Nordea is a bank emerged by the merging of some Scandinavian bank. Its competitive environment can be best understood by the use of models developed by Porter.
Threats of substitute products or services:
- Positive: Nordea use the internet that increases the efficiency of their operations, and by this, they are able to expand their market.
- Negative: The extensive using of the internet by Nordea, make a risk of substitution by new product or services. It means if a new product arrives, then the loss will be immense.
Bargaining power of suppliers:
- Positive/negative: The use of the internet can make Nordea more powerful over their corporate client. Nevertheless, sometimes the reverse may happen.
- Negative: The corporate client may have more access to the end customer of Nordea. Therefore, it reduces the importance of Nordea.
- Negative: Competitors of Nordea have equal access to the corporate client in the digital market. It reduces the importance of the differentiated services of Nordea.
- Negative: The free access of competitors to the corporate client of Nordea powered the corporate client over the bank.
Rivalry among competitors:
- Negative: The products offered by Nordea is not the unique property of the bank. The competitors can also provide the same product.
- Negative: The competition is more likely on the price than quality. It restrains Nordea’s continuous quality improvement.
- Negative: The internet creates a global market, which increases the competitors of Nordea.
- Negative: The installation cost for a new service is higher for Nordea than improving or expanding it. So the pressure for the price cut is affecting negatively.
Buyers bargaining power channel:
- Negative: In the case of the traditional system, Nordea can increase its service charges through the direct bargaining power channel. However, the chance is diminishing by the use of the internet.
- Negative: Bargaining power ultimately lies on the customers.
The barrier to entry:
- Negative: The internet reduces the use of the sales forces and other direct contacts with the customer, which cost more. Therefore, the competitor can easily penetrate the market. It intensifies the competition for Nordea.
- Negative: In the internet age, it is difficult for Nordea to keep the services away from the competitors. A new company also adopts the same strategy.
- Negative: The internet reduces the transaction cost. Therefore, a lot of competitors emerge in the banking services besides Nordea.