how can the resource based viewpoint of value, rarity, inimitability, and organization

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If you are not familiar with the five competitive forces model, here is a brief background on who developed it, and why it is useful.

The model originated from Michael E. Porter's 1980 book "Competitive Strategy: Techniques for Analyzing Industries and Competitors." Since then, it has become a frequently used tool for analyzing a company's industry structure and its corporate strategy.

In his book, Porter identified five competitive forces that shape every single industry and market. These forces help us to analyze everything from the intensity of competition to the profitability and attractiveness of an industry. Figure 1 shows the relationship between the different competitive forces.

Figure 1: Porter\'s five competitive forces

1.Threat of New Entrants - The easier it is for new companies to enter the industry, the more cutthroat competition there will be. Factors that can limit the threat of new entrants are known as barriers to entry. Some examples include: oExisting loyalty to major brands

oIncentives for using a particular buyer (such as frequent shopper programs) oHigh fixed costs
oScarcity of resources
oHigh costs of switching companies
oGovernment restrictions or legislation

2.Power of Suppliers - This is how much pressure suppliers can place on a business. If one supplier has a large enough impact to affect a company's margins and volumes, then it holds substantial power. Here are a few reasons that suppliers might have power: oThere are very few suppliers of a particular product

oThere are no substitutes
oSwitching to another (competitive) product is very costly
oThe product is extremely important to buyers - can\'t do without it oThe supplying industry has a higher profitability than the buying industry

3.Power of Buyers - This is how much pressure customers can place on a business. If one customer has a large enough impact to affect a company's margins and volumes, then the customer hold substantial power. Here are a few reasons that customers might have power: oSmall number of buyers

oPurchases large volumes
oSwitching to another (competitive) product is simple
oThe product is not extremely important to buyers; they can do without the product for a period of time oCustomers are price sensitive

4.Availability of Substitutes - What is the likelihood that someone will switch to a competitive product or service? If the cost of switching is low, then this poses a serious threat. Here are a few factors that can affect the threat of substitutes: oThe main issue is the similarity of substitutes. For example, if the price of coffee rises substantially, a coffee drinker may switch over to a beverage like tea. oIf substitutes are similar, it can be viewed in the same light as a new entrant.

5.Competitive Rivalry - This describes the intensity of competition between existing firms in an industry. Highly competitive industries generally earn low returns because the cost of competition is high. A highly competitive market might result from: oMany players of about the same size; there is no dominant firm oLittle differentiation between competitors products and services oA mature industry with very little growth; companies can only grow by stealing customers away from competitors The Industry Handbook: The Banking Industry

Filed Under » Fundamental Analysis, Statistics Fundamental Analysis, Statistics If there is one industry that has the stigma of being old and boring, it would have to be banking; however, a global trend of deregulation has opened up many new businesses to the banks. Coupling that with technological developments like internet banking and ATMs, the banking industry is obviously trying its hardest to shed its lackluster image.

There is no question that bank stocks are among the hardest to analyze. Many banks hold billions of dollars in assets and have several subsidiaries in different industries. A perfect example of what makes...
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