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Business Partners, LLC Term Paper

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Updated: May 27th, 2020


Strategic management comprises a critical component in an organization’s quest to achieve business excellence. Thus, it is imperative for organizational managers to consider the environment in their strategic management context.

According to Faulkner and Campbell, the strategic environment comprises diverse environments, viz. the firm, the competitive environment, business unit environment, and the industry environment (232). To exploit the business environment successfully, it is imperative for organizational managers to undertake a comprehensive environmental analysis.

Faulkner and Campbell further affirm that it is paramount for organizational managers to develop an economic perspective of the business strategy by adopting different mediums (237). One of the models that an organization can adopt is the Structure, Conduct Performance [SCP] model. Using the SCP model enables organizational managers to evaluate the technical and economic conditions, which constitute the industry structure.

Faulkner and Campbell further corroborate, “the industry structure is characterized by factors such as the numbers of buyers and sellers, the concentration of the industry, level of product differentiation, cost structures, and the degree of vertical integration and barriers to entry” (237).

The industry structure has a significant impact on a firm’s behavior such as its determination of the pricing, product, distribution and promotion strategies, research, and innovation amongst other factors that contribute to the overall industry performance. The Organization for Economic Cooperation and Development (OECD) asserts, “Industry level analysis sheds further light onto issues that might have been ignored by other macro-level analysis models” (11).

The industry structure influences an organization’s performance. Furthermore, it provides organization’s managers with an insight into the process of formulating strategies. To attain long-term competitiveness, it is essential for organizations to focus on increasing entry barriers, overcoming competition, and attaining a high competitive advantage (Porter 79).

Business Partners, LLC is a credit union servicing organization that was established in 1995 under the name ‘Strategic Partner’. The firm operates in the US financial services industry under the tenure of 16 credit unions. However, the main principle owners include Public Service Credit Union [PSCU], Great Lakes Credit Union [GLCU], and Farmers Insurance Group Federal Credit Union [FIGFCU].

The CUSO’s main offices are located at Chatsworth, California (Herter par.2). The firm’s operations mainly entail the provision of underwriting services, loan participation, loan origination, quality control, and servicing (Business Partners par. 1). The firm is focused on attaining long-term success in the US CUSO industry.

However, to achieve this goal, the firm must continuously evaluate the industry structure to formulate effective business strategies and policies. This paper presents an application of industry –level analysis to Business Partners CUSO using the Porter’s five forces.

Company Profile

Since its inception, the firm has succeeded in enhancing its operational efficiency and profitability. The firm has gained remarkable market success over the years because of increased recognition on the contribution of credit unions to the country’s economic growth.

The firm’s partnership with credit unions has remarkably improved its ability to offer affordable and high quality business services. Through its operation, Business Partners has been able promote the establishment of an effective financial infrastructure for brokers and lenders, hence fostering the growth of a comprehensive loan portfolio (Business Partners par. 2).

Therefore, the firm has fostered the provision of credit financial services to its members who might not have the capacity to receive financial services from conventional financial institutions. Business Partners, LLC offers loan services to clients, who are mainly comprised of institutional customers.

Customers have to secure the loan using income property such as retail, industrial, and special purpose property. The firm mainly offers loans within the range of $750,000 and $15,000,000. It ranks amongst the largest CUSO members in the United States. Currently, BP serves over 150 credit unions in the US. The firm focuses on providing confidence to their clients with reference to lending needs (CU Insight par.3).

Over the years, the Business Partners CUSO has developed optimal competitive advantage in its service delivery process. Thus, the firm has improved its capacity in assisting its clients to enhance their income, diversify their loan portfolio, and to expand their asset base.

Furthermore, the firm assists its consumers in gaining a high competitive advantage by providing them with optimal market expertise and intelligence in addition to offering client diverse lending support services (Business Partners par. 2).

In an effort to cope with the changing business environment, Business Partners CUSO is continuously implementing changes in its strategic management practices. The firm has adopted a customer-focused approach by collaborating with credit unions in order to gather market intelligence (Samaad par. 3).

This strategy has considerably improved the firm’s capacity to offer products that are aligned with the credit union’s portfolio needs. Furthermore, the firm recently appointed a new Chief Executive Officer, Pam Easley, who will be charged with the responsibility of optimizing the firm’s underwriting and lending capacity (Samaad par. 3).

Financial Services Industry

The financial services industry in the US constitutes a fundamental component in the US because it fosters the establishment of health demand and supply sides within the industry. Furthermore, it also provides consumers and investors an opportunity to access diverse financial services such as credit finance.

