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The Banking Industry of Tanzania

Essay by   •  January 25, 2012  •  Essay  •  295 Words (2 Pages)  •  1,581 Views

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The banking industry of Tanzania has been growing at a high speed for the last decade. Out of 22 banks, 19 of them have been licensed within a decade. These are good news to

the customers. On the other hand this has increased a tremendous competition within the industry. The bargaining power of the customers is high and also barriers to entry are gentle hence allowing more entrants to get to the industry. Finally the Porter's Five Forces Frameworks reveals that this industry is of TWO starts. This implies that two (Bargaining Power of Suppliers and Threat of substitutes) forces are favorable to those who are already full-fledged banks. Three forces are unfavorable. It is therefore urged from this analysis that on average the industry is not attractive. This implies that for the bank to survive profitably in the industry, it needs to choose a strategy, which can lead to a possibility of charging premium price for some products (Kotler, 1991). Since customers have a high bargaining power, it is imperative for the banks to make sure that they have a customer retention strategy in place. In this industry therefore, it is about survival of the fittest. There is no room for losers but winners only. If in the future the Tanzanian Government implements the condition of the increase of the required initial capital, e.g. from 1 billion to 5 billion, this will have a direct impact on the 'threat of new entrants'. This force might change and become favorable to the industry for those who are already within the industry. It should be borne in mind that these forces are not and will never be static. Therefore, when they change in the future, there will be a shift on the attractiveness of the industry.

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