Ally Financial Inc.: Applying Michael Porter's Five Forces Model

Porter’s Five Forces The Five Forces model developed by Michael Porter is designed to help managers and key employees understand how a firm can position itself to secure and maintain a competitive advantage within their given industry, and to realize the profit potential of such positioning. The model broadened the perspective of competitors and incorporates five influential factors, including new entrants, suppliers, buyers, substitutes, and the rivalry among competitors. These five factors heavily influence the profit potential of an industry, and is dependent upon how the forces leverage with each other. Ally Financial Inc. is a financial services company that was founded in 1919 and went public via an initial public stock offering in 2014 (Ally Financial Inc., 2017). Ally Financial Inc. offers online banking, vehicle financing, investing and wealth management services as well as commercial financing. Ally Bank is the online banking subsidiary of the company, offering checking, savings and money market accounts as well as certificates of deposit, cash rewards credit cards and consumer home loans. Ally Bank has secured over $71 billion in customer deposits (Ally Financial Inc., 2017) and will be the focus of this analysis. Michael Porter’s model uses five common forces to …show more content…
With the other four forces all applying pressure on this force, there is a fierce rivalry among the players in the online banking industry. There is also a high volume of online advertising for this industry, focused on the younger, social media driven generation, which contributes to the strong competition. Therefore, online banks must focus on how they promote their products and developing relationships with their customers. With non-price competition being a leading influence, costs can increase to further reduce