Introduction
The industries in conjunction with its subsidiaries function as voice and as an electronic interdealer broker. Its goal is to provide both the post trade risk and the information services. It engages in provision of diverse goods and services as well as being involved in offering post trade services and the shipping services. The information that is released by the industry encompasses numerous things that range from information that is relevant in securing goods and services offered by the industry all the way through to related educations services to the experts in the financial markets. Focusing on the Industrial analysis and the diverse ways that the company has embraced that have led it into flourishing into the market , this study is also not limited to examine on the methodologies that the Company has implemented and diffused within it is operations in order for it to remain strong in the global market. Therefore, the study employs Porter’s five forces theory and PEST model, which both exposes the challenges faced by the Company and the way forward to fighting over the challenges. Major challenges entails the way the Company is organized and managed second main involves the lack of framework of the global rules.
Industry overview
ICAP (IAP-LN) is an interdealer brokerage company that deals in voice and electronic devices and systems. The Company also provides post trade services. ICAP (IAP-LN) company carries out its operation in the wholesale market strategy by providing interest rates, credits, offers diverse products, FX. Moreover, the company also appears as an emerging market in equities and equity derivatives. The Company has network coverage of more or less of 50 countries in the entire global world. It has thrived to distribute its business operations in nearly 50 locations in 32 countries in an international level. It has also managed in controlling its business operation through three main regions; Europe, Middle East and Africa (EMEA) via USA and Asia Pacific. For efficient and effective management, the Company has sort to organize its business operations into three major divisions; The Voice Broking, Electronic Broking and the third one is the information. The voice brokers undertake an imperative role in diverse markets through which the ICAP is very dynamic (Brown & Osborne, 2005, Pg.2621).
The brokers under this bracket mostly operate in a market that experiences less liquidity, and they therefore, help to equate both the buyers and sellers thus assisting in discovering price. On the other hand, Electronic broking is the ICAP network of which the podiums are for spot X and Broker Tec for the rigid income products. The connectivity is able to reach out to approximately 7,400 work stations and 1,500 algorithmic trading systems globally. ICAP Company generates its post trade services via the subsidiaries. The third division; Information, ICAP Company disseminates international market information and the research experts in the global fiscal markets. The type of date that is entailed in the information provided by the company includes but not limited to; real-time data and market historical data. All this form of data emanates from the electronic broking and the post-trade podiums. The company has been named to have potential as it plays an imperative in most of the emerging and global market.
Porters Five Forces
The model of untainted competition gives an implication that the risk adjusted rates of return should be invariable over the firms and the industries. However, diverse researches have asserted that various industries are able to withhold diverse levels of productivity; a piece of this variance is covered by this industrial structure. Michael porter presented a framework that models an industry as being challenged by five forces. Any company seeking to develop a structure over its rival firms is not restricted to use porter’s model in comprehending the context under which the company operates. The five forces under this model entail; the rivalry, the buyer power, supplier power, threat of new entrants and entry barriers and threat of the substitutes.
In an economic model, unhealthy competition within the rival firms compels profits to zero. In order for firms to overcome and not reach to search an extent, they strive to achieve a competitive advantage over their rivals. Diverse factors intensify competition among firms, but none of these has been able to shake off ICAP (IAP-LN) since this company enjoys oligopoly market structure. Threat of substitutes is the second model that endangers the success of the firm in the market. The elasticity of the product is affected is affected by the substitutes of the produced good, and as such when more substitutes are brought to the market, the demand of the product is said to be elastic. This is due to other alternatives. Only those companies enjoying controlling power over other firms are able to come out success, for instance, ICAP Company has embraced a larger market segment in the global market, an aspect that has played a great role in the company fighting off its rivals. Being in the market for quite a long period of time, has helped ICAP company attain loyal customers. The buyer power over the company has been maintained for a long period of time, a porter’s model that has been an added advantage o the company in shaking off its rivals (Tarn, J, 2007, Pg.345-3692).
