Research Topics: Hong Kong Shanghai Banking Corporation

Hong Kong Shanghai Banking Corporation (HSBC) Marketing Strategy

Hong Kong Shanghai Banking Corporation (HSBC) Strategic Marketing   HSBC Businesses are continuously evolving to respond in every customers needs. To be specific, the Hong Kong Shanghai Banking Corporation (HSBC), one of the best financial institution developed different marketing strategies to maintain competitiveness. Actually, HSBC Holdings, a British financial holding company with origins in Hong Kong and Shanghai, where offices were opened in 1865 under a special charter which allowed Hong Kong rather than London as a headquarter location ( 2000).  (1998) related that the bank remained an eastern force until the 1950s, when overexposure to the crown colony and its textile industry pointed to a need for geographical diversification. HSBC was established 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 ( 2006). HSBC was in intense competition all over Asia with Chase Manhattan which showed interest in a small bank in India and Malaysia. HSBC pre-empted by purchasing the bank in 1959 ( 2000). In the same year another defensive acquisition became necessary, when an investor group tried to buy the British Bank of the Middle East, strip its assets and sell the branches to HSBC, which did the bulk of its Middle East business through the bank (2003). A few years later a banking crisis erupted in Hong Kong. HSBC was not seriously affected but Hang Seng Bank, the colony’s second largest, was about to flounder in a run. Chase offered help but Hang Seng preferred HSBC, because of its local roots, and sold it a majority stake in 1965 ( 2001). These three deals illuminate the difference between corporate strategy and the realities of the marketplace ( 1991). Diversification had taken a beating although it was only in 2000 when acquisitions in Asia became topical again, in a small way. Two of them were part of the private banking drive, PCIB Savings Bank in the Manila area and Taiwan’s leading asset manager China Securities Investment Trust Corp. in 2001, to be followed by an 8 per cent stake in the Bank of Shanghai (2003). HSBC had returned to its roots. Afterwards many more events unfolded including the turnover of Hong Kong to china this prompted HSBC to transfer headquarters to United Kingdom ( 2003). This company has then been developed successfully to become a true global bank, being the largest bank in Hong Kong and the largest foreign bank in China. It 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.  (2004) stated that HSBC occupies a unique position in the Hong Kong banking sphere. Besides being responsible for the bulk of note-issue, HSBC has some other attributes, which are now associated with a ‘central bank’ in where it acts as a banker to the government, although not exclusively. With this consideration, this paper will be discussing the strategic marketing practices of HSBC.     PESTLE (…for continuation)   5 Forces Model (…for continuation)   Marketing Mix (7 Ps) (…for continuation)   Service Quality and Relationship Marketing of HSBC (…for continuation)   Market Segmentation (…for continuation)   Competitiveness (…for continuation)   Synthesis (…for continuation)   References: Credit:ivythesis.typepad.com

Hong Kong Shanghai Banking Corporation (HSBC) Marketing Strategy

Hong Kong Shanghai Banking Corporation (HSBC) Strategic Marketing HSBC Businesses are continuously evolving to respond in every cust...

Hong Kong’s highly competitive banking industry

Chapter 1 Introduction / Purpose 1.1 Background of the Industry Every business Endeavour or venture is constantly faced with financial management problems to which the owner or manager should be able to attend to in order to take the business to success especially during the times of crisis that the global communities are facing. Thus, key financial decisions normally confronts the managers in issues and problems that concerns financial investments they usually provide answer to the problems regarding the assets on which the company of firm needs to put money and how a chosen investment should be financed.             With this consideration, we may say that the recent financial tsunami is one of the problems experienced not only by some firms in the United States but also by the global economy including the banks and other business in Hong Kong.  Basically, the recent financial tsunami of 2008 in Hong Kong is actually related to the concept classified by the general media as a “credit crunch” or “credit crisis” was started last 2007 of July.  The crisis was triggered when most investors loss their confidence in the value of securitized mortgages in the United States and then later it spread out not only in America and Europe but also in Asia.  This development created a liquidity crisis that prompted an extensive inoculation of capital into financial markets by the United States Federal Reserve, European Central Bank and Bank of England ( 2007). For evidence of the emergence of this credit crisis, TED indicator spiked up in July 2007 and remained volatile for a year and again spiked even higher in September 2008  This indicates that the crisis deepened as of September 2008 in which the global stock markets worn-out and go into a period of high volatility, and a significant number of banks, insurance companies and mortgage lenders failed in the following weeks.     Source:   As the nature of financial management becomes more and more complex in today’s business world, finance managers face a wide array of challenges, opportunities and options to enhance the investing and financing activities of the organisation as well as to minimize the inherent risks and circumstances of the financial decisions that will be made. The challenge now for the financial mangers is to explore the options and take advantage of the opportunities while taking caution in managing the business risks partially the credit crunch issue. “Experiences differ and common usage lack precision” (1988) with regard to risk. From this statement, we may say that risk involves both hazards and opportunities to people/organisation who undertake changes and development. People/organisation evaluates result based on their evaluation of the situation based as guided by criteria of gains and losses. Furthermore, risks brought by recent financial tsunami in which there are some groups who may experience losses in exchange to others goals to profit. With this, this paper will be considering the impact of financial tsunami taken place in 2008 on the performance of the “Bank Industry” in Hong Kong in terms of profitability ratio, liquidity ratio, efficiency ratio and ROCE.  Managers of major banks in Hong Kong will be surveyed regarding the impact financial tsunami in 2008 in Hong Kong.  Three major banks will be included in this paper such as Hong Kong and Shanghai Banking Corporation (HSBC), Standard Chartered Bank (Hong Kong) and Citibank (Hong Kong).   1.1.1 Hong Kong and Shanghai Banking Corporation (HSBC) 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 organisations in the world. Its international network comprises of over 10,000 offices in different countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East, and Africa (‘Who is HSBC?’ 2009). 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?’ 2009).             