PESTEL and Porter Five Forces Analysis for the Metro Bank - Essay Example

?PESTEL and Porter Five Forces Analysis for the Metro Bank PESTEL Analysis Political forces Political forces in the United Kingdom tend to favor the banking industry in the country because of the positive economic impact it has on the country’s economy, but at the same time, this force impose strict regulations on banks (Chrystal and Mizen, 2006). However, it must be understood that this particular relationship between the political forces in the United Kingdom and the banking industry is subject to change. Due to the wall of frustration that was seen it within the general population, the political forces that could seeks to ask upon the banking industry and regulated in the future, as well as potentially bail it out, may very well be limited. With that in mind, it must be understood that past experience with regards to the banking industry cannot and should not be determined to be equivalent to future expectations of how the industry will evolve and continue to be manifested. Economic Forces The improved economic performance of the UK’s economy after the 2008 to 2010 economic recession has given businesses including banks a new lease of the life as the economic situation are favorable meaning that there is high likelihood of generating substantial amounts of profits. Yet, it must be understood that this recovery is limited and might take over a decade in order to come to a complete level of fruition. By much the same token, the nascent recovery itself could be called into question by even a simple market fluctuation in the very near future. Socio-cultural force According to Chrystal and Mizen (2006), UK is a host to some of the oldest and world-renowned banks, which means that the culture of banking pre-exists amongst the British people and therefore, Metro Bank is likely to perform well since this force favors its business. As has previously been specified, the level and extent to which trust is exhibited in the system has a profound level of sociocultural importance. Due to the impact of the lost trust associated with the bailouts that took place several years ago, a significantly reduced level of consumer confidence exist with regards to the banking industry and any further action that might seek to revive this lost trust can severely impair the manner through which such a service would be offered. Technological forces The UK as a country is largely driven by technology and the banking industry has greatly embraced information technology meaning that for Metro Bank to compete effectively it has to integrate IT within its business processes (Chrystal and Mizen, 2006). Technological forces that could be evidenced have to do with the fact of the rapid technological change that the sweeping each and every industry in the market. In such a way, the technological threat could be with respect to an entirely new platform or paradigm shift with regards to the banking industry and the inability of the entity in question to rapidly integrate with this paradigm shift and provide services to the consumer base accordingly. However, by the same token, if the service provider/bank is able to integrate with a new level of technology in an efficient manner prior to the competition, this could provide a noted benefit and exponentially increase the level of service provision that it could accomplish. Legal forces After the 2008 to 2010, Chrystal and Mizen (2006) stated that legal regulations in the UK’s banking industry have increased drastically but since Metro Bank was issued with a license it means that it was able to abide by the laid down legal requirements. Of all of the information that is thus far been engaged, the legal threats, strengths, weaknesses, and opportunities that exist for a given banking entity are perhaps the most important. Due to the fact that a simple law for an entire combination of laws in the form of parliamentary legislation could adversely impact the way in which profitability, this potential for change is the most impactful of all of the others which have been discussed. Analysis of Metro Bank’s Porter Five Forces Threat of new entrants Because of many legal requirements and high capital outlay that are required to open a bank in the UK, it is correct to state that Metro Bank will not face the threat of new entrants. However, with this being said, it must also be understood that new entrants to the market could easily come from developed and well-established banking institutions outside the country. In such a way, the capital requirements and the difficulty of entry into the United Kingdom’s banking sector could easily be averted and provide the particular financial institution question with a reasonably dynamic competitor. However, with that being said, it can be reasonably assured that the overall number and type of potential competitors within this market would be greatly reduced to only a handful of key firms. Threat of substitutes Because of numerous financial institutions especially Saving and Credit Co-operative, which offer slightly similar services and products offered by commercial banks such as Metro Bank, it means there will pose a potential threat to Metro bank. In much the same way, the threat of substitutes is also ameliorated due to the fact that brand recognition and a level of tacit and innate trust within the banking sector of the United Kingdom has allowed for such firms as Metro Bank to become well-established within the mind of the consumer; thereby somewhat shielding Metro Bank from the influences and threats that might otherwise be experience in a different industry and by a smaller firm. Competition in the industry The extent of competition in UK’s banking sector is extremely high because of the existence of well-established banks that have been in operations for many years. However with that being said, it must also be understood that the competition itself is somewhat static; not amenable to rapid change with regards to the overall number of firms competing within a specific market. Power of suppliers Because of the numerous branches that Metro Banks has, it correct to state that it has wielded a significant bargaining power over their suppliers. This power over suppliers of course used as a means of leveraging the overall level of profitability and competition that can be exhibited within a given market. Power of customers Chrystal and Mizen (2006) stated that the because of the nature of competition in UK’s banking sector, the customers naturally wield a lot of bargaining power. In much the same way, the bargaining power with regards to the power that the firm has ever customers is necessarily quite limited. Due to the previously mentioned information concerning the fact that a rather high level of competition exists within the United Kingdom’s banking sector, Metro Bank is not able to exert a high level of influence with regards to the coercive power they can have the consumers it integrates with. For this very reason, it is necessary for the bank to be mindful of this and seeks to exhibit a customer friendly environment that fosters further growth and profitability within the banking sector. \ Reference Chrystal, A. and Mizen, P. (2006). A dynamic model of money, credit, and consumption; a joint model for the UK household sector. Journal of Money, Credit & Banking. Ohio State University Press Read More