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PEST and Porter’s Five Forces Analysis of AskariBank

PEST Analysis

Political Analysis
Askari Bank is operating in one of the world’s most volatile political
environment. On one side there is a very week and unpopular
government and on the other there is war against terror going on.
Since Askari bank is part of Askari Welfare Trust which is run by
Pakistan Army so it has the advantage of not being interfered directly
by the government but political forces impact Askari’s business
through consumers and businesses which are affected directly by
political instability.

There is also a great awareness about some of the global challenges


such as climate changes, poverty, scarcity of resources, and
demographic shifting.

Economic Analysis
The outlook for the Pakistani banking sector remains relatively
downbeat despite the potentially vast consumer market in the country.
Pakistan has several characteristics that make for a favourable banking
sector outlook for instance buoyant demographics, a domestic
economy geared towards private consumption and an extremely
under-banked population. However, we should not expect rapid sector
development over the medium term as these positive factors are
neutralised by an unstable security outlook and a below-potential
growth path for the economy and recent floods who have put a lot of
pressure on the economy.

Social Analysis
There has been a marked increase in the use of credit cards in
Pakistan but the usage is currently limited to educated middle class
only. At the same time accelerated by the spread of internet in the
country people are more inclined to us the net to do banking
transactions specially bill payments and within the bank transactions.
Since Askari bank has the reputation of being a conservative bank so
its consumers are quite loyal and will stay with the bank even under
tough economic situation or in the presence of alternatives.

Technological Analysis
The technology makes it possible to empower the system and establish
a competitive advantage. Pioneering the new ideas, adding the skills
and operational excellence are part of the guiding principle of the
organization. Askari has recently been investing heavily in Information
Technology as a means of competitive advantage against large
Pakistani banks.

Porter’s Five Forces Analysis

Askari is attempting to expand their business and services. Through


the investigation of the competition and entry in these markets, the
sustainability of the bank can be identified. The Porter’s analysis is
used to measure the ability of the firm in performing in the Pakistani
market.

Entry Barriers - High

1. Very high investment required.


2. Many large banks in the market.
3. Strong Regulator
4. High capital reserve requirement.

Rivalry among the Existing Competitors – High (Net interest margin,


ROE – if going down)

1. Very high Rivalry.


2. High operational costs.
3. Public and Micro Finance institutions.
4. Strong regulator.

Bargaining Power of Suppliers – Medium (All supplier of goods and


services)

There is a medium power among the suppliers of the bank who are
definitely the people from whom the banks raise funds. The major
source of funds of Askari comes from the customers or depositors that
are transformed to be their suppliers. In order to attract the larger
funds, the private banks offer high interest rate which is important for
the continuous sustainability of the bank. In addition, the Askari Card is
introduced to attract more clients and increase the volume of funds.
Bargaining Power of the Customers - Stable & Increasing

Retail clients do not demand higher interest rates and do not move
accounts frequently
Corporate clients seek highest return on their deposits and move
accounts.

There is a high power among the people in terms of utilizing the


products such as their cards, loans and other services. The high power
on the customers is gained because of the number of banks operating
in the market that offer similar services. However, Askari is in
advantage because of the e-banking and ATM network.

Threat from Substitutes - Low

1. Highly developed capital market.


2. Mutual Funds, Bonds, on-line trading and investment.