HSBC Strategic Management

HSBC Strategic Management

 

1.    Company background and purpose

a.    General background of the company

The HSBC Group is regarded as one of the largest financial and banking corporation in the global market. The Group has around 10,000 offices in 83 nations and territories in Asia-Pacific Refion, Europe, United States of America, the Middle East and Africa and the serves over 130 million customers with assets of US$ 2,354 billion as of December 2007.

The Hong Kong ad Shanghai Banking Corporation Group was established in 1865 to finance the growing trade between China and Europe, and is one of the largest banking and financial services organizations in the world. Its international network comprises over 9,500 offices in 76 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East, and Africa (‘Who is HSBC?’ 2006). Through an international network linked by advanced technology, including a rapidly growing e-commerce capability, HSBC provides a comprehensive range of financial services, including personal financial services, commercial banking corporate, investment banking and markets, private banking, and other activities (‘Who is HSBC?’ 2006).

b.    Clear purposes of the case

            HSBC emphasizes the importance of building shareholders’ value, and believes in the values and talents of its own employees, which are employed and spread all over the world. HSBC wishes to stay ahead in a very competitive global financial market, and by maintaining a great brand name, an established customer base, good and loyal employees, tight control over operating costs and constant adjustment of business strategy to cater to customers’ needs, it maintains its success in its leadership position in Hong Kong’s highly competitive banking industry. With this success, this paper studies the strategic management of HSBC.

 

2.    Industry and general environment

a.    General information on industry environment (Five-forces

The state of competition in an industry depends on five basic competitive forces. With this, Porter’s 5-Forces Model is useful for understanding the context of the industry, in which the firm operates (Porter, 1998). 

Rivalry

In HSBC, this is caused by several factors, such as the presence of a larger number of firms that compete for the same customers and resources; low switching costs for a consumer can switch from one product to another; strategic stakes are high when a company is losing market position; a diversity of rivals with different histories, cultures, and philosophies; and industry shakeout. Similarly, HSBC also faces this factor since they have a lot of competitors in the banking and financial industry.  In order to gain an advantage the company has to do some competitive moves.

Threat of Substitutes

Substitute products refer to products in other industries (Porter, 1998). The threat to HSBC is the emergence of competent rivals that provides the needs of the target market. In accordance to the threat of substitutes in HSBC, HSBC completely manages this factor to attain business success. HSBC, in its commitment to customers in the banking and financial industry, demonstrates value and return on investment.

 

Buyer Power

This refers to the impact that customers have on a producing industry. In HSBC’s customers, buyer power is strong, such that this could provide HSBC’s rivals with a strong and efficient business. In HSBC environment, the buyer power is the impact that customers have on a producing industry.  As there are still only a few banking and financial industry who can compare to what the company has managed to achieve, the bargaining power of buyers is not as great compared to the following epoch, and, coupled with the industry being a key supplying group for the buyers, which in this case, are large companies and several high end individual customers, the bargaining power of buyers have notably not budged.

 

Supplier Power

The power of suppliers over HSBC is also strong, as it also contributes to the decline of the business of the company. Due to the increase of prices in the market, prices of raw materials also increases, thus, give additional costs for the company. In this regard, some of HSBC’s suppliers of banking and financial industry components can possibly control their business operation.

 

Barriers or Threat to Entry

The economies of scale play a significant role in the cost of produce the product and service. Companies in the banking and financial industry have competitive fixed costs and spend relatively large on plant and equipment. Moreover, competitors in the industry are not likely to cut their price to defend their market position. In an industry experiencing fast market growth, patents, proprietary knowledge, and brand reputation are also considered as barriers for companies entering the industry.

 

b.     Any opportunities & threats?

Opportunities

    – Sustainability reporting requirement by government to companies thus increasing opportunity of banking institutions.

           -Growth by increasing market share through mergers and acquisitions within the industry.

