces determines the drivers of profitability in each industry. You can use Porter
Five Forces to understand key drivers of profitability of Crisil Ratings.
Porter’s 5 Forces, Competitive Forces & Industry Analysis
The core objective of strategists and leaders in an organization is to help the organization to
build a sustainable competitive advantage and thwart competitive challenges.
Step 1 – Defining relevant industry for Crisil Ratings
Step 2 – Identify the competitors and group them based on the segments within the industry
Step 3- Assess the Porter Five Forces in relation to the industry and assess which forces are
strong and which forces are weak.
Step 4 - Determine overall industry structure and test analysis of consistency
Step 5 – Analyze recent and future changes in each forces
Step 6 – Identify aspects of industry structure based on Porter 5 Forces that might be
influenced by competitors and new entrants.
How is Porter's five forces framework used in developing strategies?
To achieve above average profits compare to other industry players in the long run, Crisil
Ratings needs to develop a sustainable competitive advantage. Industry analysis using
Porter Five Forces can help Crisil Ratings in case study to map the various forces and
identify spaces where Crisil Ratings can position itself.
By doing Industry analysis using Porter Five Forces, CRISIL: Designing a Compelling
Employee Value Proposition can develop four generic competitive strategies.
The four generic competitive strategies that can be pursued in case study are -
Cost Leadership
In cost leadership, CRISIL: Designing a Compelling Employee Value Proposition can set out
to become the low cost producer in its industry. How it can become cost leader varies based
on the industry forces and structure. In pursuing cost leadership strategy, Crisil Ratings can
assess – (pursuit of economies of scale, proprietary technology, supply chain management
options, diversification of suppliers, preferential access to raw materials) and other factors.
Differentiation
Crisil Ratings can also pursue differentiation strategy based on the industry forces
description in case study. In a differentiation strategy Crisil Ratings can seek to be unique
in its industry by providing a value proposition that is cherished by buyers. Crisil Ratings can
select one or more attributes that can uniquely position it in the eyes of the customers for a
specific needs. The goal is to seek premium price because of differentiation and uniqueness
of the offering. Industry analysis using Porter Five Forces can help Crisil Ratings to avoid
spaces that are already over populated by the competitors.
Focus - Cost Focus & Differentiation Focus
The generic strategy of Focus rests on the choice of competitive scope within an industry.
Crisil Ratings can select a segment or group of segment and tailor its strategy to only serve
it. Most organization follows one variant of focus strategy in real world.
The Focus Strategy has two variants.
(a) In cost focus a CRISIL: Designing a Compelling Employee Value Proposition can seek a
cost advantage in its choses segment in case category.
(b) In Differentiation strategy CRISIL: Designing a Compelling Employee Value Proposition
can differentiate itself in a target segment in its industry.
