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COMM 491 Final: Strategic Analysis

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University of British Columbia
COMM 491
Adam Pancratz

Robert Lim 47884101 Sec 202 SHOULD COAST CAPITAL SAVINGS PURSUE NATIONAL EXPANSION? Coast Capital Savings (CC) began British Columbia as a credit union in 1940. As a nonprofit credit union, CC is accountable only to its members. CCs main objective is to provide its members with high quality financial services at the lowest possible cost. Now in light of the Canadian Jobs and Economic Growth Act and following almost 80 years of success, CC seeks to explore the option of national expansion. While CC has a strong foothold within the BC credit union industry, it needs to examine the broader Canadian credit union industry to determine whether it can maintain its core objectives while pursuing national expansion. The Canadian Credit Union Industry The Canadian Credit Union Industry is highly concentrated with its largest four competitors making up over 67 of industry revenue. Amongst these key players, Desjardins is poised as a clear market leader holding 58.6 market. The remaining market share is highly fragmented and divided amongst a large number of smaller credit unions including Servus Credit Union, Vancity and CC, each holding 3.1, 2.9 and 2.5 1 market share respectively. To gain further insight, an industry analysis built upon the Porters Five Forces Framework should be employed. Porters Five Forces Threat of New Entrants: LOW The Canadian credit union industry has a moderate level of barriers to entry for new entrants. New credit unions must seek approval from their provincial governments and have significant capital to launch new branches and ABMs. Looking to the future, the Jobs and Economic Growth Act will allow CC along with other credit unions to expand outside of their home provinces. Expansion is predicted to occur primarily from the acquisitions smaller credit unions . Despite only moderate barriers to entry, the predicted increase in concentration within an already highly concentration market should deter entrants from entering the industry. Consequently, the threat of new entrants within the industry should be relatively low. Rivalry between competitors: MODERATE Credit unions provide homogenous services that are easily duplicated by competitors. However credit unions generally service only specific local areas and are not accessible outside those areas. Thus consumers seeking to switch to an out of province credit union will experience high switching costs. Consumers living in an area can only access specific credit unions. Thus as a result of geographic limitations factors, rivalry between competitors is at a moderate level. As CC looks to national expansion, it must evaluate whether any other major credit union is also looking to do the same. The only other credit union that has expressed interest in expanding across provincial borders is 1 DCosta Viraj (2016), IBISWorld Industry Report 52213CA Credit Unions in Canada, Retrieved February 12, 2017 from IBISWorld database.
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