Analyse Barclays Bank through the lens of Porters five forces to assess how the five forces affect Barclays Bank and the Banking industry in the UK.

Barclays Bank Pestle & Swot Analysis

Introduction

Barclays Barclays is a British bank with operations in more than 50 countries including the US, Japan, India, Europe and many African countries. It is part of the UK big four, referring to the four largest UK-based banking groups which also include HSBC, Lloyds and RBS. Founded in 1690 by James Barclay, Barclays has operations in a diverse set of consumer and wholesale businesses including retail, wealth management, corporate lending, credit cards and mortgages. It currently operates its business via two clearly defined divisions-Barclays UK and Barclays International.

Barclays Bank Porters Five Forces Analysis

Bargaining power of buyers

In the case of a bank or financial institution, the power of a buyer is low because the cost of switching is high (Johnson et al 2008). If a customer already has a bank which holds his account needs, investments and debts it would be a big bother to shift from that bank to another putting into consideration the costs involved. However with the growth of FinTech companies the switching cost has become low with more and more customers starting to shift to the use of FinTech companies like google pay.

Bargaining power of suppliers

The fact that the UK banking sector is concentrated has made the bargaining power of Barclay’s bank suppliers low. This give the bank power to obtain goods and services at a low cost.

Threat of substitutes

Substitutes have the power to reduce the demand for a particular product as customers switch to the alternative. In this case , potential substitutes are FinTech firms and  Blockchain technology which are already disrupting the market. FinTech transaction volumes is forecast to grow from  approximately 15.3% in 2015 to £21.4 billion by 2021(Statista 2017). Block Chain Technology like Bitcoin is also a threat as it can help users send money without the fear of it not reaching its destination(Dawkins 2018). The growth of these different technologies is hiking the threat of substitute in the banking sector.

Competitive rivalry

The UK banking sector is an oligopolistic competitive sector with the big four (Barclays, Lloyds Banking Group, RBS and HSBC) managing 77% UK current accounts and about 80% of Business banking. Barclays Bank commands 18% of the market shares, with RBS at 18% after Lloyds Banking Group with 25%, HSBC 12%, Santander at 10% with the rest sharing 17%. This has made the structure so consolidated due to the post financial crisis mergers and bank failures and only a few new banks have been able to emerge offering current accounts in the past 5-8 years while banks like Norwich exited the sector (Dunkly 2017).

Threat of new entry/Barriers to entry

The threat of entry in the banking sector is very low considering the fact that most existing banks have already established themselves and already have a big base of customers which would be hard for new entrants to compete. This is even harder as it’s not easy to just break into an industry if there is already one or more established operators that know the industry well and have good relations with their customers and suppliers(Johnson et al 2008) because most people prefer putting their trust in banks which are already established and seem dependable. However the introduction of services like internet banking which requires approximately 10,000 customers to be viable can override the barriers to entry.

References

BarclaysPLC (2017) “Barclays PLC result announcement” Barclays PLC [Online] at https://www.home.barclays/content/dam/barclayspublic/docs/InvestorRelations/ResultAnnouncements/2017FYResults/20180222_Barclays_PLC_FY17_Results_Announcement.pdf

BBC News(2018) “Barclays takes £127 million hit from Carillon collapse” BBC News [Online] at https://www.bbc.com/news/business-43152466

Cruise Sinead (2018) “Barclays investors give CEO Staley a year to fix investment bank” Reuters [Online]at https://www.reuters.com/article/us-barclays-investmentbank/barclays-investors-give-ceo-staley-year-to-fix-investment-bank-idUSKCN1GQ2CG

 Dawkins, David (2018) “Bitcoin's blockchain and the challenges of Brexit: 'The opportunities are LIMITLESS' Express [Online] at nexis.com

Dunkley, Emma (2017) “UK challenger banks shy away from current accounts market” Financial Times [Online] at https://www.ft.com/content/ca1c26fa-81a6-11e7-94e2-c5b903247afd

 KPMG (2016) “2016 Banking Sector Briefing” [Online] at https://home.kpmg.com/content/dam/kpmg/pdf/2016/02/banking-the-customer-experience-dividend.pdf

Proactive Investors(2017) “Lloyds plays catch up with Barclays as it boosts shares of credit card market with MBNA take over” Proactive Investors [Online] at http://www.proactiveinvestors.co.uk/companies/news/178643/lloyds-plays-catch-up-with-barclays-as-it-boosts-share-of-credit-card-market-with-mbna-takeover-178643.html

Johnson et al (2008) “Exploring corporate strategy” 7th edition pg

Statista (2017) “Banking and Finance: Statista Industry Report UK” Statista