Strategic Dynamics in the Banking Industry: A Comprehensive Review

The banking industry has been a focal point for strategic analysis due to its complex nature and significant role in global economies. This assignment explores these complexities using Porter’s Five Forces as the primary analytical tool, supplemented by contemporary studies on efficiency, regulation, and competition dynamics. The analysis begins with an overview of the current state of the banking sector, highlighting key players and market trends. It then proceeds to apply each of Porter's Five Forces—threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products or services, and industry rivalry—to understand competitive pressures within the industry. The study also incorporates insights from recent research on banking efficiency, emphasizing how technological advancements and regulatory changes influence operational effectiveness. Additionally, it considers international perspectives by examining case studies such as the impact of global financial crises on Korean banks and regulatory effects in other regions like Australia and Kenya. The conclusion synthesizes these findings to offer strategic recommendations for stakeholders aiming to navigate the evolving landscape of the banking industry.

Running Head: International & Global Business
National Australian Bank
International and Global Business

International and global business 1
Table of Content
Introduction................................................................................................................................3
Banking Industry in France........................................................................................................4
The Present Situation..............................................................................................................4
Porter’s Five Force Model......................................................................................................5
Threat of New Entrant........................................................................................................5
The Bargaining power of suppliers.....................................................................................5
Bargaining power of customers..........................................................................................6
Threat of Substitutes...........................................................................................................6
Competitive Rivalry............................................................................................................6
France’s Trade Union.............................................................................................................6
Recommendation for France..................................................................................................7
Banking Industry in Korea.........................................................................................................7
Present Situation in Korea..........................................................................................................7
Porter 5 Force Model- Banking in Korea...............................................................................8
Threat of New Entrant........................................................................................................8
Threat of Substitute Products..............................................................................................9
Bargaining power of customers..........................................................................................9
Bargaining power of suppliers............................................................................................9
Competitive Rivalry............................................................................................................9
Final Words on South Korea Banking Sector........................................................................9

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Banking Sector in Brazil..........................................................................................................10
Present Situation of Banking Sector........................................................................................10
Porter 5 Forces Model for Brazil..........................................................................................11
Barriers to Entry................................................................................................................11
Threat of Substitutes.........................................................................................................11
Bargaining power of consumers.......................................................................................11
Bargaining power of Suppliers.........................................................................................11
Competitive Rivalry..........................................................................................................12
Recommendation & Conclusion..............................................................................................12

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Introduction
Banking sector in Australia is dominated by the Big 4’s, namely; Commonwealth Bank of
Australia, Westpac Banking Corporation, Australian and New Zealand Banking Group &
National Australia Bank (Moradi-Motlagh & Babacan, 2015). Apart from the Big 4, the
industry has a number of small to medium scale banks serving the population, financial
institutions, credit unions and mutual banks fill up the rest of the banking ecosystem. Other
foreign banks are also present but they have a retail presence.
National Australia Bank was formed in the year 1982 as National commercial Banking
Corporation of Australia Limited, later the name got changed to NAB. The bank has its
headquarters in Melbourne and is serving the Markets of Australia, New Zealand and certain
parts of Asia. The bank is flourishing under the leadership of Andrew Thorburn (CEO) and
Mike Baird (Chairman). The market offering of the bank are Business banking, consumer
banking, wholesale banking, wealth management & Insurance as some of its major products.
National Bank of Australia is one of the highest respected banks of the Australian continent
and people turn up to the bank for fulfilment of their financial needs with impeccable
customer service. The bank employs over 35,000 employees in all its location and the
workforce is highly diverse in nature (Salim, Arjomandi & Seufert, 2016). The people
working at the bank take joint ownership and responsibility towards helping people and
providing them with best banking services. The Bank made a whopping cash profit of $ 6.48
Billion in the year 2016, which was net up by 4.2% from the preceding year, the results of FY
2017 are also better than the expected. Hence it can be said that National Bank of Australia
within a short duration for over than 3 decade has made a mark in the Australian Banking
Industry.
Every organization is in business to make profits and expand its business operations; same is
the case with National Australia Bank. NAB is looking forward to expand in the markets of
France, Brazil and Korea (Graham & Anderson, 2015). The decision for the expansion will
be based on the market attractiveness and the present banking scenario in these countries and
accordingly strategies will be recommended to NAB for the expansion.