Corporate credit unions are incessantly experiencing a challenging businesses environment that can adversely affect their overall financial position (1). For example, the industry was adversely affected by the recent global financial crisis.

However, the economic recovery that is being experienced in the US has remarkably influenced the growth of the financial services industry as evidenced by the growth in the level of year-on-year borrowing amongst the US households from 1.3% in 2013 to 1.6% in 2014 (Callahan & Associates par.2). Subsequently, the level of year-over-year loan growth has increased by a 10.3% margin.

The figure is double the rate of deposit growth. Moreover, the industry has also experienced a remarkable growth in the size of its membership. The firm had over 100 million members who represented a 3.1% growth from September 2013. Industry asset growth also experienced a growth by a 5.1% margin by the end of September 2014. It is estimated that all CUSO’s in the US hold loans worth over $705 billion.

According to Porter, “understanding the competitive forces and their underlying causes reveals the roots of an industry’s current profitability whilst providing a framework for anticipating and influencing competition and profitability over time” (80). Therefore, developing a comprehensive understanding of the prevailing industry structure is vital in steering an organization towards a strategic position.

The competitive forces vary across industries. As a result, it is imperative for organizations to conduct industry-specific analysis. The most powerful aggressive factor controls a business’ degree of productivity.

Porter’s Five Forces

Sahaf asserts, “The competitive environment is one of the major forces that shape the marketing approach and strategies of firms within an industry” (59). Therefore, it is crucial for organizational leaders to assess the competitive environment to formulate optimal business and corporate level strategies successfully.

Business Partners’ operations are significantly influenced by changes in the external business environment that shape the industry structure as evaluated herein.

Internal Industry Rivalry

Porter affirms that the degree of rivalry within an industry is influenced by diverse elements such as the rate of new product introduction into the market, the effectiveness of the industry players in creating market awareness of their products and services, and the adopted pricing strategies (85). A high degree of industry rivalry significantly reduces the level of profitability.

Porter further affirms that the intensity of competition in an industry can be serious if the number and size of firms in the industry is large (85). Under such situations, the industry players tend to adopt ‘cannibal’ business strategies in their pursuit of a high competitive advantage. Furthermore, most of the industry’s players focus on attaining a high level of market leadership by achieving and exceeding the level of economic performance that prevails within the industry.

Business Partners, LLC operates in an industry that is characterized by intensive competition because of the high profitability potential. Thus, both large and small industry players whose operations are aimed at exploiting the existing economic profit dominate the industry.

Some of the major industry players include Primary Financial Company, LLC, CNBS Incorporation, LLC, CenCorp Business Solutions LLC, CU Business Group LLC, Charlie Mac, LLC, Centennial Lending LLC, and Credit Union Direct Lending amongst others (GOA 67). The large number of firms within the industry has significantly increased the degree of concentration.

The US financial services industry is highly fragmented because of ratification of the Gramm-Leach-Bailey Act in 1999. The Act increased the level of liberalization within the financial services industry. Thus, firms that are established within the industry have the discretion to spread their operations into diverse business lines.

Credit unions in the US are continuously improving their product portfolio in an effort to offer customers a balanced product portfolio (Business Wire par. 3). Subsequently, the firms are able to provide customers with a comprehensive loan portfolio. According to Porter, price competition is a major characteristic in an industry that is characterized by a high degree of rivalry (85).

Thus, a high degree of rivalry is extensively destructive to an organization’s profitability. However, the situation is worsened if firms compete based on price. This situation mainly occurs if the industry players provide closely identical products, which reduce the switching cost amongst the target customers. Competitors engage in intensive ‘price wars’ by reducing the prices of their products in order to develop a strong customer base.

Porter says, “Price cuts are usually easy for competitors to see and match, thus making successive rounds of retaliation likely” (85). Intensive competition based on the product price hinders consumers from paying attention to product features. A study by GOA shows that corporate credit unions have increasingly diversified their product/service portfolio.

Some of the offered services include education and training, check services, ATM card services, e-services, funds management services [financial services], and correspondence services amongst other services. Therefore, the intensity of competition with reference to product differentiation and hence the degree of rivalry has increased remarkably. Furthermore, industry players are adopting aggressive growth strategies such as acquisition.

For example, in 2008, CUSO Development Company, LLC announced its acquisition of Bellwether Community Credit Union of Manchester whose financial base was estimated to be $284 million. Furthermore, the firm acquired Belvoir Federal Credit Union of Woodbridge whose financial base was estimated to be $238 million. The adoption of acquisition strategy has remarkably improved the degree of rivalry (Callahan & Associates par. 4).

