A Porter’s Five Forces Analysis of Barclays

So, you’ve read up all about Porter’s Five Forces Analysis, and you’re dying to use it, but… but something just hasn’t quite yet clicked. Well, have no fear! In today’s article, we’ll be giving you yet another example of Porter’s Five Forces Analysis in action — this time about Barclays.

In case you missed either of the previous two, here they are:

Five Forces Analysis of The Fashion Retail Industry

A Porter’s Five Forces Analysis of Bosch

And as a quick reminder: Porter’s Five Forces Analysis is a business analysis tool which focuses on determining the profitability of a given product or service, and the balance of power within that particular market. It does so by considering 5 crucial factors (the so-called “forces” — supplier power, buyer power, competitive rivalry, threat of substitution, threat of new entry).

Context

Barclays is a British banking company which offers loans, investments, and insurance along with standard banking services. Barclays is based out of England’s capital, London, and is said to own assets worth over 1.3 trillion USD in total. Let’s see what Porter’s Five Forces have to say about their performance, though…

Buyer Power

As with every Five Forces Analysis, we start by taking a look at the power that buyers of Barclays’ products have. Just like in our analysis of Bosch, the fact that Barclays has many, everyday individuals as buyers makes them particularly powerless (as opposed to having just a few, big buyers, who would have more power to negotiate with).

Sure, buyers have plenty of alternatives when it comes to picking banks (see point 3 — competitive rivalry), but it’s not like there are too many that are that much better.

Supplier Power

Supplier power is an interesting topic with Barclays, because unlike most, they don’t really offer physical products which need to be supplied, per se. However, Barclays does have a few suppliers (such as PINsentry, Kaspersky, and Microsoft), but their products are of relatively little importance and, if needed, could easily be replaced by in-house Barclays solutions.

This expendable nature of the suppliers makes their bargaining power quite low.

Competitive Rivalry

The third force that Porter’s Five Forces looks at is competitive rivalry. Here is where Barclays loses most a considerable amount of bargaining power. This is because there are many other alternatives to Barclays, like Lloyds, HSBC, and RBS.

It is in Barclays’ favour then, that they have a good track record.

Another thing to consider is that most banks offer similar packages, so Barclays’ offerings might not be anything special — they are just well promoted and well received.

The Threat of Substitution

The Threat of Substitution is another essential factor when considering the balance of power in a market. Does Barclays have much threat of being substituted, though? Perhaps, with digital currencies like Bitcoin and Litecoin gaining prominence, and online payment gateways like PayPal and Stripe becoming ever more powerful, the real question is how long will traditional banking last?

The threat is there, even if it doesn’t need immediate acting on. However, Barclays should definitely continue reinvesting their assets into exploring the future of money.

The Threat of New Entrants

The last of Porter’s Five Forces is the Threat of New Entrants. Is there a threat of new entrants in the traditional financial services market? Hardly, this particular market that Barclays finds itself in is already dominated by big names with plenty of valuable assets. It would be difficult for a new company to come along and succeed in the market alongside names with hundreds of years of operation.

That’s all there is for this Porter’s Five Forces Analysis! Hopefully, this example article has patched up all your doubts about this particular kind of analysis and now you’re ready to carry out your own!

Have you used Porter’s Five Forces before? What was your experience with it? We’d love to hear all about it, along with your other questions and remarks, in the comments section just down below.

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