This company has been developed successfully to become a true global bank, being the largest bank in Hong Kong and the largest foreign bank in China. It 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.   1.1.2 Standard Chartered Bank (Hong Kong)[1] Standard Chartered Bank (Hong Kong) Limited is a licensed bank incorporated in Hong Kong. Basically, the Standard Chartered Bank Building is found in Des Voeux Road, Central, Hong Kong which is named after the bank, even though it’s now part of Hang Lung Group. From company’s website: , the bank is currently one of the SAR’s three note-issuing banks. They employ 30,000 people in over 500 offices in more than 50 countries.  The bank is also publicly listed on both the London Stock Exchange and the Stock Exchange of Hong Kong.  As stated in the Website of the Standard Chartered Bank (Hong Kong) Limited Hong Kong, “Well-established in growth markets, the Bank combines deep local knowledge with global capability and aims to be the right partner for its customers. Standard Chartered is trusted across its network for its standard of governance and its commitment to making a difference in the communities in which it operates.”             Based on personal experience, the Standard Chartered Bank (Hong Kong) Limited Bank of Hong Kong offers quality professional service to its customers. The employees are moderately friendly and they welcome customers thoroughly. However, the employees themselves are not quite persuasive as they should be, but nonetheless, services are satisfactory in terms of speed of service delivery and customer orientation. But perhaps, a more persuasive and friendly approach can be possible.   1.1.3 Citibank (Hong Kong) Citibank started their operations in Hong Kong in 1902.  Actually, they are the first foreign bank to offer bank services in the said country. Currently, Citibank (Hong Kong) Limited is a licensed bank incorporated in Hong Kong. And since Citibank is considered as one of the world’s largest financial institution with a strong global network in over 100 countries, Citibank International Personal Banking lets people abroad to hold bank accounts in Hong Kong without setting foot in the country. Compared to other banks, Citibank Hong Kong offers a variety of types of bank, investment products, loans, accounts options, and credit cards to its customers. . In fact Citibank, one of the more common credit card issuers, regularly changes their processes to outflank the competition in quality and buttress their search for better customer service.[2] Thus, a management information system, especially an effectively and efficiently managed one, should be in place within financial companies, as it could, apart from facilitating the basic processes of credit card management, be able to create a customer database, an interface to customers’ management information systems, smart card options and multimedia base ( 2009).   1.2 Key Issue on the bank industry listed in Hong Kong The financial tsunami of 2008 considerably create significant impact to the not only to the bank businesses in Hong Kong but also to global economy. Basically, the general concept of financial tsunami of 2008 refers to the degree to which the performance of a firm or an industry is affected by the global financial crisis.  The financial tsunami of 2008 which directly affect the lenders and other financial institutions can also affect an individual investor who owns a portfolio; a company; an exporter and importer who concentrates on international trade and even a firm that has no direct international activities.  Furthermore, financial tsunami of 2008, through their impact on the costs of inputs, outputs, and substitute goods play a significant role in determining the competitive position of companies with no direct international operations relative to foreign firms (  2000). In the case of the current financial crisis, businesses should have careful assessment of their business process to avoid downfall. They should have risks management. The cost of indemnity had restricted management’s alternatives in dealing with the hazards faced by the organisation. One of the foremost problems was that insurers rated firms according to business in such a way that a fine run firm that had few losses were required to pay for the claims of poorly run firms within the same industry. On the other hand, the debt collection, as an integral part of the credit management unit of banks, is a business activity performed to secure payments from the debtor. A credit management unit usually handles these transactions where before, most banks perform this activity by hiring their own debts collection agent. With the advent of the business phenomenon of outsourcing during the early 1990s, whose foremost aim is to cut costs of doing business, a sizeable number of collection agencies have surfaced to provide the banks with the service of debt recovery. Whichever way the banks choose to collect the debts owed to them, problems arise which require the intelligent planning of the credit management unit of the institution.  (1998), in his opening sentence in chapter 8 of his book ‘Credit Management’, stated that ‘Effective collections do not just happen. They are the result of planning.’ Every business, not only banks, should have a system for chasing debt payments, and an effective system starts with planning it. The debt collection plan of contemporary credit management units is the place to start if debt collection is to obtain a semblance of organisation.  And with respect to the recent financial tsunami, the growing number of nonpayers has made the task of debt collection more difficult than it was in the past. Additionally, the increase in the intensity of competition among banking and other financial institutions to acquire clients has made this concern more severe.             In accordance financial tsunami of 2008, extensive auditing procedures among banks must be practiced. This includes everything from external audits of risk management policies and procedures to internal reviews of quantitative exposure measurement models. In essence, this process involves the evaluation whether or not its risk management process is working properly and efficiently (Culp 2001). This must be done to assess if the company addresses the problems and risks being identified in the first process. Without this step, the banks in Hong Kong would not be able to come up with policies and regulations regarding ASA570, and would not be able to know if their measuring, monitoring and controlling processes are effective enough to suggest improvement of their operation and profit.             