Application of Porter's Five Forces in Banking at Tanzania

APLICATION OF PORTER’S FIVE FORCES FRAMEWORK IN THE BANKING INDUSTRY OF TANZANIA: Determine, Develop and Deliver Competitively.

By Dr. Elisante Ole Gabriel (PhD) Head of Entrepreneurship Development Centre Faculty of Commerce Mzumbe University P O BOX 6 Dar es Salaam Tanzania [e-mail] : Tel. [phone]

Abstract: The banking industry of Tanzania has been growing fast during the last decade. There are so many things happening within the industry after the liberalization of the sector. The aspect of competition is now crucial for the operators who are within the banking industry. Porter’s Five Forces Framework is one of the strategic models used to assess the attractiveness of the industry (being service or manufacturing). This model is defined by the five key forces which are; Rivalry among the existing firms, Threat of new entrants, Threat of substitutes, Bargaining power of suppliers and bargaining power of customers. The banking industry of Tanzania has 22 full-fledged banks, 5 Regional unit banks, 5 Financial Institutions and 102 bureux de change operators. The rivalry among the existing banks, threat of new entrants and bargaining power of customers is found to be unfavorable forces to the industry. Threat of substitutes and bargaining power of suppliers are found to be favorable forces to the industry. The industry is therefore of two starts, hence not attractive. Those who are already in the industry need to operate competitively by using a differentiation strategy to win the confidence of the customers who have higher bargaining power. A good customer service is necessary. This can be achieved through synergy and Total Quality Management (TQM) approach. The forces are not and will never be static but dynamic, hence a need for the banks to be reviewing their strategies from time to time.

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Introduction: The banking Industry in Tanzania has tremendously changed its dynamics for the last one decade. Many banks have joined the

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