            -Develop new products and services which link to changing people’s needs and services

            -Incorporate new technologies in production to stay ahead of the competition

 

Threats

                  The following are the threats of the company:

-Economy – due to Expensive borrowing

-Expansion, Mergers and Acquisitions of HSBC may lead to failure

-Competition – other major companies entering the market could affect their revenue

-Rules and Regulations of different countries

 

3.    Internal activities

a.    What are primary & support activities within the firm?

In HSBC, their strategic management can be analysed through the management program that they implement in the latter part of 2003, which is the Managing for Growth programme. Managing Program is a strategic plan that provides the company with a blueprint for growth and development from 2003 to 2008 (‘Strategy’ 2006). This strategy builds on the company’s strengths and addresses the areas where further improvement is considered both desirable and attainable. HSBC’s core values are integral to its strategy, in communicating them to their clients and other stakeholders comprise an emphasis on long-term, high productivity through teamwork, ethical client relationships, an ambitious and confident sense of excellence, being international in its image, prudence, creativity and customer-oriented marketing HSBC, 2008).

In addition, there are various elements in attaining HSBC objectives, and these involve accelerating the growth rate of revenue, enhancing brand strategy further, developing productivity, and maintaining the industry’s prudent risk management and strong financial advantage.   Developing the skills of their employees is also given emphasis to ensure that all employees understand how they can contribute to the successful achievement of HSBC’s objectives (‘Strategy’ 2006).

 

b.    Any strengths and weaknesses?

Strengths: – ensure corporate responsibility and business ethics therefore customer confidence is high

        -Highly experienced management and staff available in the market

    -Growth by increasing market share through diversification of products that supports sustainable development

  -Able to promote several products and services that meet the needs of the customers

 

Weaknesses

            -Barriers to expansion due to environmental regulations by governments

            -Licensing problems

            -Highly competitive market

            -Raising money from banks rather than shareholders.

 

Banking and financial products and services have become an important industry player by investing in diversified products and services,

 

4.    Competitive Environment

a.    How do the firms compete/take competitive actions/responses?

The company is experiencing different problems with competitors and its standing in the industry is down. But given the proper use of their strategic management they have, the company are able to stay in the competitive market. The company has competitive advantage over banking and financial industries. One of the aspects of strategic management of HSBC is its brand name. The competitors i

The company is known as one of the established baking and financial industry in the global market. People easily recognise the company and the different products and services that they provide. They can easily think about the company when banking and financial matters are mentioned. Another strategic approach of the company is its image with the clients. The company is known as a banking industry that provides excellent service to the clients. This can be proven by the frequency of visit clients do to the company’s branches and other marketing venues.

Moreover, strategic management of the company is its increasing venue of marketing their products and their services. The company is taking steps to ensure that their products and services can reach more people at more locations, hence company engaged in having more branches at different places. The company also made use of the internet and created a website that more people in the world can use to transact with the company. Lastly, a strategic approach of HSBC is the wide range of business venture they are engaging in. The company is currently engaging not only in banking and financial aspects but in other relevant industry

 

5.    Strategic intent and mission/vision

a.    Purposes of the firm

Based on the given case, the strategic intent of HSBC is to become the number one choice of the customers for the banking and financial services needs. The company’ products and services have been made to provide more convenience for customers.

b.    What goals to be achieved?

The goal of the company is to provide quality banking and financial products to their target market while providing values to their employees, management and shareholders. Their goal is to reach more customers all over the globe through their online transactions and website.

c.    Any formal mission/vision statement?

The company’s mission statement is to be one of the globe’s great specialist banking groups that is driven by commitment with their values and philosophies. The company envision to lead in the global market and deliver an excellent client experience based on their outstanding sales, services and solutions. In addition, the company aims on achieving superior, long-term and ethically based return for their shareholders and building highly motivated high performance teams and creating challenging, rewarding and convenient environment for their employees.

6.    Strategy formulation

a.    Ask the following questions:

                                          i.    Business-level strategy

In terms of business-level strategy, it is said that HSBC is keen on expanding their business portfolio to small and medium-sized enterprises which they considered as an essential market segment to HSBC groups.  In addition, their business level strategy is to provide value to internal stakeholders of the company such as employees and shareholders.

