Quarterly industry forecasts on a global scale show a provision for historical and present data forecasts with an analytical perspective of major global industries and market on the rise. Currently economic researchers examine changes using integrated global economic sector based model as a measure of ensuring accuracy in measurement. Focus in mainly on developing markets and economies with adequate coverage of all main sectors of manufacturing and services. This occurs a thorough examination of industrial sectors on scenario analytical perspective encompassing economy friendly systems with precision in methodologies of forecast.
There has been a growing emphasis by financial industry researchers concerning the global economic industry along with the slow by noticeable movements in the core system of the global economy towards emerging markets such as those in Asia. This shift in resources is revealing new development opportunities which also pose a new challenge in terms of how the economies should handle these changes this more so in developing countries with their developing economies (Alford, 2009). The interest continues to be renewed by using relevant industrial legislation of developing economies in part with their strategies of development. This occurs because the industry itself is faced with the ever changing global economic landscape and this occurs as developed economies continue to outpace developing economies. As such some developing economies and countries are tackling this challenge through implementation of industrial based policies. This uniquely acts as a means to maintain growth through diversification and domestic production upgrading.
Strategic Analysis of the Banking Industry
I shall focus on banking as an industry in the context of global management. This industry can be defined as being dynamic and important as an individual component as well as an on an organizational scale be it small or medium. It is based on the cultivation of relationships enshrined on finance as a service which Cooper, (2011) stating that it caters for a varied customers of all proportions as it supplies financial products and services. This hence occur as a simulation of economic growth in a cataclysmic manner in relation to nation based and the international economy. The banking industry is characterized by the provision of varied services such as account holding and financial services like loans, mortgages and mobilization of funds in addition to managing global mergers and acquisitions.
Figure 1; showing the Global banking loans and deposits
Source: Economist Intelligence Unit
Furthermore, the industry has sensitivity to technological regulation as well as to economical aspects with a share of issues that are concerned with these factors (Jean & Ramos, 2011). Developing economies are continually changing in the global realm as wealth and other economic instruments. In addition to the banking industry adapt to the fast paced provision of new banking products and services arising from innovation. The industry however has managed to adopt strategies of unique nature so as to overcome these issues while moving forward in delivery of financial goals to consumers and organizations alike.
Porter’s five Forces in analyzing the banking industry
This industrial analysis mode is well known as an industry model in the analysis of any industry. A critical analysis is established on the basis of pure competition as an implication related to risk rate adjustment of returns sustained in constant state across broad organizations and industries alike. Developed by Michael Porter it was presented as a framework of industry analysis, influenced by the five forces of strategic business management in the development of competition among rival organizations (Minoiu & Reyes, 2009). It provides for an improved perception of the context of the industry in which organizations operate. These five forces exist as supplier power, new entrants and the threat posed industry substitution, consumer power and the measure of rivalry.
Consumer power in the banking industry
The banking industry is known for being an industry dominated by high consumerism; this is because several individuals utilize its services such as cash deposits, mortgages, loans and exchange of currency. With the advent of the internet the livelihood for banking consumers has been changed in a way of simplification of attaining these services. This allows for easy comparison of the services with measures such as interest rates, service charges and sensitive indicators for the consumer in the industry from which decisions can be made either to withdraw or deposit their funds. Other substitute products or services that have been introduced to the banking industry over the decades are currency exchange, insurance services and loans that provided mainly through other financial institutions.
Figure 2; showing the global banking industry market estimations
Source: Alford, 2009
New entrants in the banking industry as a threat
With several nations joining the World Trade Organization and the impact of internet technology, barriers that had earlier existed within the industry gradually disappeared. Varying financial and non-financial entities can enter the banking industry with ease, using limited funds in creating a banking structure and related system while also integrating with other organizations. The cost of switching in this case is case be seen in a minimal behavior, as the advantage and associated benefits far outweigh the challenges that can be met for new entrants into the industry.
Substitute products in the banking industry
The internet as a technology can be viewed as substituted product in the banking industry because several organizations used limited funds, in relation to provision of a similar service as its associated charge reduces (Mcllroy & Straus, 2009). As such out of convenience, reduced cost and increased efficiency will compel consumers to change service providers in terms of banking service providers. For instance real time financial service providers such as Western Union and online insurance providers like InsWeb, are using the internet to provide reduced service charges for financial services that would have otherwise been provided by banks and with high quality.