From the current stance of global finance, banks needed to create ways to counter the increasing risks and classified it based on categories i.e. credit risks, liquidity and funding risks, market risks, operational risks, reputation risks, insurance risks and pension risks. The processes or steps could be a possible means of providing solutions or answers to the problems or crises being faced by the banks in Hong Kong, and this includes the policies stated in ASA570. Credit risk-Credit risk is the risk of financial loss if a customer or counterparty fails to meet an obligation under a contract. It arises principally from lending, trade finance, treasury and leasing business. It also arises when issues of debt securities are downgraded and the value of bank’s holdings of assets falls. Liquidity and funding risk- The objective of bank’s liquidity and funding management is to ensure that all foreseeable funding commitments and deposit withdrawals can be met when due, and that wholesale market access is coordinated and disciplined. Market risk- Market risk is the risk that movements in market elements, including foreign exchange rates, commodity prices, interest rates, credit spreads and equity prices, will reduce bank’s income or the value of its portfolios. Operational risk- Inherent in every business organisation, operational risk is the risk of loss arising from fraud, unauthorized activities, error, omission, inefficiency, systems failure or external events such as litigation risk. Reputational risk-The safeguarding of bank’s reputation is of paramount importance to its continued prosperity and is the responsibility of every member of staff. Reputational risks can arise from social, ethical or environmental issues, or as a consequence of operational risk events. Insurance risk- The principal insurance risk faced by banks in Hong Kong is that the cost of claims, along with the cost of acquiring and administering business, may exceed the aggregate amount of premiums received and investment income. Pension risk- Most banks in Hong Kong operates a number of pension funds throughout the world. The primary risks are that investments deliver a return below that required to provide the projected plan benefits, that interest rates or inflation cause an increase in scheme liabilities, or that scheme members live longer than expected. Aside from these risks, banks in Hong Kong need to look and consider the following risks in order to continue and develop their business operation and enhance their financial status.             Regulatory and compliance risk- banks in Hong Kong operates globally in which most of the greatest strategic challenge facing by global businesses is this type risk. With regards to this, banks in Hong Kong needs to educate employees, implement a fraud reporting hotline, develop good policies that help to ensure ethical practice and keep corporate counsel on speed dial. Global financial shocks- Global financial shock is also an issue in banks in Hong Kong like we have today, i.e. Financial Tsunami of 2008.  Since most of banks in Hong are considered global business, it is not exempted in this type of risk.  Basically, global financial shocks are most like concerned to the inflation and deflation issues of certain countries in which a certain was operating. Aging consumers and workforce- According to the experts, aging consumers and workforce are really a factor in global businesses.  This type of risks is also apparent in banks in Hong Kong.  It means, the company needs to reform their global strategies to maintain and enhance their appeal to consumers. Actually, areas such as asset management and insurance are experiencing dramatic shifts in demand as their consumer age. HSBC is facing severe competitive challenges as a result of their aging workforces. To be competitive, banks in Hong Kong need to better understand specific needs of these new consumers. Emerging markets- In accordance to growth, emerging markets also create great risks. Global companies like most banks in Hong Kong will need to partner/form networks with firms in many markets. There are also currency, regulatory, operational, cultural and language, risks in these countries, especially as firms manage outsourced business and supply chains in these markets. Industry consolidation/transition- As part of the development in business, banks in Hong Kong would continue to create a key strategic challenge because of the changes in underlying structural trends, GDP growth, such as population growth, restructurings, consolidation and spin-offs, mergers driven by competitive pressure, and need for acquisitions to meet growth targets. Energy shocks- Shocks in energy prices and access to supplies are challenging not only to the energy sector but also to other bank sectors since it can also trigger economic shocks that could impact their business operation. Execution of strategic transactions- In accordance to this factor, there is an ultimate risk that transactions undertaken in response to business consolidation may fail to deliver, not because they are poorly envisioned, but because of a failure to meet business challenges. Cost inflation- The return of high inflation is a major risk. Radical greening- The banks in Hong Kong should consider this risk since there are only little efforts that the company given in this type of variable. Increasing environmental concerns from the voluntary world of corporate social responsibility – to hard regulatory and economic necessity. Radical greening is a strategic risk, partly driven by the consumer and regulatory responses to climate change, and also by the weather events resulting from climate change. Consumer demand shifts- The failure to foresee and react to consumer demand shifts driven by demographic shifts, such as rising consumer aging could be a strategic risk when the changes are significant, quick or unexpected.             Basically, the issues and risks considered by banks in Hong Kong is actually reflecting to their ratios such as profitability ratio, liquidity ratio, efficiency ratio and ROCE.   1.3 Rationale of doing the study Financial reporting is a continuous process that provides management information and financial statements.  As part of the reporting procedure especially during the times of crisis, financial ratios are very important. To effectively review interim and annual financial statements, the review committee must understand the current status of bank industry, and the attendant risks. The committee should be satisfied that the key financial systems and the procedures and controls that support them will generate information necessary to manage and properly report on the operations of the bank.             On the other hand, financial issues particularly the financial tsunami of 2008 has a significant influence not only on the financial reporting at most banks in Hong Kong but also to their overall business process. Thus, this study will be discussing the issues and impact of the recent financial tsunami of 2008 to the development of well known banks in Hong Kong in terms of profitability ratio, liquidity ratio, efficiency ratio, and ROCE.   1.4 Significance of the study This study plays a significant role to the development of bank industry in Hong Kong since more banks are now considering different measures to be more competitive. And in order to counter the impact of financial tsunami of 2008, reporting so very vital. Basically, these banks are now developing creative ways to their overall business process to increase business development. In particular this study will: 1.      Promote awareness of investors in financial performance of the Hong Kong listed bank industry since the recent financial tsunami taken place in 2008. 2.      Provide alert for management to take proactive action to meet challenges from the recent financial tsunami.     1.5 Research question, diagnosis on the issue and proposition development This study intends to find adverse impacts on the financial performance of the bank in Hong Kong in terms of profitability ratio, liquidity ratio, efficiency ratio, and ROCE. Specifically, the study intends to answer the following questions: 1.      