                                        ii.    Corporate level strategy

HSBC Holdings complied with the entire applicable code provisions of the host country regulations on their corporate governments. In terms of corporate level strategy, the management see to it that they adhere to their corporate responsibility to the community and that they are able to adhere to their corporate governance policies.

                                       iii.    Cooperative strategy

In terms of cooperative approach, it can be said that the entire management have a good relation with shareholders and their customers. They also cooperate with government institutions to ensure that they always adhere to the needs and demands of their clients.

                                       iv.    Others i.e. acquisition, joint venture etc

To expand their business portfolio, HSBC attempts to acquire various industries in different country. Merging and acquisition to existing industries in a specific nation is the approach use by the company to enter the foreign market. In addition, merging and acquisition enables the company to expand their groups and provide more diversified financial products and services.

 

7.     Strategy implementation

a.    How does the firm implement the chosen strategies?

The firm implements their chosen strategies by using an intensive strategic planning. In addition, the firm also implements their chose strategies through their management team and leaders. Accordingly, the presence effective and efficient leadership in today’s organization imposes a great responsibility to the organization’s team and management networks as leadership implies the overall capacity of the organization’s performance like for instance, in terms of operations and research development.

b.    How effective?

Based on the given analysis, it can be said that the implementation of the business approach of HSBC has been effective because of its strong competitive advantage and position in the marketplace today. The use of strategic planning helps them to monitor their strategic implementation.

c.    Evaluation of action plans/tactics (key actions)

The action plan of the company has been able to lead them in having competitive advantage in the global market.           With this information, the company must continue to find innovative strategic programs and relate effectively to other companies in the global market. The company must efficiently and effectively create a good relationship with their customers and shareholders, to continually operate. HSBC must continually conceptualize and implement strategic management approach to be able to set trends in the banking industry. Aside from developing marketing strategies, the company must focus on building employee and customer relationships, in accordance to strategic marketing concepts, for it is essential to determine and focus on the needs of the customers, as customers are the reason for being alive in the business and marketing industry.

 

8.    Summary

a.    Key current situations

            The current situation of the banking industry can be considered to be impacted by the growing issues in the global market, such as the sub-prime crisis. The global presence of an organisation, in this case, the HSBC Bank, has been due to the strategic management and business approaches of the company. It is important to note that with globalisation and with the current rate of advancement in technology, there is an increasingly bigger chance of getting the entire firm’s marketing message through to the target markets with the utilisation effective strategic management. As discussed, the wise use of a strategic management as well as information technology could either attract or lose existing and potential customers. The strategic marketing and management approach of the firm, therefore, need to be consistent with what was preset as marketing objective of the firm and in an industry as provision where innovations are an edge, this is very vital.

 

b.    Future of the firm

It can be said that the global market provides opportunities for the baking industries to develop relationships with their stakeholders it has been found that the number of competitive moves increased as issues and problems in the global market arise. It becomes more important to manage relationships as competition increases through the use of e-commerce. It can be stated that the most effective strategy for HSBC can use in the future is a collaborative one with their channel partners.  In addition, another future strategy of the company is to use integrated marketing communication to reach more clients in the global market.

 

Reference

David, F.R. (1999). “Strategic Management, Concepts and Cases,” 3rd ed. Prentice-Hall, Inc.

David, F.R. (2001). Strategic Management: Concepts and Cases. 8thed. Prentice Hall, Inc: Upper Saddle River, NJ

Drejer, A. (2002).  Strategic Management and Core Competencies: Theory and     Application. Westport, CT: Quorum Books.

Elkin, P. (1998). Mastering Business Planning and Strategy: The Power of Strategic Thinking.

Knod, E. & Schonberger, R. (2001). Operations Management: Meeting Customers’ Demands. 7th Edition. Boston, MA: McGraw-Hill Irwin.