Supplier bargaining power in the banking industry
Depositors in the realm of the banking sector are a supplier of capital, as they undertake product comparison so as to ascertain which decision to take in withdrawing capital or depositing it. The concentration of services such as credit cards is as a result of the popularity of credit cards on a global scale, notable organizations such as VISA and Master Card dominate this sector such that the cost of switching by other financial entities is higher in comparison to others (Jean & Ramos, 2011).
Figure 3: Islamic Banking Analysis
Source: Mcllroy and Straus, 2009
The measure of rivalry in the banking industry
Several banks exist in the world generating more than $6451 billion annually as of 2005 according to industry finding figures; this is part to improvements in technology and eased financial control with adjustments in the general banking environment (Cooper, 2011). In addition the competition that exists among banks is rigorous and mature, more so in western nations which compels banks in this region and globally to continue to seek for profits.
Brussels as an emerging city in the global economy
Brussels the Belgium capital is the main administrative centre for the entire European region, with a broad orientation towards the service industry as it is dominated by varied administrative related services. Locked in the boundaries of the Flander region the city has a well developed service economy with more than half of all employment based in the service sector. This growth in the service sector has been in part to its status as Europe's capital. This is addition to the capital's expertise in the banking transaction service sector, as well as beer production, confectionary industry as well as pharmaceuical research. Brussels has long been the financial capital in international banking transaction since the establishment of notable French bank Societe Generale as of 1822, from this time on Brussels has been known as the European center of international bank transfers and clearing with well known industry names such as Swift and Euroclear (Baten, et al. 2010). In a global perspective this has brought reputation to the city of Brussels as a global financial transaction center as well as a common point of meeting for several global financial giants in the financial transaction industry.
The global political environment of the banking sector
In the political setting, the banking industry has undergone several changes in terms of global legislation. The change including the New Basel Capital Accord is a political global framework that aims to provide adequate capital while touching on considerations in implementation as well as providing the technical guidelines to achieving this objective. The framework strives to provide encouragement to banks in improving risk management, beyond the confined compliances of reduced capital ratios (Alford, 2009). The emergence of new market in other regions such as Asia more so China has relaxed Foreign Service enterprise legislation under the World Trade Organization as banks continue to expand their products and services to China in an effort to penetrate the Chinese market.
The global economic environment of the banking sector
Economically the banking sector continues to cope with the rapid pace of financial globalization, as the pace quickens in terms of financial innovation and reduced communication cost as the core driving force for financial globalization with the pressures of inflation remaining silenced.
The global social cultural environment of the banking sector
The banking industry on a global scale as argued by Minoiu & Reyes, (2009) who state that it is faced with several social-cultural aspects such as accepting the increasing of credit, relying on state owned financial institutions in which case banks are obstructed by key environmental challenges. therefore, the continuing increase of the middle class population, bridging the gaps in terms of skill through alliance on a foreign landscape and increase in the elderly age group within the global population is therefore defined.
The global technological environment of the banking sector
Technologically the banking sector faces several challenges and opportunities such as network based solutions as an improvement to the process of banking, electronic signature as a requirement for stricter banking procedures as called for by Cooper, (2011) the rise of credit assessment structures and the flourishment of electronic banking in spite of the challenges it faces.
In conclusion we see that the banking industry on a global scale boasts of a large network spanning the continents of Asia and Africa, more so in the retail sector with private data communication systems for internal operations. The challenges lay in the high cost of certain technologies and the outdated credit card system which raises expenditures as more staff is employed to for the process of input. Furthermore, considerable time is spent in providing equal services in terms of information technology. Opportunities however exist as more customers are attracted to the economies of scale of services such as Automated Teller Machines, as well as the invasion of financial globalization as a barrier breaker between banking institutions while increasing competition.
Baten, M. Jalal, S. Anton, K. (2010). Electronic banking prospects in an economical perspective, Journal of Internet Banking and Commerce.15,1-10
Alford, D. (2009). College regulation in European Union banking laws, Social Science Research Network .1,23-78.
Cooper, J. (2011). The brand value of retail banking in global rankings, The Banker.1,12-34.
Jean, P. Ramos, M. (2011). Centralized banking rethought, Committee on International Economic Policy and Reform. 1,8-45.
C,Minoiu. Reyes, J. (2009). Global banking network analysis, Network. 11,19-62.
Mcllroy, D. Straus, J.(2009). Banking regulation and the future, The Role of Law and Ethics in the Globalized Economy. 10,119-129.