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    Porter's 5 Forces For Broking Industry

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    Avengers Heroes
    The document analyzes the broking industry using Porter's 5 Forces model. It finds that the bargaining power of buyers is high due to lack of product differentiation between brokers and buyers' growing expertise. The bargaining power of suppliers is also high given brokers' dependence on IPOs and relationships with small cap companies. Threat of substitutes is high from alternative investments and discount brokers. Rivalry among existing brokers is strong due to the large number of competitors fighting on commission rates. Finally, the threat of new entrants is increasing as foreign brokers plan to enter the Indian market and forms of trading make entry more viable.

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    Porter's 5 Forces For Broking Industry

    Uploaded by

    Avengers Heroes
    1K views2 pages
    The document analyzes the broking industry using Porter's 5 Forces model. It finds that the bargaining power of buyers is high due to lack of product differentiation between brokers and buyers' growing expertise. The bargaining power of suppliers is also high given brokers' dependence on IPOs and relationships with small cap companies. Threat of substitutes is high from alternative investments and discount brokers. Rivalry among existing brokers is strong due to the large number of competitors fighting on commission rates. Finally, the threat of new entrants is increasing as foreign brokers plan to enter the Indian market and forms of trading make entry more viable.

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    Porter's 5 Forces for Broking Industry

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    The document analyzes the broking industry using Porter's 5 Forces model. It finds that the bargaining power of buyers is high due to lack of product differentiation between brokers and buyers' growing expertise. The bargaining power of suppliers is also high given brokers' dependence on IPOs and relationships with small cap companies. Threat of substitutes is high from alternative investments and discount brokers. Rivalry among existing brokers is strong due to the large number of competitors fighting on commission rates. Finally, the threat of new entrants is increasing as foreign brokers plan to enter the Indian market and forms of trading make entry more viable.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    1K views2 pages

    Porter's 5 Forces For Broking Industry

    Uploaded by

    Avengers Heroes
    The document analyzes the broking industry using Porter's 5 Forces model. It finds that the bargaining power of buyers is high due to lack of product differentiation between brokers and buyers' growing expertise. The bargaining power of suppliers is also high given brokers' dependence on IPOs and relationships with small cap companies. Threat of substitutes is high from alternative investments and discount brokers. Rivalry among existing brokers is strong due to the large number of competitors fighting on commission rates. Finally, the threat of new entrants is increasing as foreign brokers plan to enter the Indian market and forms of trading make entry more viable.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 2

    PORTER’S 5 FORCES FOR BROKING INDUSTRY

    Bargaining Power of Buyers:


     When retail clients trade frequently, brokers earn more commission.
     Distribution of stocks of mediocore or small-cap companies to unknowing clients so
    as to earn placement agent fees.
     Lack of Expertise in Clients can reduce their bargaining power. Retail investors often
    lack the knowledge and expertise in the financial sector that calls them to approach
    the broking houses.
     Lower product differentiation can increase the bargaining power of the clients. The
    retail broking services provided by the various companies is homogeneous with very
    low product differentiation. This allows customers to enjoy a greater bargaining
    power.
     Institutional clients realize the deterioration of research quality, so they use brokers to
    collect inside information and outsource the labour-intensive research and modelling
    work.
     Institutional clients encourage competition among brokers to bring down the
    commission costs.

    Bargaining Power of Suppliers:


     Increase in dependence of IPO. There is a growing dependence of corporates on
    broking houses with the rising number of IPO’s coming to the market.
     For small cap companies, many brokers try to lock in special relationships so that they
    benefit from being exclusively associated with the company.

    Threat of Substitute Products:


     Threat from Alternative Investment Options. Various alternative forms of investment
    include fixed deposits with banks and post offices, etc. These act as substitutes to
    retail broking products and services.
     More number of customers are shifting towards Discount Brokerage Model that offers
    lowers brokerage. This will shrink the commissions and size of the industry.
     Even various banks provide similar type of services now. They also give the same
    service of portfolio management and wealth management.
    Rivalry among Existing Firms
     Large no. of competitors with different and lower commissions.
     Lot of brokerage companies are moving towards consolidation with the smaller ones
     becoming either franchisees for the larger brokers or closing operations.
     Online Trading Competes with Traditional Brokerage. There is an increasing demand
    for online trading due to consumer’s growing preference for internet as compared to
    approaching the brokers.

    Threat of New Entrants


     Forms of trading including Dematerialization and increase in holding period in
    margin financing business (generally T+180 or T+360) are strengthening the retail
    brokerage market and attracting foreign companies to enter.
     Various foreign brokers like Interactive Brokers and others are planning to enter the
    Indian retail Brokerage Industry.

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