INDUSTRY ANALYSIS

POTERS FIVE FORCES

COMPANY NAME: AXIS BANK-RETAIL
BANKING

PRESENTED BY:
ERICK DSOUZA-1018
MERLIN MENEZES-1040
PRATISH JAIN-1049
ROHAN PANKAR-1050

Contents
ACKNOWLEDGEMENT ...................................................................................................................... 1
ABOUT THE INDUSTRY ..................................................................................................................... 1
ABOUT AXIS BANK ............................................................................................................................ 1
BARGAINING POWER OF SUPPLIERS............................................................................................. 2
BARGAINING POWER OF BUYERS ................................................................................................. 3
COMPETETIVE RIVALRY .................................................................................................................. 5
BARRIERS TO ENTRY ........................................................................................................................ 6
BARRIERS TO EXIT............................................................................................................................. 7
OVERALL ASSEMENT ........................................................................................................................ 7

ACKNOWLEDGEMENT
We have taken a lot of efforts for the successive completion of this assignment. However, it
would not have been possible without the help and support of many individuals and the
current organization where we have been doing our internship. The credit for the successful
completion of this assignment would be given to the collaborative efforts of Erick Dsouza,
Merlin Menezes, Pratish Jain, Rohan Pankar.
We express our sincere gratitude to our professors, Prof. Vaidyanathan and Prof. Kamesh
whose constant guidance and encouragement helped us get the assignment to its current form.
We express our deepest thanks to Ms. Priyanjali Dsouza (Senior Executive) for giving us
necessary advice and guidance, and arranging for all the possible sources required for the
successful completion of the assignment. We take this moment to acknowledge the guidance
provided by the employees of Axis Bank which has proved to be valuable for our study both
theoretically and practically.

ABOUT THE INDUSTRY

Indian banking is the lifeline of the nation and its people. Banking has helped in developing
the vital sectors of the economy and usher in a new dawn of progress on the Indian horizon.
As the banking institutions expand and become increasingly complex under the impact of
deregulation, innovation and technological upgradation, it is crucial to maintain balance
between efficiency and stability.
During the last 30 years since nationalization tremendous changes have taken place in the
financial markets as well as in the banking industry due to financial sector reforms. The
banks have shed their traditional functions and have been innovating, improving and coming
out with new types of services to cater emerging needs of their customers.

ABOUT AXIS BANK

Axis Bank is the third largest private sector bank in India. The Bank offers the entire
spectrum of financial services to customer segments covering Large and Mid-Corporates,
MSME, Agriculture and Retail Businesses.
The Bank has a large footprint of 2904 domestic branches (including extension counters) and
12,743 ATMs spread across the country as on 31st March 2016. The overseas operations of
the Bank are spread over nine international offices
With a balance sheet size of Rs. 5,25,468 crores as on 31st March 2016, Axis Bank has
achieved consistent growth and stable asset quality with a 5 year CAGR (2010-11 to 201516) of 17% in Total Assets, 14% in Total Deposits, 19% in Total Advances and 19% in Net
Profit.

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BARGAINING POWER OF SUPPLIERS

Banking industry is governed by Reserve Bank of India. Reserve Bank of India is the
authority to take monetary action which leads to direct impact on circulation of money in the
Economy. The rules and regulation lay down by RBI. Suppliers of banks are depositors. these
are those people who have excess money and prefer regular income and safety. In banking
industry suppliers have low bargaining power.
Capital is the primary resource on any bank and there are four major suppliers (various other
suppliers [like fees] contribute to a lesser degree) of capital in the industry.
1. Customer deposits.
2. mortgages and loans.
3. mortgage-backed securities.
4. loans from other financial institutions.
By utilizing these four major suppliers, the bank can be sure that they have the necessary
resources required to service their customers' borrowing needs while maintaining enough
capital to meet withdrawal expectations.
The power of the suppliers is largely based on the market, their power is often considered to
fluctuate between medium to high.