There is no significant difference of profitability ratio of bank industry between pre and post of the recent financial tsunami taken place in 2008. 2.      There is no significant difference of liquidity ratio of bank industry between pre and post of the recent financial tsunami taken place in 2008. 3.      There is no significant difference of efficiency ratio of bank industry between pre and post of the recent financial tsunami taken place in 2008. 4.      There is no significant difference of ROCE of bank industry between pre and post of the recent financial tsunami taken place in 2008.   1.6 Scope of the Study As seen in the background of the study, the financial tsunami that hit Hong Kong created issues of economic fall down and bankruptcy among businesses around the globe.  For this reason the following scope are considered in this research. 1.        To overview, assess and verify on whether the bank industry have been facing difficulties of debt collection during the recent financial tsunami taken place in 2008. 2.        To analyse, assess and verify on whether there is no significant difference of profitability ratio of bank industry between pre and post of the recent financial tsunami taken place in 2008. 3.        To analyse, assess and verify on whether there is no significant difference of liquidity ratio of bank industry between pre and post of the recent financial tsunami taken place in 2008. 4.        To analyse, assess and verify on whether there is no significant difference of efficiency ratio of bank industry between pre and post of the recent financial tsunami taken place in 2008. 5.        To analyse, assess and verify on whether there is no significant difference of ROCE of bank industry between pre and post of the recent financial tsunami taken place in 2008.   1.7 Aim of the Research This the paper aimed to achieve the following: 1.      Determine the current status of bank businesses in Hong Kong. 2.      Compare the past and previous performances of surveyed Hong Kong Banks in terms of profitability ratio, liquidity ratio, efficiency ratio, and ROCE with respect to financial tsunami of 2008. 3.      Identify the banks preventive measures imposed by these banks in accordance to recent Financial Tsunami of 2008 and in order to avoid possible bankruptcy. 1.8 Objectives of the Study With respect to the given background and aims, this study will consider the following objectives: 1.      Promoting awareness of investors on risk of financial difficulties of the Hong Kong listed bank industry since the recent financial tsunami taken place in 2008. 2.      Provide as an alert for management of these companies and government to take proactive measurement on the matter.   Credit:ivythesis.typepad.com

Hong Kong’s highly competitive banking industry

Chapter 1 Introduction / Purpose 1.1 Background of the Industry Every business Endeavour or venture is constantly faced with financi...

Industry and Firm Strategy Analysis

Strategy Analysis PART 1 Industry Analysis This paper is an analysis of the Banking Industry in Hong Kong. It discusses the competitiveness of this industry and the critical issues affecting its operation both in the national and the international arena. The Case of Hong Kong Banking Industry Introduction The Banking Industry in Hong Kong is among the leading international financial centers in the Asia Pacific region and the world. It is a market friendly industry with a sound tax system and regulatory framework. The openness to foreign competition and international practices also contributes to the qualities of the industry. In fact, Hong Kong is ninth among the largest international banking centers in the world when it comes to external transactions. More than 100 international insurance companies prefer Hong Kong and seventy six of the world’s top 100 banks also selected the country as the best place to do business in Asia (2002). Generally, the Banking Sector has remained to be attractive for the following factors: <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Full Convertibility of the Hong Kong dollar</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Relative Simplicity  and Less complexity of business acquisition in Hong Kong</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Minimum Regulatory Interference from the Government</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Soundness of the Tax System and Regulatory Framework</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> The absence of competition legislation and the openness to international practices</li> </ul>   Macro Analysis Hong Kong’s Business Environment has been economically successful since the Second World War. The Gross Domestic Product has consistently grown and envied by most of the developed and developing systems. The rate of unemployment is at low level while the demand for employment is stable (2002). The population has experienced a huge improvement in their standard of living which is often cited as a significant factor for the high level of social stability. The civil service is considered to be the most efficient and non corrupt throughout Asia with the citizens being mostly law abiding. Various political parties support the wide capitalist ethic which dominates the country’s thinking. Trade unions are not very powerful forces and those that existed are mostly moderate and accommodating. The business elite are predominantly Hong Kong Chinese. They favor the tax system, minimal interference of the government and the system focused on making profit. Furthermore, government policies implement a non interventionism policy which is favored by many businesses. The Basic Law in Hong Kong also supports a largely capitalist system. Much of the constitution for Hong Kong is based on guaranteeing its autonomy from the interference of China. It also states that profit, low taxes, low levels of government intervention and the freedom to trade with are guaranteed (2002).  Hong Kong was named by the Heritage Foundation as the “world’s freest economy” attributing its success from its willingness to transform and embrace the forces of globalization. However, its position as a one time center for diverse economic activities has been left only on the finance and service industries. In the wake of the Asian financial crisis, the country realized the difficulty of being a financial center. Like Malaysia, money-men in Hong Kong discovered the vulnerability of their currency reserves and capital investments ( 2002). Its claims to be a world class financial center were in serious threat. Also, mainland China is fast becoming adept in many services which Hong Kong offers. Some analyst claims that Hong Kong will only have a lead time of 10 years before China can offer more attractive option. Primarily, the reduction in business prospects following the Asian financial crisis is due to the high operating costs. The living costs in Hong Kong are higher than anywhere in the United States. It is ranked as the fourth most expensive city in the world (2002). In March 2001, a London-based Hong Kong bank shifted about 1,000 of its jobs to Guangzhou in China until the next three years. This brought shocks to the entire financial service sector (2002). The financial services though asserted that the two cities, Shanghai and Hong Kong are