Threat of Entry

The attractiveness of an industry increases the threat of entry. According to Porter, entry of new firms into an industry stimulates the industry players’ motivation to gain a high market share in order to sustain their competitive advantage (80). For example, attaining a high market share, for example by focusing on economies of scale improves an organization’s competitive edge.

Furthermore, Porter asserts that new entrants puts pressure on the average cost of operation, product prices and the industry’s commitment towards new investments (80). New entrants also affect an industry’s profitability. A high threat of entry pressurizes the incumbents to adjust their product prices downwards in order to deter competition. Porter emphasizes that the prevailing entry barriers determine the threat of entry into a particular industry (80).

Therefore, an industry that is characterized by low entry barriers is more likely to depict a high rate of entry compared to one that has high entry barriers. The threat of new entrants into the US CUSO industry is high because of its profitability potential. According to Porter, it is essential for a firm to create optimal entry barriers in order to sustain its market position and hence the level of profitability (81).

Barriers of entry can be achieved by focusing on a number of aspects. The first source relates to the supply-side economies of scale, which is achieved if an organization is able to undertake mass production at a relatively low cost per unit. Supply-side economies of scale act as an effective entry barrier because such economies hinder the entry of small firms. To compete with a firm that has integrated this entry barrier, new entrants are usually forced to venture into the industry through a large-scale operation.

Business Partners, LLC has successfully adopted supply-side economies of scale in its operation. The firm has achieved this goal by investing in an extensive distribution network. For example, currently, Business Partners, LLC serves over 150 credit unions in the US (Business Wire par. 1).

Furthermore, admission obstruction can be increased by the level of asset necessity. Joining some industries requires a relatively high financial capital compared to others. The US CUSO industry is characterized by varying financial requirements. Appendix 1 illustrates the financial requirement that a particular CUSO can serve and the number of credit unions that a firm can serve.

According to appendix 1, the financial requirement of a credit union ranges between less than $10 million to over $1 billion (GOA 6). Therefore, small credit unions can easily join the industry in an effort to exploit the industry’s economic profit. However, Business Partners, LLC focuses on limiting the threat of entry. This goal has been achieved by establishing a strong financial base.

For example, the firm can offer loans of between $750,000 and $15,000,000. This achievement increases its competitiveness significantly. Additionally, the firm has developed a strong market reputation, which has improved its competitive advantage as one of the leading credit unions in the US.

Porter asserts that potential new entrants are likely to withdraw their entry decisions if they understand that the incumbents are likely to implement extensive retaliation measures (82). The decision to withdraw the entry decision may be motivated by the fact that the new entrant might not be in a position to exploit, attain, and maximize the industry’s economic profit.

Porter further affirms that an organization’s capacity to establish effective entry barriers is influenced by its resource capacity (82). According to Samaad, Business Partners, LLC’s financial strength has remarkably contributed to its ability to sustain its competitiveness (par.3).

For example, the firm has invested in improving its technology in addition to diversifying its lending services amongst its credit unions to commercial real estates. This move has played a fundamental role in the company’s restructuring efforts (Samaad par. 3).

Threat of Substitutes/ Support from Complements

The attractiveness of an industry is directly influenced by the threat of substitutes. Most industries are characterized by varying degrees of threat of substitute (Gimbert 66). The threat of alternatives is influenced by diverse factors such as the cost of switching to a competing product. According to Porter, a low cost of switching increases the likelihood of switching to a competing product (85).

Numerous firms that cover diverse financial services characterize the US CUSO industry. Therefore, the cost of switching to another financial service provider is relatively high. Some of the services that are offered by CUSO firms vary.

However, the main categories include check services [check loss reduction, teller check, money order settlement, check collection, share draft processing, and travelers check conversion]. They also comprise card services [debit and credit card issuing, ATM card issuing], funds management services [corporate checking accounts, account management, and statements, asset/liability management, derivative hedging, loans/lending, investment advisory, derivative hedging, and money market accounts] (GOA 65).

Moreover, the credit unions also offer miscellaneous financial services such as cash letter credit and securities safekeeping. It is estimated that over 53.9% of all CUSO members operate a checking account. This observation illustrates that CUSO members increasingly perceive their organizations as primary financial institutions (Callahan & Associates par.2).

In the course of its operation, Business Partners, LLC has diversified its operations into underwriting, loan participation, loan origination, and servicing. Therefore, the industry is characterized by the existence of close substitutes, meaning that the rate of changing is relatively insignificant. The available products vary based on price.

In addition to the intense competition within the CUSO industry, the industry also experiences a high threat of substitute from other firms that are established within the consumer finance industry that offers diverse financial services to consumers. Examples of such firms include pawn companies, leasing companies, banks, and credit card companies.

