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Bargaing Power of Suppliers and Customers

In: Business and Management

Submitted By manjulstha74
Words 890
Pages 4
Bargaining Powers of the Suppliers:
The suppliers of the bank are basically the investors in the bank. Those suppliers of the bank are i. Promoters:
They are the pre-investor of the business house. They were the initial investors of the bank. Initially sunrise bank was a private limited bank, during that time promoters had very high bargaining power. In the past it was experienced that the bank had to work in accordance to the promoters. After the bank was open to the general public, the bargaining power of the promoters has diminished. Unlike in the past any actions taken by the promoters are now answerable to the general public. So the few major promoters themselves cannot take decision. So decisions should be taken in consideration of the equity owner of the bank.

ii. Shareholders:
They are the equity owner of the business. It was in recent times that the bank had opened its ownership to the general public. It was experienced that sunrise bank had the biggest share ratio in terms of capital. At present there are 80,000 shareholders of the bank. It was after the establishment of the bank that it had opened its share to the general public. Now, as the share ratio of sunrise bank is highest compared to other banks, the bargaining power of the shareholder can be taken high. Any decision taken should be approved by shareholders; in this context the bargaining power of the shareholder can be high. There is a provision that the shareholders nominate 2 people as their representative in the Board of Directives. In the BOD those 2 people represent the decision of the general public. Any suggestion or decision cannot be directly taken by the shareholders; those decisions need to be evaluated by the higher authority such as the CEO, promoters, and many more. In this regard the shareholders do not possess high bargaining authority.

iii. General Suppliers
Like in any business there are requirements of certain good in the organization for its functioning. This includes the supply of things such as stationary to supply of furniture, supply of papers, supply of computers, and many others. In these cases, bank chooses the supplier through bidding process. The bank chooses that supplier which gives services at a low price having high quality. So in this regard the suppliers do not have bargaining power.

iv. Depositor:
They are basically the prime supplier of the basic raw material of the bank. A bank has to function within the periphery of the deposit. It is the depositors’ fund that the bank mobilizes in providing loan. At present we can see that there is stagnant money market. People prefer to keep money with themselves rather than keeping it in the bank. Central Bank of Nepal has put forward a new policy that any depositor who deposits amount greater than Rs 10,00,000.00 will have to show the source of the fund. Due to which there is the problem of liquidation crisis in the nation.
Sunrise bank is providing attractive interest to those who deposit high sum of money. Higher the deposit amount higher will be the amount of interest the depositor will be getting. In this regard as the fund for the bank is relatively low the bargaining power of the depositor is high. It can be seen that the bank is providing eye-catching schemes to attract the customer in depositing money in the bank.

Bargaining Power of Customers: They are basically the people who take the service of the financial institution. The prime customer of the bank is the loan-takers. In the past, banks had adequate fund with them, so the bargaining power of the customers was very high. At present there is deficiency of funds, sue to which there is very less alternative for the loan takers. There is relatively less fund for the loan-seeker, so the loan taker have to accept what the bank provides them with. So the bargaining power of the loan seeker has diminished. Previously there were greater amount of funds available for the loan-seekers. As the budget for the loan were very high but the amount that people actually utilized were less. So the loan-taker had greater influence over the bank. The loan seeker had greater power, so they had high bargaining power. But now, as the funds have decreased due to decrease in deposits, there is relatively less budget for the loan-seeker and there is increase in the people seeking for loan. So the bargaining power of the customer is seen to have decreased.

Conclusion Every business house is affected by PEST (Political, Economical, Social and Technological) aspect of that country. A business cannot work properly without the harmonious functioning of all the four aspects. So in a bank as well there is greater influence of all the PEST factors. Failure in proper execution of any of the aspect, the bank will not be able to operate. It is not only a single external factor that influences the operation of the bank rather it is execution of all the factors that influences functioning of the bank. The performance of a bank could be evaluated by its response to Porters Five Force Model. By evaluating Porters Five Factors we can understand the competitive environment of the business.

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