likely to complement each other rather than compete. While retaining its confidence in the financial sector, the city also continues to strive for high quality and potential for growth. In fact, there were efforts to improve the infrastructure of the financial sector through reform and increase in the depth and breadth of the market. There were also reviews undertaken on the debt issuing mechanisms and the simplification of the procedures. The industry undergone liberalization and reform with the final phases of the rate deregulation expected to be completed by 2014 (2002). Another critical problem of Hong Kong banking industry is the shortage of qualified and high skilled human resources. Despite its high tech image, Hong Kong lacks quality professionals to back it up. Sydney which has shown a promise in the financial sector has a clear advantage to Hong Kong in terms of its high skilled workforce (2002). The key strength that moves Australia is the strong supply of skilled workers. By the end of the day the up front cost is still embedded in the workforce despite the favorable tax system. Businesses are less likely to make a profit to be taxed on as long as this problem remains. The industry must also consider the changing demands of the customers and the need to produce new products, better channels and more responsive services. The change in technology helps various financial institutions to introduce and manage new products and services. There is the growing trend towards information technology in the critical factors of the competition such as costs, service quality and price. Information Technology is an aspect of the industry which is considered to be critical. It helps improve the quality and the value added to the products and services. However, the cause of IT systems is too huge to be afforded. Banks can share the costs associated with this through merging with other companies. The past decade has shown an increase in this kind of investment in Hong Kong and is expected that more overseas companies will invest in the country. PESTEL Analysis Political Factors <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Policy of Non Interventionism</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Autonomy from People’s Republic of China </li> </ul> Economic Factors <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Increased in the GDP</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Sound tax system </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Low unemployment rate and buoyant demand in employment </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> High Operating Costs </li> </ul> Social Factors <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Entrepreneurial Drive of the people </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> High Level of Social Stability</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Increase in the Standard of Living </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Shortage in Qualified Human Resources </li> </ul> Technological Factors <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> High Technology Projects</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> The use of Information Technology in various aspects of the industry  </li> </ul> Legal Factors <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Minimum government intervention </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Sound legal and regulatory framework</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Liberalization and reform in the financial infrastructure </li> </ul> Five Forces Analysis             In any industry, the rules of competition are governed by five competitive forces. These forces determine the ability of the industry to become more attractive than others. Potential Entrants             Potential entrants enjoy the simple and less complex way of acquiring business in Hong Kong. The financial industry being a premier center has been a market friendly and open market for competitors. This is proven by the number of international financial services operating in the country Competitive Rivalry Towards the end of 1999, there are around 156 licensed banks and 288 financial institutions in the country making it the highest in the world. Seventy six of the 100 largest banks in the world operate in Hong Kong. More than 100 international insurance companies prefer Hong Kong and seventy six of the world’s top 100 banks also selected the country as the best place to do business in Asia. Substitutes The customers’ transfer from small and medium sized banks to more reputable institutions such as the Hong Kong Shanghai Banking Corporation (HSBC), Citibank and Standard Chartered Bank. Bargaining power of Buyers Customers’ demands are changing and requiring the industry tom produce new products, better channels and more responsive services. The financial sector is compelled to follow the lead of other industries in improving their service standards. Bargaining power of Suppliers             Hong Kong is suffering from the shortage of qualified human resources. The gap is filled through imports from Mainland China. Of the abovementioned forces, the degree of rivalry is the most obvious in the banking industry. The number of licensed banks and financial institutions operating in the country indicates the stiff competition in the financial sector. Also, the openness has resulted to fewer barriers for foreign investors and new entrants. In this case, the market becomes more accessible to new entrants which in turn increase the degree of rivalry. As a matter of fact more than 50% of the largest banks in the world already have their operations in the country. Banks compete rigorously in terms of prices, customer convenience and their reputation. Evaluation of Findings             The Banking Industry retains its position as the premier financial centers in the world. The characteristics of the market and the business environment are the primary reasons why this sector is attractive to foreign investors. However, it is susceptible to competition from countries such as China, Singapore and Sydney. China for one is catching up by providing the services which Hong Kong offers. The relatively lower operating costs in China provide more alternatives for businesses. In addition to this, the shortage in the human resources is filled through imports from mainland China. The industry and the whole country in general lacks with qualified professionals. This weak area of Hong Kong is considered to be the key strength of Sydney, a promising financial center. These concerns affect the ability of the banking industry to maintain and strengthen its position in the international financial sector. As time progresses, the environment in the financial services will get tougher particularly in the international arena. Hong Kong being the leading center has the most to lose. In order to maintain its position, the infrastructures of the financial sector must be reformed and increased in scope. The government must take the necessary measure to simplify the procedures relating to debt issuing mechanisms. Lastly, the Asian economic crisis has changed the competitive landscape of the banking sector. Since 1997, the licensed banks are reduced by about 17 %. As the customers worry about the stability of financial institutions during the crisis, they have transferred