Bargaining power of suppliers

Attractiveness
Remarks
5
Suppliers of banks are people who prefer low risk and
Number of
need regular income and safety. Banking industrys
Suppliers
suppliers are not concentrated. There are numerous
suppliers with negligible portion to offer. So, this
reduces their bargaining power. If they were
concentrated, then they can bargain with banks or can
collectively invest in other non-risky projects.
They believe that banks are safer than other
investment alternatives. So, they do not consider other
alternatives very seriously, which lowers their
bargaining power.
3
Suppliers are risk averters and want regular income.
Availability of
So, they have few alternatives available with them to
Substitutes
invest like Treasury bills, government bonds. So, few
alternatives lower their bargaining power.
1
Cost of switching from one bank to another is low.
Switching Cost
Banks are also providing zero balance account and
other types of facilities. They are free to select any
banks service. Switching costs are becoming lower
with internet banking gaining momentum and as a
result consumers loyalties are harder to retain..
3
Forward integration is possible like mutual funds, but
Suppliers Threat
only few people now about this. Only educated people
of Forward
can forwardly integrate where as a large number of
Integration
suppliers are unaware about these alternatives.
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Industrys
Threat of
Backward
Integration
Contribution to
Cost

Bargaining power of suppliers rests on account of RBI

regulatory benchmarks. Banks have to meet
numerous regulatory standards created by the RBI.

Industrys
Importance to
Supplier

There is low cost attached. Banks are also providing

zero balance account and other types of facilities.
They are free to select any banks service.
Banking as an industry is extremely important
because it leads to the circulation of money in the
economy, also various services provided by the banks
cannot
be
substituted
(RTGS,NEFT,FUND
TRANSFERS etc.)

BARGAINING POWER OF BUYERS

The individual doesn't pose much of a threat to the banking industry, but one major factor
affecting the power of buyers is relatively high switching costs. If a person has one bank that
services their banking needs, mortgage, savings, checking, etc., it can be a huge hassle for
that person to switch to another bank.
To try and convince customers to switch to their bank they will often times lower the price of
switching, though most people still prefer to stick with their current bank.
The internet has greatly increased the power of the consumer in the banking industry. The
internet has greatly increased the ease and reduced the cost for consumers to compare the
prices of opening/holding accounts as well as the rates offered at various banks.
The banking is highly standardized and highly regulated by RBI, also since its a tangible
service the buyers do not have much bargaining power

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Bargaining power of buyers

Attractiveness

Remarks

There are large number of buyers for the banking

industry in terms of people and corporates
requiring loans overdrafts working capital and
other services. However, there is no uniformed
front from these buyers i.e. they are not unified
and therefore the cannot bargain much since the
business for one individual is small.
Large amount of competition is prevailing in this
sector. The customers have a choice to choose
from a large number of institutions offering
similar services at same cost. Customers have very
large number of alternatives. There are foreign
banks, private banks, cooperative banks and
development banks together with the specialized
financial companies that provide finance to
customers.
Customer switching cost is very low. They can
easily switch from one bank to another bank and
Very little loyalty exists.

Number of Buyers

2
Availability of
Substitutes

1
Switching Cost

3
Industry's Threat of
Forward Integration

2
Contribution to Cost

Since its a service industry the threat of forward

integration is not applicable also the industry
model in play today does not support integration.
However there is integration within the industry
also more recently bancassurance and investments
services have also come up with the banking
sector.
Customer has to bear the charges that are levied
by the bank e.g. transaction cost, debit card
charges, cheque book charges etc. These charges
are minimal which leads to customers
contribution to cost being low..
Customers money is kept safe at very low cost,
thereby increasing the profitability of customers.

Buyer's Profitability

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COMPETETIVE RIVALRY
The banking industry is considered highly competitive. The financial services industry has
been around for hundreds of years, and just about everyone who needs banking services
already has them.
Because of this, banks must attempt to lure clients away from competitor banks. They do this
by offering lower financing, higher rates, investment services, and greater conveniences
than their rivals. The banking competition is often a race to determine which bank can offer
both the best and fastest services, but has caused banks to experience a lower ROA (Return
on Assets).
Given the nature of the industry it is more likely to see further consolidation in the banking
industry. Major banks tend to prefer to acquire or merge with other banks than to spend
money marketing and advertising.