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Banking Industry in France
A major structural reform in happened in the year 1984 in the French Banking industry, a
noteworthy fundamental change was removing the distinction between commercial and
merchant banks and clubbed them all together under one supervisory system. Credit Agricole
(CA), BNP Paribas, Societe Generale, Caisse d’Epargne, LCL and Credit Mutuel are some of
the largest France banks across the globe (Schwienbacher, 2016). The commercial banks
perform all the functions of regular banks like providing short and long term credits,
overdrafts, assisting in public offerings of shares and corporate debt et.al. Overall, France
has a total of 132 foreign banks with most of them having sizeable branch networks.
European central bank is the supervisory authority which controls all the financial
instruments and is responsible for printing of money.
The Present Situation
 There is improvement in the economic situation of France; GDP grew by 1.2 % in the
year 2016.
 France has in total 364 banks (January 2017)
 European banking authority has said that the top 6 banks are amongst the Global
systematically important banks.
 Almost 370,000 people comprise the workforce of the banking industry.
 The six largest banks of France made a total income of €145.7 Billion
 French banking industry is currently dealing with many International and European
regulatory requirements along with heavy tax burdens.
 Outstanding business loans until 2017 were to the tune of €920 Billion.
 SME’s are the prime beneficiaries of the bank lending activities.
 The French Banks have decided to come up with an API in order to propose a much
stronger, secure, resilient and a standardised solution to connect the third party
providers.
Hence, the statistics and the figures of French banking industry says that the economy and the
banks are still struggling to recover from the Failure of the economy and banking system in

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some countries of EU, and the aftermath of the same is still being felt by the banking industry
(Riasi, 2015). Thus it can be said that, in the future the market condition will improve for
certain, but it is actually a tough call to get dragged in the prevailing condition of France.
In order to further determine the market attractiveness of the French banking industry,
Porter’s 5 force model will be used to analyse the profitability and the attractiveness of the
market.
Porter’s Five Force Model
Porter’s 5 force model is extremely useful when it comes to finding the attractiveness and
profitability in the market (Dobbs, 2014). Porter uses the 5 force as the attribute to determine
the industry attractiveness. Following the guidelines of the model will understand the France
banking industry
Threat of New Entrant
France had undergone a fundamental regulatory change which got commercial and merchant
bank together under one roof of European central bank. France is still recovering from the
crisis faced by the European Union. The threat of entry seemed to be moderate in the industry

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due to less of regulation, but at the same time recovering economy makes the foreign players
dicey about entering the France market (Rothaermel, 2015). Another reason which makes the
threat of entry low is High initial investment, capability to distribute funds in an ailing
economy and skilled manpower.
The Bargaining power of suppliers
Four banks of France feature amongst the top 20 banks of the European Union and hence
European central banks pay good attention towards the need of French banks. Rise in
investment avenues, growing demand of SME’s and other industrial requirements, offshore
operation and the positive economic outlook make the industry attractive and increases the
bargaining power of the suppliers (Dalken, 2014).
Bargaining power of customers
As mentioned earlier in the report, SME sector is leading the lending charts of France
banking industry; the sector is quickly flooding money in their respective industry to grow
further. There is billions of Euros which is outstanding in the SME sector, but the
government is keen on pushing the reforms and hence giving out the money to business
investments. The switching cost is low for customers and growth in banking technology has
made it easier for them to carry out the business transaction (Fabbri & Klapper, 2016). Hence
it can be said that the bargaining power of customers is high.
Threat of Substitutes
Threat of substitutes in case of banking sector is very limited, because one of the most
fundamental banking reformed turned the entire merchant and the commercial banks as one
in France. Moreover there is little threat from the investors and NBFC, but as mentioned its
very limited threat. Moreover some of the banking functions like insurance, mutual funds,
withdrawals, fixed security are available only with the mainstream banks. Thus the threat of
substitutes is very low (Schaner, 2017).
Competitive Rivalry
6 of the top largest banks of France like BNP Paribas, Credit Agricole,Societe Generale
features in the top banks of the entire EU. In the year 2016 these banks earned an income of
€145.7 Billion. Apart from these 10 banks, other are very small. The competitive rivalry is