to more reputable institutions such as the HSBC, Citibank and Standard Chartered Bank (2000). With this, small and medium sized banks find it hard to survive the competition. Even with the recovery of the economy, there remains to be a weak demand for domestic credits. As a result, banks need to write off bad loans, improve services and invest in the development of products, technology and skills to compete with more established banks. Generally, the banking industry has undergone rapid changes. Among the factors influencing competition are technology advancements, regulatory requirements, high skilled work force and quality products and services. This intense competition can be survived by the banks by improving the quality of their services. Conclusion Hong Kong’s openness to foreign competition and international practices has paved the way for greater opportunities particularly in the banking sector. Foreign investors favor the clarity of policies, financial reforms and liberalization in the industry. Even so banking industry must focus on its weak areas to maintain its position and remain competitive in the international scene. Among the global competitors of Hong Kong are Singapore, China and Sydney. Though the Hong Kong banking industry has marked its position in the international scene, it must strengthen its weak point to remain attractive for investors. High skilled workers are clearly the disadvantage of Hong Kong from its foreign rivals. Aside from this, there is also the high operating costs which reduces the business prospects. Ultimately, the ability to satisfy the needs of the customers will determine the competitiveness of the industry and every bank participating in it. The industry can move into a more competitive landscape by improving the quality of its services and adopting technological advancements. The reform and liberalization of the financial structures is also a viable option.     Recommendations <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> The reduction of operating costs will help the industry to regain business prospects it has lost. In 2001, a London based bank shifted its jobs to China. This illustrates the tendency of financial investors to transfer their operation in countries with fewer costs</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> The lack and shortage of highly skilled professional has been a critical problem. Other financial centers have taken advantage of this weak area such as Sydney. The government must  implement measures to improve the quality of education and produce qualified professionals</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> The increase in competition also requires improvement in the service standards. Banks and financial institutions must continue to produce products, services and better channels to meet the changing demands of the customers. They must  focus on the particular area of ‘service quality’ and ‘customer care’</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Existing employees must be trained continuously to provide the services which the customers want. The industry must be attentive in providing the needs of the customers in order to attract and retain them. They can implement initiatives to improve the quality of performance among their employees. </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Technology advancements must be used to facilitate new products and services. Information technology must be utilized to change the significant aspects of competition which includes costs, price and quality of services. </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Banks can resort to Mergers for significant savings in adopting information technology. Financial institutions must compete in the changing environment through their IT systems. The integration of IT can be done though mergers</li> </ul>       PART 2 – FIRM ANALYSIS This paper is an analysis of the Hong Kong and Shanghai Banking Corporation. It discusses the competitiveness of the bank and the factors that contributes to its success as a banking and financial service company The Case of Hong Kong and Shanghai Banking Corporation (HSBC) Introduction HSBC is one of the largest banking and financial services worldwide. The HSBC Group started in Hong Kong around 140 years ago and the Special Administrative Region remains one of its key markets and operating centers at present. The Hong Kong and Shanghai Banking Corporation Limited is established in Hong Kong in March 1865 and in Shanghai a month later. It is the founding member of the HSBC Group and serves as the Group’s flagship in the Asia Pacific region. Known as Wayfoong which means the ‘focus of wealth’ or ‘abundance of remittances’, the bank is one of the three note issuing banks of Hong Kong which accounts for at least 65.2 %of its bank notes. HSBC holds a distinctive position in the banking sphere of Hong Kong. Aside from the bulk of note issues, it has some attributes which are associated with a ‘central bank’. It serves as a banker to the government and other banks though not in exclusive terms. At some occasions, it also acts as lender of the last option. There are no statutory obligations for the HSBC to perform these functions and its quasi-central bank qualities are not sought after but came naturally towards becoming the largest operating bank in the country (Pui-Tak & Faure, 2004, p.200).   Its main subsidiaries: Hang Seng Bank Limited (62.14 % owned)       HSBC Investments (Hong Kong) HSBC Bank Australia Limited                                           Limited HSBC Broking Services (Asia) Limited               HSBC Private Equity (Asia) HSBC Insurance (Asia Pacific)                                               Limited Holdings Limited                                          HSBC Trustee (Hong Kong) Limited                    Source: The HSBC Group in the Hong Kong Special Administrative Region (SAR) 2006 The bank including its subsidiaries has more than 600 branches and offices in 20 countries and territories in the Asia Pacific and 20 in five other countries all over the world. They employ at least 50, 800 staff. HSBC Limited is wholly owned by the HSBC Holdings plc of the HSBC Group. As one of the largest banking organization, it has around 9,500 offices in 76 countries serving 125 million customers with a total of e customer base of 2 million. The HSBC Group is one of the major users of Information technology with a yearly spending of US.4 billion. The e-business includes the internet, PC banking and telephone banking through fixed phones and mobile phones. HSBC has its own telecommunication network which is one of the largest in the world. This network is used in delivering IT services to the customers and employees worldwide. During the first half of 2006, at least 900 million visits are recorded on its website. Its services: Personal Financial Services             HSBC offers a wide range of personal financial management services to at least 4 million personal customers in Hong Kong. The services include multicurrency savings and current accounts, mortgages, hire purchase and leasing for motor vehicles, credit cards and loans. Customers are also given access to insurance products wh9ich includes life, health, home, hospital and travel insurances. The financial team helps the customers in planning their financial needs such as education, retirement