Porters five forces analysis is a framework for industry analysis and business strategy

development formed by Michael E. Porter that determine the competitive intensity and
attractiveness of a market. Keeping in view the intense competition existing between financing
industries, a competitive analysis has been carried out. One additional force has been added to
reflect the power of government, local community, and other group. We can analyze an industry
by rating each competitive forces as low, medium, high in strength.
1. Threat of new entrants:
The threat of new entrants in the banking industry were medium because of the entry
barriers to the new banks were medium. It is neither easy to enter this industry nor too
difficult. The high capital requirements, strict government policy possess some barriers
for the new entrants. The new entering banks should come up with the high differentiated
service providing option with huge capital.
2. Rivalry Among Existing Firms
The competition is high among the different banks providing services to the customers.
There are many players in the market with high competition rate. Other banks such as
Standard Chartered, Everest Bank, Bank of Kathmandu etc is considered among the top
banks of the country and many other are coming up with high promotional strategies
along with the service and differentiation and low cost method.
3. Threat of Substitute Product
Substitute products are those products that appear to be different but can satisfy the same
need as another product. Substitue product for the Nabil Bank is other institutions such as
development banks, co-operatives etc. There is medium threat from these substitute
institutions because the current and potential clients can easily shift into other institutions
if they are not satisfied with Nabil Bank.
4. Bargaining Power of Suppliers
Depositor and technology are the potential suppliers of a bank. Due to increasing number
of banks there are more suppliers so they demand higher interest rate and more facilities.
Depositors have more options in choosing the bank so they have high bargaining power.
The technology has been coming up as the vital force for enhancing the banking system.
Hence the technology providers such as software building houses, IT specialist etc have
high bargaining power.
5. Bargaining Power of Buyers
Banks have increased in huge numbers. Borrowers are the main buyers of a bank. So due
to high numbers of banks, borrowers have more choice of choosing the bank. Therefore
there is high bargaining power of buyers. Borrowers demand lower interest rate, quick
loan processing, free services like ATM cards, cheque books, internet banking, SMS
banking and bank statement. Due to the heavy competition, many other banks are

coming up with new and attractive customer oriented schemes, so that buyers will have
wide range of options for choosing the banks.
6. Relative Power of Other Stakeholders
Sixth force is added to Porters list to include a variety of stakeholder groups from the
task environment. Some of these groups are governments, local communities, creditors,
shareholders etc. Nepal Rastra Bank is the main regulatory institute that supervises and
controls the activities of commercial banks in Nepal. Major banking policies are in
compliance with the rules and regulations of NRB. NRB guides the banking procedure.
Therefore any new law and rule imposed by NRB will certainly affect the banking
procedure of Nabil Bank. Rules, regulations and policies are implemented by the
Bankers Association of Nepal. Government is also another important player in the task
environment. The government rule on banking procedure also affects the banking
procedure of Nabil Bank. So, there is high relative power of other stakeholders in the
banking industry.