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moderate as there is no cut throat competition, but every player competes on providing better
services and products (Piercy, 2014).
France’s Trade Union
There are in all 5 trade unions in the banking sector, namely
Federation of workers in Banks & Assurance (FSBPA)
French Democratic Confederation of Labour
Work force in banks, affiliated to General confederation of Labour
Federation of Christian workers in banks
The trade unions in the sector compete for the members and look for their support in the
workplace to get a seat in the council. The rivalry as of now is not much but in couple of
years, it will surely get fierce (Lange, Ross & Vannicelli, 2016). A strong point of
competition among the union is in terms of the rights to be consulted on the formulation of
public policy and its implementation.
Recommendation for France
France with a GDP of 2.465 Trillion is fifth largest economy of the world. Despite the fact
that economy is growing back from its slow down a couple of years back, the NPA,
unsecured loans, outstanding loans et.al are excessively high in France. Moreover the sector
is dominated by the 6 major banks which have been in the industry for decades. Hence, in all
light of the evidence, France will not be a better market for expansion owing to the sluggish
growth in the economy and tendency of people to default on their loans. For NAB, the
expansion in France is not a feasible option considering the growth of the bank
Banking Industry in Korea
South Korean economy is showing some good resistance to the political and geopolitical
turmoil, the GDP grew by 2.2% year on year following a gain of 2.4% in the last quarter of
the year 2016.Further the sector is having a positive outlook owing to the rise in domestic
demand and rise in the investment are positive signs of growth (Kanagaretnam, Lobo &
Wang, 2015). Consumer spending is bound to increase, but high household debt burden will

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inhibit the growth. US & China are the biggest export destinations for Korea, and the export
outlook looks positive just opening up opportunities for the Korean banks. South Korean
industrial products and exports are on an upward trend and even the business sentiment n the
manufacturing sector is showing signs of improvement, a very promising outlook for the
South Korean Banking sector. Service sector in South Korea plays an important role and
provides for 60% of the GDP and 70% of the workforce employed.
Korea’s banking system consists of banking and non-banking financial institutions. Financial
services commission and the Financial Supervisory Service are the bodies responsible for
supervision and examination of all banks, including both the specialized, government owned
banks, securities and the insurance companies.
Present Situation in Korea
 Since 2014, the banking sector’s net foreign asset turned positive and since then it is
on an upward trend of improvement. It rose from US $100m in 2014 to US
$47.2billion in 2018.
 The profitability of the South Korean banks has improved in recent times despite a
low interest rate and a mature market, though the banks have been facing growing
competition and regulatory pressures in the domestic market.
 Arrival of 2 internet bank is creating a disruption and stir in the market, as mobile-
savvy consumers are smart and quickly adopting to smartphone banking.
 Housing debt level is rising.
 The earning of South Korean banks grew sharply in the first half of 2017 (US$ 7.1
Bn), 171% rise from the previous year.
 The increase in the pure-play internet banks is posing a threat to the brick and mortar
banks.
 K Bank & Kakao banks launched their commercial operations in the year 2017 and
have been making a splash ever since.
 South Korean Banks are themselves looking for globalization in the emerging
markets; they are rapidly expanding into the Asian markets, due to increase from
domestic competition and the rise of internet banks (Park & Lee, 2017).

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Porter 5 Force Model- Banking in Korea
Threat of New Entrant
As South Korean banks are looking for a way out for global expansion into developing or the
emerging economies around Asia, it leaves a fair chunk of market open to any new Entrant.
The cost of entry is particularly high, but South Korea as a banking sector has good scope for
growth. With the expansion if Internet banks like Kakao, the market looks more attractive
(Porter & Heppelmann, 2014). Government regulation and policies are strong; hence there is
moderate threat to entry.
Threat of Substitute Products
As long as people need money, insurance, financial products, fixed deposit security et al, the
threat of substitute products remain very low. Institution can lend money but they still don’t
have power to function like a regular bank thus reducing the threat of substitute products to
low.
Bargaining power of customers
South Korea is one nation whose population can be clearly identified with the service class.
The service class looks for faster services and solution in comparison to the business or

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agriculture class. Penetration of internet banking happened due to the need of speedy
services. The switching cost is relatively lower and the loyalty of customers towards the bank
is moderate, thus making the bargaining power of customers range from medium to high.
Bargaining power of suppliers
Bank of Korea is the central bank of South Korea and it has recently mentioned that it will
leave Won to operate according to the market forces and will not respond until Won gets too
big a currency and price destabilization happens. Bank has raised interest rate for the first
time in 6 years and is hopeful of solid advance growth due to controlled inflationary pressure
and a strong rising demand. It can be said that the bargaining power of suppliers is moderate
due to less intervention.
Competitive Rivalry
The competitive rivalry seems to be divided into click and mortar and the newly emerged
internet banks, this is leading the red blood competition in South Korea. K bank & Kakao are
making a splash in the market, kind of what happened when Apple launched iPhones. Also,
the new future is internet only banks because of a new legislation were pending. Hence, the
rivalry is high (Lee & Ryu, 2014).
Final Words on South Korea Banking Sector
The year 2014 saw struggle in South Korean Banking sector, with big names like HSBC and
Standard chartered withdrawing from the retail market, banking scandals and excess liquidity
were the times of troubled waters. Both the private and public sector banks were looking for
growth in the outside markets. Regional banks of Korea have shown some strong promise in
comparison to nationwide banks, experts believe that the regional firms are the ones who will
dominate the banking sector of Korea (Wee, 2017). Hence, NAB has an excellent opportunity
here, to merge with the regional bank of South Korea, get into the depth of internet banking
and make it easier for people to bank. South Korea despite all the scandals, issues, problems
it faced in the market still seems to be a profitable market. And NAB can go with the
acquisition growth strategy to expand its base, first in Korea and then to the neighbouring
parts of Asia.