and estate. Commercial Banking             HSBC provides financial services to small and medium sized enterprises. The services offered include multi currency business accounts, payment and cash management, insurance, trade services and borrowing solutions. It has business banking branches that covers key commercial centers and a multi channel service to make the service convenient for the clients. Automated banking terminals are available in key areas to allow 24 hour access to cheque deposits and cash transactions. Corporate, Investment Banking and Markets             HSBC provides a wide range of services to corporate and institutional customers within Asia. It promotes long term relationships with the clients based on the global knowledge and expertise of the Group. This division is composed of three business line: Global Banking, Global Markets and Global Transaction Banking. Private Banking             HSBC provides private banking for its clients to protect their wealth. Aside from the investment and management solutions, it also offer wealth planning including inheritance and succession planning Organizational Culture             HSBC is highly committed to standards of corporate behavior which is central to its strategy. Its core values focus on the long term ethical relationships with the clients, high productivity through cooperation, a sense of excellence, international in outlook and customer focused. The strategic plan also involves the corporate social responsibility. HSBC continue to commit itself to high standards of conduct and its obligations in the society. The groups’ CSR policies are focused on education and environment which is the primary recipients of their charitable activities.             The growth ambitions centers on the four groups of customers. These comprises of the personal financial services, commercial banking, corporate and investment banking. Specific strategies are developed for each of the area. The customer focus is reinforced by organizing the internal and external reporting around the customer groups.             The competitive positioning of HSBC is accomplished by introducing skills and practices from the leading retailing businesses world wide. The integration is increased with more skills sharing and technology transfer to enhance its existing activities. The key elements in achieving its objectives is to accelerate the growth rate of revenue, develop brand strategies, increase productivity and maintain the risk management and the strong position in the financial services. The development of staff skills is a critical factor and is necessary to ensure that they contribute to the success of the Group. Employees who contribute to the achievement of corporate goals are rewarded. Strategic Plan The vision of the Group remains constant: HSBC aims to be premier financial service company worldwide. To be ‘leading’ means being preferred, admired and recognized for providing the customers with a fair deal. The main goal of the strategy is to guarantee that the shareholders get better returns from the banks than they would have in any financial service company.  The sustainable success includes the addressing the needs of the customers, colleagues and those representing the interests of different communities. By the end of 2003, HSBC launched a strategic plan which serves as a blueprint for growth and development until the year 2008. The strategy is evolutionary and builds on the key strengths of HSBC. More so, it addresses the areas which need further improvement. Strategic Imperatives: <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> To become one of the leading brands for customer experience and corporate social responsibility</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> To be the strongest global player in personal financial services by driving growth in key markets, expanding businesses with existing clients and penetrating new ones </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> To make the most of the international customer base by promoting efficient customer relationship and management</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> To speed up growth with the enhancement of the capital market </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> To serve the individual and family clients all over the world </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> To develop and motivate employees by rewarding success</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> To concentrate in increasing the earnings at a favorable rate. It will also focus on investing technology, its people and brands to support the future value of the company</li> </ul> Value Chain Analysis Primary Activities Inbound Logistics <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> HSBC promotes the manufacture and use of environment friendly products. It directly influences the environmental impacts of its suppliers. </li> </ul> Operations <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Operating as the number of local banks all over the world. It operates on 10,000 offices in 82 countries in Europe, Asia Pacific region, America, Middle East and Africa. </li> </ul> Outbound Logistics <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Processing work is offshore to lower costs economies in order to decrease the costs associated with the services provided in developed countries. </li> </ul> Marketing and Sales <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> The HSBC brand and the hexagon symbol are adopted in all markets where it operates to enhance the recognition of the group by the customers, stakeholders and employees all over the world. </li> </ul> Service <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> HSBC provides a wide range of financial services which includes business and commercial banking, investment banking and personal banking.</li> </ul> Support Activities Procurement <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> The procurement network consists of 430 people in 56 countries and territories. The suppliers range from multinationals to small local businesses. E procurement systems are also utilized to accommodate both the local and global business needs </li> </ul> Technology Development <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> The largest expenditure is on the Information and Technology equipments and services. Its e commerce capabilities are rapidly increasing. It has invested in Sparkice Inc. which will develop the online trade finance, payments and insurance services in the business-to-business website of the company. Human Resource Management</li> </ul> <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> The company acknowledges the need to attract and motivate talented and skilled people. The HSBC’s values thrive on the importance of respecting and embracing the ideas, abilities and diverse culture of its employees. This principle is manifested on its present campaign “Your point of view”.  Its global sourcing strategy plays an important role maintaining competitiveness in the international financial services.  </li> </ul> Firm Infrastructure <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> The HSBC is headquartered in London and operates in five other regions including Europe, Hong Kong, Asia Pacific, Middle East, Africa, north and South America.  