Firms that are established in the industry are also diversifying their operations, hence providing customers with a wide range of close substitutes (Callahan & Associates par. 4). For example, companies in the manufacturing industry such as the General Motors, International Business Machine, Microsoft Incorporation, and Sony Incorporation are increasingly diversifying into the financial services sector.

Consequently, the industry is likely to experience remarkable growth with regard to threat of substitutes. In its quest to achieve an optimal market position, Business Partners, LLC has adopted the focused differentiation strategies. The decision to adopt this strategy has been instigated by the need to ensure that its products are optimally differentiated.

To achieve this goal, Business Partners, LLC has formed a well-experienced credit review committee that comprises Credit Lending Officers of the respective credit unions. The responsibility of the CLO is to ensure that the company’s products such as the loans are specifically designed to meet the lending criterion as stipulated by Business Partners, LLC (Samaad par. 8).

Furthermore, the company has also adopted the concept of outsourcing to improve its expertise on management of credit services. Business Partners’ commitment towards improving the level of expertise in managing financial credit services has considerably improved the firm’s corporate reputation.

For example, the firm ensures that every loan is comprehensively reviewed to ensure that the level of its risk tolerance is aligned with the company’s guidelines. Thus, the firm has been able to differentiate its products successfully by entrenching a high level of confidence with reference to the quality of its financial services such as underwriting (Samaad par. 8).

Power of input suppliers

Porter affirms that suppliers can increase their ability to influence the market by setting high prices (82). Alternatively, Peng says, “suppliers can increase their input power by reducing the quality of their products and services” (41). Suppliers derive their power from four main sources.

First, the number of suppliers in an industry determines the supplier power. Therefore, an industry that is dominated by a relatively small number of suppliers is likely to have a high supplier power. In such situations, the supplier input power arises from the suppliers’ ability to integrate monopolistic tendencies (Peng 41).

Secondly, suppliers can also achieve a high power if they offer unique and differentiated products, meaning that there are no close substitutes.

The third source of supplier power arises if an organization can successfully integrate the concept of forward integration. Suppliers can attain forward integration by adopting direct distribution strategy, for example by establishing distribution stores.

Despite the intense competition in the financial services industry and the degree of industry concentration, the power of input suppliers has remained moderate due to the adoption of forward vertical integration. Nieman and Pretorius define forward vertical integration as a technique in which a firm purchases its customers in an effort to control distribution (112).

The concept of forward integration is mainly adopted by large credit unions. Business Partners, LLC has adopted the concept of forward vertical integration by investing in a comprehensive growth strategy, which involves acquiring other credit unions.

The CUSO partnered with Sierra Point Credit Union in 2004, whose capacity is estimated to be $27 million. The firm expects to sustain this partnership into the long term. Consequently, the CUSO has developed optimal market dominance in South San Francisco. Therefore, the concept of forward integration has significantly enabled the CUSO to attain a high power in supplying credit services because of its financial strength and volume (Samaad par. 3).

Power of Buyers

According to Sahaf, the power of buyers refers to consumers’ ability to influence organizations’ operations, hence meeting their interest (64). Therefore, power of buyers determines the extent to which consumers influence the value that is offered by buyers.

Some of the ways through which the power of buyers is depicted entails the ability to influence product prices and the quality of the offered product. The power of buyers is influenced by diverse factors such as the number of buyers, the extent of backward integration, and the proportion of the incurred costs.

The power of buyers in the financial services industry is relatively low. The low buyer power emanates from the fact that several buyers characterize the industry. The situation reduces buyers’ ability to influence suppliers. Due to the low power of buyers, the relationship between credit unions and their customers is based on a win-win situation.

Therefore, negotiations between credit unions and customers are based on a situation that is intended to benefit both parties. Before offering credit financial services, the credit unions engage in a comprehensive evaluation of the clients’ creditworthiness, which entails analyzing the clients’ ability to repay the loan.

Assessing the degree of creditworthiness is fundamental in determining the risk of default, which can adversely affect an organization’s financial position. In an effort to eliminate the risk of default, Business Partners, LLC has instituted a well-experienced credit review team that is charged with the responsibility of assessing that the advanced loans meet the predetermined loan criterion (Samaad par. 8).

However, the large number of industry players increases the power of buyers. Therefore, consumers can adjust to credit unions depending on the superiority of the offered commodities and services. The low switching cost motivates credit unions to integrate competitive pricing strategies to attract clients.