The Company has also achieved in maintaining its reliable suppliers, an aspect that has driven them to have a controlling power over its competitors. In order to maintain the supplier’s power, a company is required to always and ever amend the existing relationship and this is by responding to the suppliers without delay and vice versa to the suppliers. Lastly, threat of new entrants and entry barriers is the fifth porter’s model that determines the existence of a firm in the market. Apart from the incumbent rivals that pose danger in an industry, the likelihood of new Companies in the industry may also influence competition. Theoretically, if a firm is capable of entering into the market, then it’s neither limited to exit the market. The returns earned here should be nominal, but in most case this is never achieved by most of the firms, those holding almost all the market share, implements some features that inhibits high profit returns and also inhibits any rivals from incoming. This are the barriers to entry and ICAP firm having the largest share in the market has been able to set off its rivals.
PEST Analysis
PEST analysis is a scrutiny of the external macro-environment factors that affects almost all the firms. P.E.S.T is an ellipsis for the Political, Economic, Social and the Technological factors that influence the operations within a firm. In most cases the said external factors are past a firms control and are extensively presented as threats to a firm. However, if some adjustments are performed in the environment then the “pest” can be overcome. The following outlines some of the factors under the PEST analysis.
Economic Analysis ; Exchange rate and system, rate of interest, inflation, Gross Domestic Rate, rate of unemployment, money power from financial markets
Social Analysis; demographic structure, cultural structure, entrepreneurial aspect, and many more.
Technological Analysis; modern technological advances, impact of technology on the products produced, rate at which technology is diffused, effect on the overall chain structure.
As indicated on each analytical factor, the macro-environmental factors are numerous and the ones indicated are just but a few of them. In Practical terms, it is a firm’s duty and responsibility to identify and trail those factors that manipulate its industry. Even though as mentioned, overcoming these factors may prove difficult, a firm may decide to diversify its planning techniques in order to deal with such qualms (Tarn, J, 2007, Pg.345-3693).
On Economic analysis, which I find to be the factor that mostly affects most of the company’s operations PEST analysis, emerging markets from Asia and South America has to some extent been affected by the eurozone economic problem. On the same note, they remain stagnant due to economic instability in China which is propagated by a rise in inflation. This has even caused other emerging and competitive markets like the Central Bank to evade making momentous interest rates treks, in fear of experiencing capital inflow and a rise in stock currency which ends up in raising the inflation. As the chart indicates, the dark parts stands for higher inflation and this are only located in regions that are experiencing a rising economy (Tarn, J, 2007, Pg.345-3694).
Competitors
The extent upon which a number of firms can evade from stealthy competition from other firms depends on whether the firms are related, in terms of the products they offer, the costs of their products, the objectives and lastly the strategies they implement in their operation. The severe competition that ICAP Company faces affects its market share in the global market and this is partly due to the fact that its rival competitors have large shares in the market. Even though ICAP enjoys an oligopoly structure, its key challenge is the rival competitors that have great potential even to overcome ICAP Company. If we narrow down the comparisons of the four ICAP rivals by relating its operating profit or the revenues earned during the second quarters of year 2011, then we ought to come up with the following results;
Tullet Prebon (UK)
This firm offers the similar goods and services as the ICAP Company. As a highbred brokerage firm, it has been able to enhance its services by offering real time data and commodity prices. From the reported revenue from Tullet Prebon Company during the first four months of the year, Revenue the year 2011, the revenue was 3% down from the same period during the previous which was computed to read, £304m. The management reached to a conclusion that the financial statements during the two periods stood unsettled (Adcock & Sullivan, 2002, Pg.345-3505).
BGC partner (US)
It’s one of the leading international brokerage firm chiefly offering services to the wholesale financial market. For its second quarter during the year 2011, revenues stood at $364.8 million compared to $336.3 million during the previous year. This is an indication that the company performed better as compared to Tullet Prebon.
GFI Group (US)
In the second quarter of 2011, the operating profit read $191.0 million contrasted with $194.2 million in the second quarter of the previous year. On regional basis, the brokerage revenues in the second quarter was reported to have increased by approximately 10.0% in Asia-Pacific and 4.3% in USA, consequently decreasing by 8.2% in Europe , the Middle East and Africa, in contrast to the second quarter of the previous year( 2010). The figures presented indicate that of the two firms GFI Group (US) performance was at the lower end (Smith & Hargroves, 2005, Pg.525-5276).
