Canadian Banking Industry Situation Analysis

PESTEL Analysis

Political

Economic

Social

Technological

Legal

Environmental

Porter's Five Forces

Threat of entrants

Consumer bargaining power

Threat of substitutes

Supplier bargaining power

Competitive rivalry

Strengths

Weaknesses

Opportunities

Threats

How attractive was the Canadian banking industry in 2013?

The attractiveness of the 'no frill's segment

Acquisition of ING by Scotiabank using the Tangerine brand

Resources and capabilities by PC to fight in the no-frills segment

The impact of co-branding with the Loblaws PC Points program

Were PC's efforts considered a 'blue ocean' strategy?

Alternatives

Recommendations

Timescales

References

Analysis of the Canadian Banking Industry

Problem statement

PC Financial Services is struggling to survive in the phase of industry transition. Just like other global banking organizations, PC Financial faces significant new challenges. Stiff competition and new technologies are disrupting the industry. Customer expectations are rising and evolving. Regulatory reforms and requirements continue to evolve and grow. All these are vital components of doing business today. Besides the areas mentioned above, PC Financial still faces challenges in various areas. However, three problems appear to stand out in the current market.

Evolving consumer expectations: Nowadays, banks are focusing on delivering the best customer experience. Thus, PC Financial feels pressured they because they must meet the consumers' demands relating to technology.

Intense rivalry from FinTech firms: Normally, these are start-up firms that grounded on the application of latest versions of software to offer financial services (Braudo & MacIntosh, 1999). For instance, the increasing popularity of ING Bank of Canada is disrupting the way traditional banking has been done. This has created a great problem for PC Financial because they must adjust to the changes, not only technological but also in culture e, operations, and other industry facets.

Regulatory pressure: The Canadian banking sector faces increased regulatory requirements. Therefore, PC Financial must spend a great portion of their discretionary budget on being compliant and implementing systems to be at par with the escalating requirements (Northcott, 2004). As these issues continue to escalate, PC Financial must constantly evaluate and upgrade their operations and strategies to keep up with the fast pace of evolution in today's banking and financial sector.

Situation analysis

While seeking to secure a global position and market value for PC Financial, this section applies various analysis tools. Porter's five forces will identify the external factors affecting the business while PESTEL identifies the macro trends in Canadian banking and financial sector. Besides, SWOT analysis will be used to explore the company's internal and external strengths and weaknesses.

PESTEL Analysis

Political

The political instability of Canada affects the banking industry directly. This means poor administration, bureaucracy, power, and coalition hampers the resilience of PC Financial (Peterson, 1997). For instance, the recent coalition politics resulted in the delayed implementation and decision making following diversified interests of different political organizations. However, the Canadian government has taken steps to boost the economy, thus the banking industry. Moreover, the monetary policy of PC Financial has been restrictive over the past years. This is attributable to inflationary pressure that the Canadian economy or otherwise global economy was facing (Hamilton, & Webster, 2015).

Economic

Global banking firms are still feeling the aftermaths of the 2008 financial downturn and the associated liquidity problem that oversaw the failure of others. Banks like PC Financial were rescued by the fact that they are universal regarding product offerings, which cover many geographical locations (Norton & Hadjiemmanuil, 2005). The company has survived the economic turmoil and performed well because its base revenue growth is driven by the fast growing regions of Latin America where the economic outlook is promising.

Social

The Canadian banking market is marked by tech-savvy customers who offer an opportunity and pose challenges. These consumers are seeking electronic methods of money transfer besides personal experience and touch. We are living in an information era where the young generation is often updated and able to make informed decisions. This generation likes to make their decisions and control their finances. Moreover, PC Financial is focused on supporting a move towards a low carbon economy. As such, the company provides numerous climates funding such as debt and equity investment, and environmental markets (Wise, 2003).

Technological

Currently, PC Financial is investing in climate and clean technology research as a move to support the low carbon economy. For instance, in last year, the company offered structured finance for low-carbon emission vehicle systems. This makes the company the industry leader regarding climate change technology funding (Ghosh, 2012).

Legal

New capital requirements and increased governmental...