Understanding the prevailing industry conditions is paramount in the process of formulating business strategies and policies. One of the aspects that should be considered in undertaking industry-level analysis entails the intensity of competition, which can be attained by assessing the industry’s structure.

The above analysis shows that the CUSO industry is characterized by intense competition, which is illustrated by Porter’s five forces. First, the large number of industry players has led to an increment in the degree of concentration and hence rivalry. Firms that are established within the industry vary with reference to their size and financial strength.

Therefore, the industry players can be ranked based on follower, challengers, and leaders. Business Partners, LLC has successfully positioned itself as a market leader as evidenced by its financial capacity and the number of credit unions under its management. The industry players offer closely related products, which reduce the cost of switching amongst customers and hence the degree of rivalry.

The study also highlights that the CUSO industry is characterized by low power of buyers because of the relatively large number of consumers. Subsequently, buyers’ actions cannot influence the credit union’s behavior. Conversely, the power of input suppliers is moderate because of the crucial nature of the financial services that are offered to consumers.

Despite the degree of rivalry within the US financial services industry, the CUSO market segment is characterized by moderate power of input suppliers, which has originated from the increased adoption of forward vertical integration. The leading CUSO companies such as Business Partners, LLC are increasingly implementing the concept of forward integration strategy by acquiring major firms in an effort to control the distribution network.

This strategy has played a fundamental role in enhancing the company’s competitive strength. Furthermore, the concept of forward integration has increased Business Partners’ supplier concentration by improving its distribution network.

The high profitability potential within the CUSO industry has led to a remarkable increment in the threat of entry. Despite the adverse economic effects of the 2007 economic recession, the industry has experienced a significant recovery, which is evidenced by its growth.

Subsequently, the industry is characterized by a high potential of entry by new firms in their quest for economic profit within the industry. However, Business Partners, LLC has succeeded in incorporating entry obstructions in an effort to sustain its prosperity. One of the ways through which this goal has been attained entails investing in a comprehensive distribution network.

For example, the firm serves over 150 credit unions in the US. The move has remarkably improved the company’s supply-side economies of scale. Additionally, the firm has developed a strong financial base, hence increasing its capacity to implement retaliation measures to curb the moves by new entrants.

In addition to the above elements, the industry is also characterized by a high threat of substitutes emanating from the intense competition. In an effort to attain a competitive market position, industry players have extensively invested in product diversification.

Subsequently, most of the credit unions in the US offer closely related products, which reduce the switching cost amongst consumers. Moreover, other financial service companies such as pawn companies, credit card services, and lease companies have diversified their product offering, hence increasing the substitute products.

To improve its long-term competitiveness, it is imperative for Business Partners, LLC to analyze the industry structure continuously. The analysis will provide the firm with critical insight regarding the prevailing industry changes.

Thus, the firm will be in a position to integrate the necessary adjustments to its business strategies and policies. In the future, the organization stands a chance of boasting of increased sales volume. It will also emerge as the global market leader to the extent that other industries will want to emulate its successful business strategies.

Works Cited

Business Partners. About Us, 2014. Web.

Business Wire. Business Partners, LLC names financial services veteran Pamela C. Easley president and chief executive officer, 2014. Web.

Callahan & Associates. Credit unions, 2014. Web.

CU Insight., 2013. Web.

Faulkner, David, and Andrew Campbell. The oxford handbook of strategy; a strategy overview and competitive strategy. Oxford: Oxford University Press, 2006. Print.

GOA. Corporate credit unions competitive environment. New York, NY: National Credit Union Administration, 2004. Print.

Gimbert, Xavier. Think strategically. Basingstoke: Palgrave Macmilan, 2011. Print.

Herter, Mark. . 2013. Web.

Nieman, Gideon, and Marius Pretorius. Managing growth; a guide for entrepreneurship. Cape Town: Juta Academic, 2004. Print.

OECD. Understanding economic growth; a macro level, industry level and firm level perspective. New York, NY: OECD Publishing, 2004. Print.

Peng, Mike. Global strategy. Mason, Ohio: Cengage Learning, 2014. Print.

Porter, Michael. Competitive strategy; techniques for analyzing industries and competitors. Chicago: Simon and Schuster, 2008. Print.

Sahaf, Musadiq. Strategic marketing; making decisions for strategic advantage. New York, NY: PHI Learning, 2008. Print.

Samaad, Michelle. . 2014. Web.

Samaad, Michelle. . 2013. Web.

Samaad, Michelle. , 2013. Web.

Appendix 1

Size of credit union Number of credit unions
Over $1 billion 0-65
$100 million -$1 billion 3-232
$10 million -$100 million 3-359
Less than $10 million 0-553

Source: (GOA 66)

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