​DBS Bank - PESTEL AND Porter five forces analysis

IntroductionDBS Bank is a public limited company which was set up in July 1968 by the Government of Singapore (DBS Bank, 2016). The multinational banking and financial services corporation is headquartered in Marine Bay, Singapore (DBS Bank, 2016). DBS, initially The Development Bank of Singapore, was started with the main aim of encouraging the growth and development of manufacturing and processing industries in the country (DBS Bank, 2016). The Bank was to provide loans and financial aid to the industries. Currently, the bank is the leading financial service group in Asia with the larger customer base being Singapore (over four million customers) (DBS Bank, 2016). It is greatly extending its presence to Southeast Asia, Greater China, and South Asia.
Company BackgroundClaiming to be born and bred in Asia, the company has grown to be the largest, safest, and, therefore, the best banking institution in the entire Singapore and Southeast Asia (DBS Bank, 2016).  The institution has positioned itself, in the Asian banking industry, to capture the opportunity in the entire region. The company has over 280 branches in 18 markets spread in the entire continent (DBS Bank, 2016). The company’s amazing success is attributed to its leadership and the good relationship it has with its primary stakeholders (DBS Bank, 2016). The company’s management is committed to equitably protect the interest of all the stakeholders and the business itself. The company’s good management was recognized in 2014 Singapore Corporate Awards, where it won the Best Managed Board for companies’ award. The company also values its employees (DBS Bank, 2016).  
Country BackgroundSingapore is considered to be the top two safest emerging markets, alongside Hong Kong, in Asia. As a result, more international investors are moving into the country. This is encouraging the development of banking industry (Espinasse, 2014). The country is offering a cost-competitive appropriate business environment. The country is characterized by an effective regulatory environment, highly skilled pool of financial professionals, and a good infrastructure (Espinasse, 2014). Singapore being surrounded by other good merging market with supplementary factors of production, such as cheap labor, gives it a strategic location. The role of the Singapore to finance local and regional growth to facilitate activities such as trade, infrastructure development, and corporate financing proves a great opportunity to the country’s banking industry (Espinasse, 2014) .
PESTEL AnalysisPESTEL analysis is a tool used by marketers and investors to analyze and monitor Macro-environmental factors affecting business operation. PESTEL is an acronym Political, Economic, Social, Technological, Environmental, and Legal (Choudhry, 2010). These summarize the entire external marketing environment. The following is the PESTEL analysis for DBS bank (Ruckemann, 2013).       
Political factorsThe political stability in Singapore has created an environment of a quite low political risk (Menon, 2013). This kind of environment has encouraged more local and international investment in the country. Increase in business activities is encouraging the Development of Banking industry. DBS being one of the major players in the industry enjoys the development of the industry.
Singapore has highly growing merging market. Highly profitable larger business organizations are coming up (Menon, 2013). As a result, the government might increase the tax rates.
Economic factorsSingapore is experiencing increasing labor cost. This might affect the company by taking away the cost advantage. Singapore dollar is strengthening in the currency market (Menon, 2013). This might make it more expensive for DBS to do business in countries and continents such as Europe, Africa, and South America. The high and still developing per capita in Singapore is likely to expand the potential market for the higher-end consumers of the services provided by DBS (Menon, 2013). Labor shortage in Singapore is likely to trigger further increase of the labor cost in the country hence disadvantaging companies such as DBS bank.
Social FactorsThe culture of hard work and materialism desire among the Singaporeans could encourage the further improvement in the living standard (Menon, 2013). Increasing living standards in the country could encourage the business activities in the country including banking activities (Menon, 2013). This could benefit banking institutions including DBS Bank. High level of education in Singapore is likely to create a pull of skilled labor for business organizations such as DBS Bank. 
Technological FactorsOne of the key drives to the economic development in Singapore is increased connectivity and improved communication system (Siaw et al., 2004). The country has a widespread IT infrastructure. This encourages e-commerce which banking industry depends on greatly (Siaw et al., 2004). DBS Bank exploits this opportunity to increase its connectivity with the stakeholders. DBS Bank is the leading business organization to effectively implement the use of Infocomm Technology which has increased ATM network efficiency and customer satisfaction in general (DBS, 2016).