According to PC Financial, they are devoted to cutting their carbon emission by minimizing transport emissions and improving energy efficiency in their buildings.
Porter's Five Forces

Threat of entrants

PC Financial confronts various threats from Wal-Mart to Canadian Tire and many others who are planning to enter the industry following the lucrative profits that the industry provides (Schatan et al. 2008). Large supermarkets in Canada intend to enter without considering that their presence would breakdown organizations like PC Financial. While the company confronts a significant threat of potential entrants, the company has still maintained high standards for the competition.

Consumer bargaining power

In this market, PC Financial have managed their client base by gaining customer loyalty. This approach allows the company to beat their competitors while maintaining their market share.

Threat of substitutes

Emerging competitors are offering new products and services; thus, they pose a significant threat to PC Financial. For example, Wal-Mart Canada Financial Services offer a rewards credit card with optional credit protecting insurance and extended product warranties. In addition, Wal-Mart offers Bluebird banking services through American Express. This is an alternative to the traditional checking accounts. However, following this threat, PC Financial is forced to work harder to sustain its industry position.

Supplier bargaining power

The power of consumers reflects that of suppliers. PC Financial applies the technique of charging markets with varying prices based on the differences of the price of a buyer.

Competitive rivalry

The Canadian banking sector has a plethora of rivals dominated by the Big Five full-service chartered banks. They include Canadian Banks, Royal Bank of Canada (RBC) and the Toronto Dominion Bank (TDB), which control at least 40% of the Canadian retail banking deposits. The other three include Scotiabank, Bank of Montreal (BOM) and Canadian Imperial Bank of Commerce (CIBC). The banks control at least 70% of the retail banking deposits through their vast network of branches spread throughout Canada. Following the capabilities of these competitors, PC Financial has devised strategic plans to guarantee that they are permanently the first choice of consumers in the industry (Silcoff, 1997).

SWOT analysis

Strengths

PC Financial is the largest no-frills venture concerning lending assets. The company is striving to secure a position at the top with a market value of $120 billion (Jeon & Olivero, 2013). In 2008, the banking industry confronted a gigantic economic challenge. However, even during those difficulties, PC Financial revenue grew by 3%, emerging as the only successful no-frills banking provider in Canada. Today, the company is on a path to long-term success in a market that seen so many firms leave.

Weaknesses

One weakness of PC Financial is the lower penetration level in the rural areas. The company has a footprint in the rural area. Nevertheless, the rural market is so vast that the organization cannot cover the entire area. Unlike the Big Five Banks that has established a deeper penetration in the rural market, PC Financial has no opportunity here. Moreover, the company may also lack the ability to reach different customers because of distance barrier (Braudo & MacIntosh, 1999).

Opportunities

The greatest opportunity for PC Financial is their expansion. The company has grown exponentially; diversifying into various niches and continues to the leading no-frills bank (Safarian et al. 1995). In fact, recently, PC Financial has been actively engaged in acquisitions and mergers to increase their market presence and business worth. The positive move to enter the emerging markets of Asia and Africa has proved to be flawless and has boosted the company's profit percentage. Today, PC Financial is planning to acquire Bank Ekonomi, which is the largest commercial bank in Indonesia. The company intends to start different alliances with business in different geographic locations.

Threats

PC Financial confronts the major threat of online banking service. Their online banking service is of high standards and is advertised as the safest packages to bank online. Nevertheless, as with any technology, the system also has some drawbacks. It is associated with security issues like theft of organizational data. For instance, in 2009, it is believed that the company's computers were hacked resulting in the loss of transactional information of almost 200,000 accounts (Crossan, 2005). This incident lowered the customers' confidence thus lost confidence in PC Financial. Worse still, the globalization of world economies invites the foreign players like Citi Bank, HSBC Holdings plc and Bank of Baroda, because they are technologically advanced, thus pose further threats.

Questions

How attractive was the Canadian banking industry in 2013?

As per 2013, the Canadian Banking industry was in an excellent shape and until today, it remains properly regarded because of its risk policies and prudent management. Nevertheless, market shifts and regulatory changes are triggering new challenges. Data from early…