Competitive rivalry
Attractiveness
Remarks
5
There are many banks and non-financial institutions
Number of
fighting for the same pie which has intensified
Competitors
competition.Top competitors include- HDFC,ICICI, etc.
4
India is seen as one of the biggest market place and growth
Industry
rate in Indian banking industry is also very high. This has
Growth
ignited the competition. Though the banking industry is
facing some trouble it is still expected to grow.
3
Banks have to incur fixed costs like salaries, maintaining
Fixed Cost
the systems, office expenses etc. which any organization
would have to incur and hence the fixed cost is low.
1
Almost every bank provides similar services. No
Differentiation
differentiation exists. Every bank tries to copy each others
services and technology, which increases the level of
competition
2
Customer switching cost is very low. They can easily switch
Switching Cost
from one bank to another bank and very little loyalty exists
4
All the information is easily available so there is high
Openness of
openness in terms of sale. Also since every player aims to
terms of Sale
retain the customer, they have to be open so as to gain
customer loyalty.
2
This is a service industry so there is no excess production.
Excess
When a client comes and approaches the company there is
Capacity
a plan which is presented on that bases the deal is made. So
the supply is made keeping the demand in mind.
4
There being stiff competition in the banking industry the
Strategic Sales
sales have to be strategically planned so the company does
not loose on additional revenue.

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BARRIERS TO ENTRY
Barriers to entry in banking industry no longer exist. So, lots of private and foreign banks are
entering in the market. Product differentiation is low and exit is difficult. So, every bank
strives to survive in highly competitive market. So, we see intense competition and mergers
and acquisitions.
Government policies are supportive to start a new bank. There are less statutory requirements
needed to start a new venture.
Every bank tries to achieve economies of scale through use of technology and selecting and
training manpower. The most influential factor for a new entrant to Indian banking industry is
market growth.

Economies of
Scale

Product
Differentiation

Barriers to Entry
Attractiveness
Remarks
2
There are no economies of scale in this industry as it is not
a manufacturing industry, hence the per unit cost cannot be
decreased. Every bank tries to achieve economies of scale
through use of technology and selecting and training
manpower.
1
Similar services are provided by every bank and the
charges levied for these services are similar to that of their
competitors resulting into low product differentiation.

Brand Identity

Access to
Channels of
Distribution

Capital
Requirement

Access to
Technology

There is basic technology used and not specialized.

Applications to enhance productivity and content, access to
a cloud storage, etc. are some technological elements. But
these are also present in other banks and can easily be used.
Not Applicable since this is a service industry and doesnt
have any raw materials to convert in finished goods.

Since this industry is involved with large no of customers

and client money is at stake there is high level of
government protection. Government policies are
supportive to start a new bank. There are less statutory
requirements needed to start a new venture however RBI
has set up stringent rules regarding exists.

Access to Raw
Material
Government
Protection

Axis bank has a strong identity in the market and is ranked

3rd among the private sector banks in India. It offers diverse
spectrum of financial services to its customers.
There is equal opportunity to access various channels of
distribution. All the avenues of distribution are open and
same among competitors. Though the level of use different
channels may differ from bank to bank.
The norms stipulated by RBI in regards to minimum capital
requirement is Rs. 500 crores and therefore the capital
requirement for a new entrant is very high.

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BARRIERS TO EXIT
Asset
Specialization

Cost of Exit

Government
Restrictions

Majority of the banks work on the systems and the

manpower that is employed to work on the same.
Therefore, the main asset of this organization are the
employees hired.
The cost of exit is very high as the banks deal in large
volumes of money and also the loyalty and trust
established over the years is broken. The barriers to exit
from traditional banking businesses can be considerable.
The RBI has a policy of providing assistance to banks facing
financial difficulties in order to help the bank survive in the
market.

OVERALL ASSEMENT
OVERALL ASSESSMENT
Barriers to
Entry

Attractive
Remarks
ness
Entering
the
banking
industry
is regulated and expensive.
3
The possibility of a large bank entering the market poses
a real threat.

Competitive
rivalry

Banking industry is highly competitive. Banks attempt to

lure clients away from competitor banks by offering lower
financing. As a result, high competitive rivalry.

Power of
Customers

Customers can switch to any bank anytime. On the other

hand, corporates have high bargaining power as they
provide big business to banks. Customers have medium
bargaining power.

Power of
Suppliers

There being only one supplier i.e. the RBI who has total
control over the banking industry. Therefore, overall high
supplier power.

Threat of
Substitutes

Plenty of substitutes have emerged in the banking

industry. Even the NBFCs offer similar services. Overall
rising threat of substitutes.

Overall
Attractiveness

High because the banking industry is dependent on its

competitors, customers and its suppliers. All 3 being
highly attractive, the banking industry as a whole is highly
attractive.

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