Legal FactorsDBS Bank is in a highly regulated sector. The government of Singapore has several business laws and regulations which aim at protecting the rights of all the players in the banking industry (Bowhill, 2008). Due to the rapid growth in economy which is as a result of increasing business activity in the country, the government is likely to increase the level of litigation to the both public and financial sectors (Ruckemann, 2013). By planning to expand the area of operation beyond the boundaries of the countries it is operating in currently, DBS Bank is likely to face increased business laws and regulations.  
Environmental Factors The activities in the Banking industry have relatively the lowest negative impact on the natural environment (Bowhill, 2008). However, as a big institution, which is ethically required to encourage environmental responsibility within the community where it is operating. Currently the country is under a serious problem of environmental pollution due to industrialization which is going on. The country’s mangrove forest is under a great threat as 30% of it has been depleted.

Porter's Five Forces AnalysisPorter’s five is a tool used to identify and analyze five competitive forces that basically shape every industry. This can help in identifying the strengths and weaknesses. These forces are Supplier power, Buyer power, Competitive rivalry, Threat of substitution, and Threat of new entry (Hill et al., 2010).
Competitive RivalryThe current business environment is characterized by stiff competition. Every firm in every industry is struggling to secure a better position in their industries. Banking industry is one of the industries characterized by stiff competition (Hill et al., 2010).  The intensity of competition depends on the number of firms in an industry that is the more the number of firms, the more the competition.
 Bargaining Power of SuppliersThe suppliers bargaining power is affected by the ratio of suppliers and firms depending on the suppliers (Hill et al., 2010). If suppliers are many and the firms are few, the bargaining power of the supplier becomes low. If the number of suppliers is few, their bargaining power tends to be high. The bargaining power of the suppliers affects production cost.  
Bargaining Power of CustomersThe bargaining power of customers depends on the number of suppliers, offering substitute products in an industry, and the number of consumers. If there are many substitute products in an industry, the bargaining power of the customers increase since they have several alternatives (Hill et al., 2010). The loyalty of customers to specific brands in an industry also plays a role in their bargaining power. If customers are more loyal to a brand, it becomes less likely for them to shift to other substitute products from other brands.  
Threat of New EntrantsThe threat of new entrants is affected by the type of entry barrier in an institution (Hill et al., 2010). The barriers might be posted by legal laws and legislations, financial requirements, or other operation factors such as the ability to develop a strong customer base. If barrier to entry into an industry is many and stronger the threat of new entrants becomes less potential investors are able to overcome the barriers and enter into the market (Hill et al., 2010). If the barriers are few, there is a likelihood of more firms entering into the industry hence increasing the threat of new entrants due to increased competition.
Threat of substitute productsThe threat of substitute products is caused by the number of substitute products from other industries (Hill et al., 2010). Increase in the substitute products from other industries increases the elasticity of the demand for products since consumes get more exposed to alternative products (Hill et al., 2010).
Porter’s Five Forces Analysis for DBS Bank
Competitive rivalryAsian Banking industry is very competitive. There are more firms in the industry which are trying to secure a better position in the industry (Kawai et al., 2012). Every bank is, therefore, trying to lure the customers to their side so as to beat competition. More banking institution from Europe and America are also extending their services to Asia hence providing more competition to DBS Banks (Kawai et al., 2012). DBS Bank, however, has adopted strategies which helps it to acquire and maintain the loyalty of its customers. The strategy includes offering lower financing, offering better investment services, and higher rates (Kawai et al., 2012). The company also carry out business integration such as merger and acquisition to expand its operation size so that it can survive the competition in the industry.    
Bargaining Power of SuppliersThe primary resource for firms in the Banking industry is capital. The major suppliers of capital to banking firms are majorly four, that is; Mortgages and loans, customer deposits, Mortgage-baked securities, and loans from other financial institutions (Menon, 2013). DBS Bank is appropriately utilizing the four supplier hence necessary resources to carry out their services. The bargaining power of suppliers, however, ranges from medium to high since there ae more banking firms in the industry.   
