Financial Services Industry in US Porter's Five Forces Strategy Analysis

The financial sector consists of businesses primarily engaged in transactions that involve the creation, liquidation, or change in ownership of financial assets (stocks, bonds, and derivatives), and these services are provided all entities, including households, corporations, not for profit organizations, small businesses etc. These businesses are principally commercial banks, security brokers and dealers, portfolio managers, insurance companies, and exchanges.

The financial sector's share of aggregate income reveals the value that the rest of the economy attaches to these services. These businesses perform functions that are essential to the efficient functioning of the "real economy." They allow those who have savings and other assets to lend them to those who want to borrow capital. In exchange, these lenders accept a combination of risk and expected return. The need to pay a return to lenders provides borrowers with the incentive to use capital productively. The opportunity to earn a return provides lenders with the incentive to save rather than consume.

The U.S. financial markets consist of many separate markets for diverse products offered on a range of trading platforms and exchanges. Among the many products traded are fixed-income securities, equities, foreign exchange and derivatives.

Aruvian Research analyzes The Financial Services Industry in United States in Michael Porter's Five Forces Analysis. It uses concepts developed in Industrial Organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Porter referred to these forces as the microenvironment, to contrast it with the more general term macro-environment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a company to re-assess the marketplace.