Individual Assignment 1 Implementation of the Porters Five Forces Model - Research Paper Example

Despite of this, yet there are minute chances for them to differentiate the way they do businesses. The framework of Professor Michael Porter is widely used to analyze the attractiveness of an industry as well as its competitive positions. Porter’s five forces model is applicable to banking industry to a great extent (Hill 2008). Five forces that are used in this model are: Threat of new entrants refers to the number of entrants that cause an increase in the number of players performing similar activities and serving a similar market.

In banking industry, an average person cannot start up his own bank therefore there is low threat of new entrants due to variety of forces that discourages the new players. Main threat to enter in a banking industry is the requirement of large capital investment. This obligation doesn’t permit every other person to enter into this industry and only entrepreneurs can commence business in this sector. Running a bank needs specialized knowledge and expertise regarding this area which can not be possessed by every other person.

The complexities of this sector can only be understood by someone who has lifetime experience of working in this area. Owners who have life time experience of working in banking sector and deals with the complications with sharpness are observed to achieve greatest success in this area. Not every other person is able to take such huge responsibility. There can be threat of new entrants for banking sector when other financial institutions start offering the services which are being offered by conventional banking systems.

What if insurance companies start offering loan and mortgage services? That can be a threat for banking sector. Substitutes tend to steal the market share and intensify the competition. In banking sector, there are plenty of substitutes as one can probably imagine. Every banking suite is offering similar products and services. At the lending side of industry, there are