Bargaining Power of BuyersThe major factor affecting the power of buyers in banking industry is the higher switching cost. Most customers have a specific banks which they trust with their banking needs, mortgage, checking, and savings. Switching for another bank by such kind of customers might be very costly (Kawai et al., 2012). DBS Bank has taken this advantage to regulate the bargaining power of its customers.
Threat of New EntrantsBanking industry is experiencing extremely high threats of entry. It is estimated that the over 300 new banks open each year. This is despite the barrier to entry caused by different factors such as high cost of opening and many government laws and regulation. Asia, especially, Singapore is one of the regions which experiencing such a threat. The currently existing firms, led by DBS Bank, uses business integration such as merger and acquisition as a strategic measure to control the threat. DBS Bank acquires small Banking firms so as to turn their existence in the industry its advantage.  
Threat of Substitute ProductsThe threat of substitution for banking industry are from no-financial competitors such as fixed income securities, insurance, and mutual funds. There are is a very limited threats of substitution for deposits and withdrawal services for the firms in the industry. Payment method substitute is also a threat to the banks including DBS Bank. For example, Large electronic companies, Car companies, and Jewelers tends to offer higher purchase payment for high valued items services which requires a lower interest rates compared to Bank rates. This discouraging taking loans from banks.
Strategic Recommendations for DBS
DBS should explore more emerging marketsDBS Bank is currently considered the largest and the best Banking institution in Singapore and Southeast Asia. This implies that the company is well positioned in the Banking industry of these regions (Kozak et al., 2009). However, the company should continue extending its operation beyond the Singapore and Southeast Asia boundaries. There are other emerging markets such as China and Japan which has a rapidly growing Banking industry, the company can increase its presence in these regions by locating more of its branches in these areas (Kozak et al., 2009).  China, for Example, has the largest population among the countries in the entire world. The company has a greatly improving economy characterized by improving living standards. This region, therefore, proves a better environment for a banking institution such as DBS Bank (Kozak et al., 2009).
 DBS Bank Should take part in more business integrationsDBS Bank is known for its active involvement in business integrations especially acquisitions and merger. The company ties to acquire smaller companies in the industry so as to increase its size and revenue (Ernst et al., 1994). The company should increase its involvement in such integrations. Integration with smaller institution in the industry can help the company to easily find its way in other emerging market (Ernst et al., 1994). For example, if the company acquires or merge with smaller institutions in china, it can easily penetrate into the country’s Banking industry (Ernst et al., 1994). This can help DBS Bank to expand its operation to regions which are more appropriate for banking industry.  
DBS Bank should diversify its products and servicesDiversified products and offerings is one of the strengths of DBS Bank which has made it to acquire the best position in the Singapore and Southeast Asia banking industry (Gurusamy, 2009). However, this is a good strategy which the company should put more effort in so as to encourage its continuous growth. Offering diverse Products and offering can enable the company to meet the diverse test, fashion, and preference of various consumers (Gurusamy, 2009). This can enable the company to improve its sale hence its revenues.
DBS Bank should legally acquire employees from the neighboring regions with cheap pool of employees.Singapore has shortage of labor which has resulted into high cost of labor (Jeffreys et al., 2009). Some of its neighboring countries such as china, however, has a pool of cheap labor. The company can acquire labor from such regions in order to facilitate more production and reduce the cost of production. This can help the company to improve its profits hence revenue.
ConclusionDBS Bank has achieved a lot since it was formed. This achievements are as a result of proper management, which has built a good relationship between the company and its stakeholders, as well as good strategic management which has enabled the company to acquire and protect a better position in the banking industry in Singapore and Southeast Asia. However, due to rapidly changing business environment in the entire world, the company needs to adjust its developmental strategies so as to better and maintain its position in the industry. The above strategies can be employed by the company to enable it to improve its operations and its relationship with the stakeholders.