PEST and Porter’s Five Forces Analysis of AskariBank

PEST Analysis

Political AnalysisAskari 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 AnalysisThe 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 AnalysisThere 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 AnalysisThe 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 Regulator4. 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 frequentlyCorporate 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.