Porter’s Five Forces: Philippine National Bank Threat of new entrants Since the implementation of the bank deregulation in the Philippines, it has been easier for new entrants to position themselves in the industry. Because of the lower minimum capital requirement, more firms have the freedom to compete with the existing market. However, because of this, it is also a bigger threat for smaller firms, because more stable firms can undercut their prices to minimize competition. While this works in favor of the consumers, as the firms’ strategies to eliminate rivals have a positive impact on buyer well being because of the decreased average industry prices and improved services, it makes smaller banks more vulnerable. As the fifth largest bank following its merger with Allied Bank, PNB is not so susceptible to the threat of new entrants as compared to other players in the market. It is also a universal bank that performs both commercial and investment functions, which gives it a competitive edge over it’s a portion of its contemporaries. Threat of substitutes Banking is a universal need required by individuals and firms alike, thus creating a constant demand for its services. As mentioned earlier, the deregulation and implementation of Basel II has made it easier for firms to enter the industry, thus increasing competition. Because of this, consumers are at an advantage because of their high bargaining power- should they be displeased with the performance or service of a firm, they can easily switch given the relatively low prices and abundance of other options. This gives rise to a high threat of substitutes for firms in the banking industry. PNB, in particular, is susceptible to this threat, as are all financial institutions. It is among the largest banks in the Philippines, and due to this, it is not as vulnerable to the threat of substitutes as its smaller competitors, however it is only the fourth largest, coming after Banco de Oro (BDO), Metropolitan Bank and Trust Company (Metrobank), and Bank of the Philippine Islands (BPI), and thus still susceptible to the threat of substitution. Bargaining power of buyers In relation to the above-mentioned threats, there is a high bargaining power from the side of the buyers. As there is an abundance of banks offering services in the market, buyers have multiple options at their disposal, forcing the firms to push their service rates down. As the prices are low, the switching costs are also low. This, in addition to the number of competitors, empowers customers to bargain. Bargaining power of suppliers Unlike manufacturing and trade industries, service-oriented firms rely primarily on homegrown skills. Instead of depending on a third party to provide them with raw materials or inventories to buy and sell, they utilize human capital. Because of this, there is a low supplier bargaining power. While training is a cost that it must incur, PNB can easily hire fresh talents well-versed in the skills required by the tasks needed to be accomplished. And since there is an overflow of skilled human capital in the Philippine market, PNB, as an employer, has an edge over the talents, as it can dictate exactly how much it is willing to spend on labor, and the recruits will still comply due to limited job opportunities.
Intensity of competitive rivalry Banking is a cut-throat, multi-million Peso industry, and there are several key players in the market competing for the pool of consumers. Due to this, the institutions need to outshine their competition and put themselves above their peers. This gives rise to innovations, promos, advertising and marketing, in order to make them known. They need to respond to consumers’ growing demands and keep up with technological trends in order to stay in-demand. Though its competitors have more intensive advertising and marketing promos, PNB offers a selection of innovations that appeals to a range of customers. Through its loans such as the Own a Philippine Home Loan (OPHL) on top of its regular services, it addresses the needs of its locally-based clients, but a bulk of its innovations capitalize on the large OFW population. It offers products such as the PNB Pangarap Loan that offers services to Italy-, Singapore-, and Hong Kong-based OFWs, the Global Filipino Card that allows remittance transactions via ATM, and the option to pay bills from anywhere in the world. Though it’s not as focused on the local markets, its strategy is streamlined to cater to OFWs situated across the globe, who happen to account for majority of the Filipino income. As the only bank that specializes in this, PNB has an edge over its competition.