Neumann, E. & Sumser, R. 2002, Marketing Communications: A Vital Element of Achieving Change. The Public Manager, 31 (4), 9+.

Proctor, T 2000, Strategic Marketing:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case Questions

 

1. What is the firm’s competitive strategy?

            1. In accordance with the case study to the business approach and strategies of HSBC it can be said that the company has been able to continue to grow and expand their business in the global market. It can be said that HSBC has been able to use various strategies which enable them to sustain their competitive position in the global market.  Based on the conducted reviewed in the previous section, it can be said that HSBC strategy includes differentiation approach and innovative approach.

2. The company has been able to have a sustainable focus on their core business values ensuring that their goals, objectives and mission are achieved.  In addition, the company has been able to sustain good relationship with its target market and all other stakeholders and the company focuses itself on satisfying the costumers by providing them quality products and services in the online. The ability of the management to manage their financial resources and limit their expenses to sustain their needs for expansion has also been considered as one of the capabilities that sustain their competitive advantage.

The strategies used by the HSBC include Intensive strategy, which aims to competently position and promote their products and services in the global market. The industry has also utilized the Integration strategy and forward integration in order to promote and closely manipulate where all the HSBC products and services are being sold. To improve financial performance, the company sees to it that they utilise all their resources in a manner that will be beneficial to enhance the performance of the company. 

            3. Based on the given case, it can be said that the two resources and capabilities of HSBC includes their flexibility and innovation strategy.  It can be said that the ability of the company to expand their business is through their ‘flexibility and innovation’ which enable HSBC to counter the risks of erosion and losing of their competitive advantage.  In order to cope with the various influences and effects of market environment changes, and to sustain their competitive advantage, the management of HSBC has been able to improve and expand its organisation so as to conduct business operations and activities on a global scale which include the expansion of HSBC through the online presence of the brand in different parts of the world. Herein, the management of the company has been able to improve their organization structure its organisational structure to achieve their organisational objectives.  In addition, the improved organisational structure is done in order to initiate speedy and flexible measures in managing their internationally diverse employees.

            4. The management of HSBC has also been able to focus on their research and development department and to initiate innovative strategies designed to provide a competitive advantage and edge in the marketplace. As business gravitates towards a global scale, entrepreneurs find themselves faced with the challenge of producing new and better products at reduced cost and market price. Daft (2003) pointed out that in managing a global environment, managers of HSBC must be characterised by the ability to bring about change through innovation and creativity. Further according to Daft, a revolutionised manager sees change, rather than stability, as the nature of things (2003). Innovation as a ground for doing business in the 21st century will be the consistent tugging force that the organisation must either strive to adopt or suffer the consequences of being left behind by competitors. In addition diversification approach is also considered by HSBC to ensure having sustainable competitive advantage. Part of the diversification is to generate new coffee products that would meet the needs of the consumers in various parts of the world

 

2. What is the Strategic intent of the company?

1.         HSBC strategic intent is to provide more options for their clients by partnering with other international and local banking and financial industries. The company also diversified their offerings to different products, services, categories and other physical assets. Furthermore, based on the given case, the company’s strategic intent is to sustain their competitive advantage by compelling what the needs and demands of their target market and expanding their business portfolio in the global market.  The company’s strategic intent is to do their business in a slow but sure manner by becoming innovative in what they are offering for the customers.

2. Another strategic intent of HSBC based in case is its goal to be recognised and respected as a global banking and financial institution and brand and to dominate the global market through their high quality product and service offerings. As discussed in the case study, the strategic management of HSBC have been focusing on how the products would gain interest from their target market and how they can be able to generate sales with their products.  This is HSBC’s stronghold where it continues to yield strong sales revenue by leveraging off its excellent branches in different locations.  strong brand name and excellent reputation among customers.   HSBC has also been continuing to create affiliate websites to expand their business market among various consumers.