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Banking Sector in Brazil
Presently the banking system in Brazil looks promising and is extremely efficient. Almost all
the banks have internet sites which are offering most to its entire product and services on
web, hence at technology front the banks seems to be doing good. There are numerous bank
branches all over the cities with at least one major bank in the entire city (Barbosa, Rocha &
Salazar, 2015). The five largest banks have almost 15000 branches spread through Brazil,
while the international operations are centralized at the bank’s headquarters either in Sao
Paolo or Rio de Janeiro. Overall, in the top 10 banks of Brazil, 3 are state owned( Banco do
Brasil, Caixa Economical Federal & Banrisul) five being private Brazilian bank’s (Bradesco,
BTG Pactul ) and two being foreign banks( Banco Santender from Spain and Citibank)
Present Situation of Banking Sector
 Moody has recently revised Brazil banking sector outlook to stable owing to the
improvement in the economy.
 The condition seems to have improved after 3 years of continuous recession, relieving
the pressure on both the bankers and the borrowers.
 The economy is forecasted to grow by 1.5% in 2018 (Kanagaretnam, Lobo & Wang,
2017)
 Bank profitability will improve as lenders will benefit from lower cost of funding and
having to provision for bank losses.
 Credit demand to increase in the year 2018 due to falling lending rates.
 Selic –the central bank of Brazil was predicted to be at 8% in 2018 owing to good
credit growth.
 Banks seem to profit due to less of political noise.
 Forecast for credit growth, -1.1% in 2017, 6.7 % in 2018 and 9.8% in 2019.
 The banks are looking to increase their credit growth and take advantage of lower net
interest margins.

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Porter 5 Forces Model for Brazil
Barriers to Entry
Selic is the central bank of Australia which is showing a strong presence now, the sluggish
economy in the past and the recession damaged the economy and the banking sector of
Brazil. However, the situation is seeming to improve now and private and public sector are
coming together to revive the banking sector. The barriers to entry are moderate to low for
Brazilian banking sector.
Threat of Substitutes
Threat of substitute is extremely low owing to non-replacement of the monetary products.
Internet banking is pervasive in Brazil with all of the financial products available online.
Threat of substitutes remains low.
Bargaining power of consumers
The private sector banks are targeting the rural sector while the public sector banks have
made a dominance over the corporate sector, corporate falling under the lower end of the
spectrum in case of Brazil economy. The portfolio of loans to be given to Retail sector is
going to be on an increasing trend. Due to division of power and different target groups the
buyers have a high bargaining power.
Bargaining power of Suppliers
Selic being the central bank of Brazil is in no mood to settle down for loss, it is pulling out
every arrow from its quiver to shoot down the bad elements of the banking sector and take
the economy to uphill. Bargaining power of supplier is relatively higher in this case.

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Competitive Rivalry
Public-Private limited banks cover the entire ecosystem of the Brazil banking sector. The
private sector bank is focussed more on the rural end of the pyramid and is going by the trend
that retail sector will take banking sector to unprecedented growth. On the other hand Public
sector banks are working with corporates and trying to drive in an industrial growth. Both the
units seem to be working for the betterment of the economy right now. Hence, less
competitive rivalry can be observed.
Recommendation & Conclusion
After analysing the profitability, attractiveness and the present situation of all three markets,
France, Brazil and Korea, the best strategy for NAB would be to expand in Korea, get into an
alliance with a regional bank, focus on being an internet friendly bank and penetrate amongst
the population. Reason for dismissing Brazil is less of manufacturing and industrial sector
and domination of the retail sector, which is already being taken care by the private sector,
leaving very limited growth potential for Brazil. On the other hand, France is still struggling
to revive its economy and will take at least 5 years to be on track. Hence in the light of the
above argument and statistics, South Korea market seems to be the most favourable market
with great forecasted demand of credit and the falling interest rates to benefit the sector
(Anginer & Demirguc-Kunt, 2014). The growth of Internet banks is giving a stiff
competition to the nationalized banks of Korea, Hence, NAB has a perfect opportunity to fill
in the gap of services provided by national & regional bank by merging with the regional
bank and upping the scope of services being provided to the Koreans.

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