We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

Porter’s 5 Forces Model & Investment Banking Crisis Essay Sample

essay
The whole doc is available only for registered users OPEN DOC

A limited time offer!

Get a custom sample essay written according to your requirements urgent 3h delivery guaranteed

Order Now

Porter’s 5 Forces Model & Investment Banking Crisis Essay Sample

The ongoing investment banking crisis is hereby being addressed from Porter’s Five Model perspective. The five forces have somehow contributed to the current crisis. The open entry and exit from the competitive financial industry has continued to pressure existing firms to improve quality of services and products supplied to the market. This resulted to investment banks making serious blunders in their investments, especially in the mortgage sector. The rivalry from existing competitors had been developing products that attract each other’s clientele. The availability of many products and investment banks to choose from had given consumes more power over these companies. Problems in the investment banks resulted from the ongoing global credit crunch (Doran, 2007). The declining value of company shares resulted to companies finding themselves with low capital to continue operating; it is due to this reason that companies such as Lehman Brothers and Merrill Lynch filed for bankruptcy.

The remaining investment banks had to convert from their stand alone model as a measure of surviving the crisis. Like their counterparts in the larger financial industry, investment banks had been involved in reckless lending to mortgage consumers without adequate security; they relied on the then ever rising real estate prices as guarantee that money would be paid back. This is a mistake that will serve as a lasting lesson for the global financial industry. Given the grave impact of the current crisis on the American economy, the US government has provided a US $700 Billion to buy off the mortgage debts from the troubled institutions. The government has also supported moves of selling the affected firms to well capitalized banks such as Bank of America, Citi and JP Morgan Chase. The most noble idea has been converting investment banks (specifically Goldman Sachs and JP Morgan) to become deposit taking institutions, which would provide them with access to more stable source of capital (The Economist, 2008).

References

Doran J. (2007). Credit Crunch Hits Investment Banks. Retrieved September 26, 2008,

from, http://www.guardian.co.uk/business/2007/sep/09/money4

The Economist (2008). The Investment Bank. Retrieved September 26, 2008, from,

http://www.economist.com/finance/displayStory.cfm?source=hptextfeature&story_id=12305537

We can write a custom essay

According to Your Specific Requirements

Order an essay
Get Access To The Full Essay
icon
300+
Materials Daily
icon
100,000+ Subjects
2000+ Topics
icon
Free Plagiarism
Checker
icon
All Materials
are Cataloged Well

Sorry, but copying text is forbidden on this website. If you need this or any other sample, we can send it to you via email.

By clicking "SEND", you agree to our terms of service and privacy policy. We'll occasionally send you account related and promo emails.
Sorry, but only registered users have full access

How about getting this access
immediately?

Become a member

Your Answer Is Very Helpful For Us
Thank You A Lot!

logo

Emma Taylor

online

Hi there!
Would you like to get such a paper?
How about getting a customized one?

Can't find What you were Looking for?

Get access to our huge, continuously updated knowledge base

The next update will be in:
14 : 59 : 59
Become a Member