3. Another strategic intent is with regards to the achievement of their mission and vision by giving priority and values to their shareholders and customers. Based in the case, HSBC is committed to their mission of being the number one choice of the customers in their banking and financial needs. With custsomers increasingly willing to switch banking companies because of the wide variety of choice available, it is of paramount importance that the company would stick to their strategic intent and used effective approach o promote excellent marketing strategies.

Its importance as possibly a bank interface could also be exploited by the industry. Since the homepage is the first thing that the users saw upon entering the website, it also was the most critical aspect on the site, where the customer should get an idea of what the site is an about and where to go within the site. All the graphic elements noticeable in most all of the reviewed websites apparently serve a purpose–to solidify the direct relationship between the customer and the brand and to make use of the visual attraction vital to clients’ decisions.

 

3. What are the capabilities and strategies of the company?

1. Based on the given case study, one of the capabilities and strategies of the company is the presence of strong as well as effective leadership of the company. It is said that having effective leader implies great responsibility to the management and employees networks as leadership implies the overall capacity and performance of the company.

It can be said that HSBC’s resources and capabilities can be divided in the management of the company specifically their leader, the ability of the management to effectively use strategic management and aligning it with their business process and information technology, their competitive advantage in the online market, and the financial resources that it gains through its successful approaches.

Accordingly, the leader of the company has been able to use appropriate leadership style to solve the issue of the company in dealing with their online clients and consumers.  In addition, it can be said that the transformational leadership approach of their leader as a transformational leader has been able to lead the company. Successful business organizations need vital leadership as the latter serves as a successful vehicle for the organization’s stability and growth within the global market. Based on the given case, HSBC has been able to use four views of leadership which include the transformation view, power, paradigm shift as well as social responsibility view (Proctor, 2000).

2.  According to Kim and Weaver (2000), the administration and management of a particular business organization entails full utilization of the resources of the company in order to lead, direct, and control operations to meet the set objectives.  Based on the given case study, it can be said that HSBC has been able to use strategic approach to sustain their competitive advantage. One of the capabilities HSBC is how the leaders of the company do their business.  Guided by their vision and mission, the leader and management of the industry clearly illustrate integrity in all their actions.  The management has also strong commitment in promoting the company values. In addition, the management of the company has been able to understand the priorities of the business and make every decision in line with the strategic direction by giving consideration to the effect on all aspects of the business and on other stakeholders. 

3. Another sustainable capability of the company is its continuous focus on the importance of both internal and external customers to ensure that these customers remain loyal to them.  Furthermore, the company’s ability to identify and recognise contributors is another factor that sustains the company’s competitive advantages. The ability of the management to diversify and differentiate their business strategy to dominate the global market can also be considered as the major capabilities of the HSBC.

Indeed, making a business successful in a particular setting demands crucial and detailed studies and examination of the factors that will generate the best results that will serve the aims and objectives of the company. In this light, owners of big business organizations operating in a competitive business environment should be in constant look out with its competitors and the overall status and events in the industry. Taking advantage of the opportunities and intensifying the strengths while minimizing the risks and weaknesses of a business firm greatly helps in predicting the success in business enterprise

4. Jayne and Dipboye (2004) indicated that in highly differentiated industries intense competition results to more diverse operation systems and processes because the participation among different sectors within and outside the company is needed to gain more economic advantage. Assets, skills, and capabilities available to a particular business organization are pooled together to come up with better business strategies.

 

Reference

Daft, R. (2003). Management. 6th Ed. Cincinnati, Ohio: Thomson South-Western.

 

Jayne and Dipboye, (2004). Leveraging diversity to improve business performance: research findings and recommendations for organizations. Human Resource Management. v43 i4. 409-424.

 

Porter, M 1998, Competitive Strategy: Techniques for Analysing Industries and Competitors. Free Press.

 

Proctor, T 2000, Strategic Marketing: An Introduction, Routledge, London.

 

Williams, J. R. (1992). How Sustainable Is Your Competitive Advantage? California Management Review, Spring, pp. 29-51.

 

 

 

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