The financial services it provide range from personal, commercial and corporate banking. In 1999, the HSBC Group was established with a uniform international brand name. </li> </ul>   Financial Information   Paid up Capital:       HK,494 million (US,896 million) at 30 June 2006 Reserves:                  HK,793 million (US,303 million) at 30 June 2006 Pre-tax profit:            HK,516 million (US,289 million) for the first six months of 2006 Attributable profit:     HK,471 million (US,381 million) for the first six months of 2006 Capital Strength:      Tier 1 capital ratio: 12.1 % at 30 June 2006                                     Total capital ratio: 13.1% at 30 June 2006 Source: The HSBC Group in the Hong Kong Special Administrative Region (SAR) 2006     Financial Highlights                                                                                                             2006               2005 For the year                                                                                     HK$m           HK$m Net operating income before loan impairment charges               92,325           77,222 Profit before tax                                                                                52,016         45,249 Profit attributable to shareholders                                                 37,709          32,873 At year-end Shareholders’ equity                                                                       145,450        97,334 Total equity                                                                                       165,445     114,425 Total regulatory capital                                                                    183,981      154,065 Customer accounts                                                                                     1,989,467   1,735,110 Total assets                                                                                       3,150,840   2,672,532 Risk-weighted assets                                                                      1,367,607   1,238,164 Ratios                                                                                                %                    % Return on average shareholders’ equity                                                 31.1                37.4 Post-tax return on average total assets                                        1.46               1.44 Cost efficiency ratio                                                                         41.4               41.2 Net interest margin                                                                          2.31                2.14 Capital adequacy ratios – total capital                                                                                     13.5                12.4 – tier 1 capital                                                                                   12.3                11.7     Profit before tax (HK$ millions) 70,000            60,000                                                                                                            52.016 50,000                                                                         45.249 40,000   30,000   20,000   10,000   0 2006                      2005   Source: HSBC Annual Report and Account The profit attributed to the shareholders for 2006 increased by HK,836 million or 14.7% to HK,709 million. The profit before taxation increased by HK,767 million or 15.0 % to HK,016 million Core Competence HSBC has establish itself as a leading commercial bank not only in Hong Kong but worldwide.  Its long term existence has earned it the reputation which is unequaled by any other banks. Today, HSBC remains to be one of the most trusted financial institutions with operations in Europe, Asia Pacific region, America, Middle East and Africa. It maintains a sound financial status which is growing by the year.   Evaluation of Results The Corporation serves an international customer base in about 82 countries all over the world.  Its financial services range from personal banking to commercial and corporate banking service. It operates on high technology that delivers a wide range of products and services designed to meet the needs of the customers. HSBC attributes its competitive positioning in the integration and sharing of skills, technology transfer and the adoption of best practices. It also recognizes the need to develop its human resource as they are crucial elements in achieving the goals of the corporation. Moreover, it adheres to its corporate social responsibility through its philanthropic activities for education and the environment. The HSBC maintains a sound and increasing financial status as shown in its financial information and financial highlights for the year 2006. It also has this unique position in the Hong Kong Banking sphere as a ‘central bank’. It acts as the banker to the government and other banks though not exclusively. Conclusion             Over the years, HSBC has been able to maintain its competitive position in the financial services. The growth focuses on four main areas including personal financial services, commercial banking, corporate investment banking and markets and private banking. Each of these areas is addressed through a set of specific strategies. The financial success of the company is attributed mainly in meeting the expectations of its customers, its people and various communities. The key to its strategy is to maintain corporate behavior that foster long term client relationships and increase productivity of its people. This is accomplished through skills sharing and the transfer of technology. HSBC recognizes the potential of Information Technology and invested significantly in the improvement of its IT infrastructures. In return, the e business enabled easier access to the international customers and employees. Recommendations <ul style="margin-top: 0in; margin-bottom: 0in" type="disc"> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Expand the business and penetrate other market though the effective channels. The use of IT systems is an advantage and the company must continue to lead advanced information technology </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Promote good customer relations by being responsive to customer needs. The company must also improve its flexibility by meeting the changing demands of the customers suitable for their lifestyles. In addition to this, regular monitoring on customer satisfaction must be implemented</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Empower the employees by understanding their needs and measuring their engagement to the company. Feedbacks must also be encouraged from the employees and use them to contribute to the company’s success</li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Manage the business in the interests not only of the clients but the wider society </li> <li class="MsoNormal" style="text-align: justify; line-height: 200%"> Fulfill corporate responsibility through environment friendly purchasing and supplier engagement. Aside from the environment, philanthropic activities can also be focused on education and poverty alleviation</li> </ul>   Credit:ivythesis.typepad.com

Industry and Firm Strategy Analysis

Strategy Analysis PART 1 Industry Analysis This paper is an analysis of the Banking Industry in Hong Kong. It discusses the competitiven...