Tradition (Switzerland)
During the second quarter of the year 2011, the Swiss Post International reported an increase in sales in the company, which read at EUR 3 million compared to the year 2010, where the company generated a total of EUR 303 million. Nevertheless, we can conclude that the four firms have had a competitive environment over the past two years but none has yet overpowered ICAP (Fleisher & Bensoussan, 2008, Pg. 287).
Industry forecast
According to the reports released in regard to the welfare of the Industry, the industry confirmed that it was satisfied with the present range of analysis that forecast about ICAP’s profits that was determined. It is expected that by the end the year, the Industry should post a pretax profit that should range from GBP366 million to GBP402 million. In future, the Industry anticipates that there would be a raise in trading as the financial institutions should diverge the inflation and the interest rates (McBrewster & Vandome, 2011, Pg, 123-1258).
Conclusion
The inter-dealer brokerage industry has been featured by intense competition from well founded and established firms, which includes , Tullet Prebon (UK), BGC partner (US), GFI Group(US), Tradition(Switzerland) among others. The establishment of the firms has emanated from diverse factors, that includes, anxiety to lower brokerage commissions, a demand for expensive technological abilities; a need to equalize on the product costs and regulatory costs and above all pressure from the clients demanding to get information concerning correlated fiscal products. Even though the firms are striving to reach at such a consensus, other small firms are emerging which makes the competing firms to enhance their competition. The completion is further propagated by the challenges that industry faces, which may be categorized under Porters Five models and PEST analysis. Failure to fight off the challenges inhibits the firm from continuity in the global market. Such an aspect is the one that has led to ICAP Company acquire the largest share capital in the global market.
Bibliography
Brown,K, Osborne, S, 2005, Managing change and innovation in public service organizations
Volume 1 of Routledge masters in public management series, Chicago: Routledge, Pg.262.
McBrewster, J, Vandome, A, Miller, F, 2011, Pest Analysis, Chicago: House Ltd., 2011
Chapaman, R, 2006, Simple tools and techniques of enterprise risk management
Volume 327 of Wiley finance series, California: John Wiley and Sons.
Fleisher, C, Bensoussan, B, 2008, Analysis without paralysis: 10 tools to make better strategic decisions, Illinois, Chicago: FT Press, Pg.28
Smith, M, Hargroves, K, 2005, the natural advantage of nations: business opportunities, innovation, and governance in the 21st century, Earthscan, Pg.527 pages
Jones, G, Hill, C, 2009, Strategic Management Theory: An Integrated Approach, 9th Ed. Chicago: Cengage Learning, Pg.524.
Adcock, D, Sullivan, M, 2002, Retail marketing, Chicago: Cengage Learning EMEA, Pg.350.
Tarn, J, 2007, Enterprise systems education in the 21st century, Idea Group Inc (IGI), Pg, 369.
Anderson, A, 1996, Small store survival: success strategies for retailers
Volume 38 of National Retail Federation series, Chicago: John Wiley and Sons.
Halper, E,1991, Shopping center and store leases, Volume 2 Shopping Center and Store
Leases, Emanuel B,1991, Halper Real estate series, Chicago: Law Journal Press.
Mazze, E, Michman, 2001, Specialty retailers: marketing triumphs and blunders, California: Greenwood Publishing Group, 2001
"The Truth about Frivolous Tax Arguments", Internal Revenue Service, 2006-11-30. Retrieved from, http://www.irs.gov/taxpros/article/0,,id=159932,00.html. Accessed on 2008-03-04.
Sussman, Bernard J, 1999-08-29, "Idiot Legal Arguments". Anti Defamation League. http://www.adl.org/mwd/suss1.asp. Retrieved on 2008-03-04.
Evans, Dan, "Tax Protester FAQ". Retrieved from, http://evans-legal.com/dan/tpfaq.html. Accessed on 2008-03-04.
Christopher S. Jackson, 1996- 1997, "The Inane Gospel of Tax Protest: Resist Rendering Unto Caesar - Whatever His Demands", 32 Gonzaga Law Review 291-329.
