Examine the Mission and Core Values of Tisco. Are They Clear and Appropriate? How Would You Improve Them?

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- Threat of New Entrance or Potential Competitors.

In order to entry to the banking sector, new entrants are required to have a high investment (capital), high investment on employees and IT system investment as well as need to follow all the federal requirements. Banking industry has a high learning curve which means that new competitors must spend times and resources to study the trend of the market. In addition, another factor that may deter new banks is the reputation and new company might lose their opportunity to come into the industry as people would not trust in new entrants. The switching cost is high as people are getting used to with their current banks and processes to switch to other banks are difficult. Thus, the threat of new entrants is low.

- Threat of Substitute Products

With the variety of financial products and services, the possibility of substitute products is high to bank. For the case of deposit, people might instead invest in bonds rather than just stick with the saving account as stock might be a better alternative investment in the environment of low interest rates. In addition, many financial institutions other that banks such as thrift and credit union, also provide variety of products that is similar to banks to service customers. For investment investors, plenty of products available in the market give people a choice of investment as well as for the institution. However, banks by its feature are still a significant factor driving the economy. Many products and services are only provided by banks. Therefore, the threat of substitutes is moderate.

- Threat of Existing Rivalry

As we can see, banks are branching everywhere. The competition in the banking sector is high by its nature as banks are completing to gain more customers by offering a better rate than competitors. The competition on giving higher rates for deposit and lower rates on loan can be expected. In addition, another factor to drive the reputation to clients is how ethically they are. Customers perceived value towards the satisfaction is crucial for banks to focus. Furthermore, there are also financial institutions that operate similar to banks which mean bank industries will not only compete with each other but also with other financial service providers as well. Therefore, the threat of existing rivalry is high.

- The Power of Customers

The power of customers in the banking industry is high. If the customer doesn't like anything about his bank, he can open account in another bank, which it won't take him more than 30 minutes. This is why customer service is becoming so important in this industry. Moreover, banks tend to promote their services along with the normal account such as credit card. The clouding network of services gives privileges benefit to customers. Thus, there are high switching costs for the accounts as people have already get used to with services of bank such as internet banking and transfer processes. In addition, in some case such as investment account and deposits account; customers are freely to switch their account to other banks if they feel uncomfortable with the services where as some fees might apply.

- The Power of Supplier

The suppliers of funds to bank are depositors. Banks, in turn, pay interest rates to service supplier as a cost of borrowing. Supplier can pressurize bank industry through price increment or quality reduction for the purchased products. Powerful supplier can squeeze the profitability of bank industry so far that they can’t recover their cost of raw material inputs. They can be companies that supply raw materials, equipments, machinery, associated services and labour. For example suppliers for a bank may include trade union of the supply of labor force, ATM suppliers, cleaning service, IT consultants and others. This makes the bargaining power of suppliers to be moderate.

From the above explanation, Porter’s 5 Forces Model says that banking industry is unfavourable to enter since most of the forces scored moderate and high. As we can see, the threat of existing rivalry and the power of customers are lies ahead for the worldwide banking industry. This implies that, for the bank to survive profitability in the industry, it needs to choose a strategy, which can lead to a possibility of charging premium price for some product. Since customers have a high bargaining power, it is imperative for the banks to make sure that they have a customer retention strategy in place.

- Using market product analysis, what growth strategies can TISCO pursue? (20m)

One of the common business strategy frameworks used in understanding growth strategies is the Ansoffs Growth Matrix. It not only identifies and analyses different growth opportunities but it also encourages planners to consider both expected returns and risks. The four generic growth strategies are identifies as:

Market penetration: Increase sales to the existing market

Market development: new customers for existing products

Product development: New product developed for existing markets

Diversification: New products sold in new markets

Existing Products

New Products

Existing Market

Market Penetration

Strategy: This could involve an increase in sales of existing products to existing market, spending more on advertising, secure dominance of a growth market and minor products improvement.

For examples; increased sales of banking, using cross-selling to encourage customers to use more of a company’s other products.

For example; encouraging a Current Account holder to invest in a high yielding investment.

Risk: Little risk involved because the bank is already dealing in the same markets and products.

Product Development

Strategy: This strategy involve in developing new products to serve the needs of bank’s current target market.

They come in the form of new products, new innovative products, product improvement, product line extensions, new products to complement existing products, and product at