Corporate Strategy Analysis: Case Study of HSBC

1.0 Introduction

Without organizing the tactical measures, the business of banking industry will never be able to mitigate the current demands of the potential market. Agarwal and Ramaswami (2010) mentioned that effective corporate strategies averts the loyal customers from being aggressive in the competitive market, therefore, leads the banking industry to experience only the break even and prevents from earning profit. Hence forth, corporate strategies supports the firms to gain the competitive advantage and checks the brands from getting separated from the market and serves to maintain a competitive spirit in the current market scenario. On the other hand, Araten et al. (2004) contradicted that, if a brand fails to execute the planned strategies in the market, the client might create a false impression about the brand and might lead to hamper the reputation of the brand. However, Asiedu and Esfahani (2008) mentioned that effectual corporate polices helps the banking industry to generate the vision and mission statement that needs to be corresponded to the stakeholders in order to maintain a proper balance and to remain tangent with the current objectives. Moreover, the involvement of the staff during the decision making time is quite important for developing the strategies with structured policies and knowledgeable framings, to mitigate the firm to achieve the goals.

HSBC is one of the largest and reputed bank in the financial service organization of UK. Black (2010) mentioned that HSBC is comprised of 1500 branches of retail banking network and the offerings of the bank has extended to the full range of commercial, premier, corporate and private banking services. The key objective of the present corporate banking is to lead its clients to attain the ambitions, as the values are comprised of respect, reliability, service, superiority and stewardship. Thus, the chapter will highlight the various corporate strategies of HSBC and will critically evaluate the present strategies to mitigate the market edge.

1.1 Current environment and industry structure of HSBC, UK

The corporate strategy of HSBC, UK is connected with the two long-term trends: economic development and financial flow. Several of its current and future policies is based upon the latter corporate strategies. Brynjolfsson and Smith (2004) added that the in the drive to become a sustainable bank, HSBC is facing stiff competition and other market threats. However, the bank has tried to play a positive role in the society by meeting their financial needs. Below is the current environmental structure of HSBC, UK:

Porter’s Five Forces:

Potential Entrants:

HSBC offers stiff competition from players in the market. Biemans and Harmsen (2005) determined that the future competitors of HSBC are Tesco and Sainsbury’s. In future several other players could enter the market as a result of high earning potential.  Customers’ are considered to be segregated as a result of new market entrants. Super-markets often the banking sector only in lieu of earning profits and not paying heed to market threats. However, Caldwell and Hayes (2007) mentioned that irrespective of the market threats, HSBC could set a high standard of competition. Strong brand image have acted in favor of HSBC to overcome competition.

Bargaining Power of the customers:

Higher bargaining power is considered to adversely affect the brand as the loyalty decisions will decrease. It is a determinant factor for ensuring market sustainability. However, Crossan et al. (2008) mentioned that HSBC have managed to capture the attention of the customers’ by earning their loyalty.  Several of its current loyalty schemes have assisted the bank to influence the customers’ loyalty decisions, thereby, lowering their bargaining power. It has currently positioned itself as a world leader in the banking industry.

Threat of substitutes:

The competitors keep involving fresh products and services in the market that eventually acts as a market threat for the firm. Almost all the players in the market is current offering homogeneous products and services. Krykilis and Pantelidis (2003) determined that the threat of substitute products of HSBC is relatively low as a result of being the first recall of the banking customers’. It has also focused its market strategy to four different market segments. The current segmentation strategy has assisted in meeting the specific needs and preferences of the target market segments. However, Geroski (2006) acknowledged the significance for the brand to strive towards maintaining its current market position. Doing so will prevent HSBC to experience any added market pressure from substitute products’.

Bargaining power of the suppliers:

The customers are basically the suppliers who invest and withdraw funds from the bank. Grossman (2007) elaborated that the bargaining power of the suppliers is dependent on significant size and their concentration and supply of differential products. The current industry factor is relatively low as a result of differential pricing policies followed by HSBC. It alters its prices as per the market, including the buyer’s preferences. It has helped in gaining buyer’s preferences.

Rivalry among the current competitors:

Barclays and Royal Bank of Scotland is among the prime competitors of HSBC.  All three of the current banks have been able to carve a distinct identity in the market. María-Teresa et al. (2012) pointed out that the strategic marketing plan and effective policies have assisted the bank to maintain its leadership position. However, recently the bank went into liquidation as a result of financial crisis. The competition, thereby, thickened to regain the market edge of the respective banks.

1.2 Analysis of the current market strategy of HSBC, UK

The core values of the bank are among the current strategy that it follows in order to meet the objectives. Luk et al. (2002) mentioned that in order to promote itself as a dependable, customer centric and innovative bank, it has focused it has centered its market strategy on ensuring:

  • Continuous growth: The bank has embraced latest technology involvement such as mobile banking for customer satisfaction. It has also tried to improve the level of services being currently offered. Meyerhoefer et al. (2008) elaborated that the bank had developed a range of wealth management services to meet the changing needs.
  • A sustainable bank: The bank maintains a long term view of the market. Besides taking care of its employees, HSBC tries to be social responsible and invests in the future of local communities. However, Sosna et al. (2010) noted that being socially responsible is an additional financial burden that reduces the yearly revenue.

In order to face competition, the bank has incorporated as a strategy known as ‘Managing for Growth’ Seddon et al. (2006). The current strategy has been designed to help the firm to adapt their operations as per the changing market situations. It even follows a strategic HRM approach in order select ‘right candidate for the right job’. HSBC focuses on strengthening its CRM values such that the services demands of the customers’ are met.  David et al.  (2002) added that the use of technology and internet have assisted the bank to expand its services across wider target mass. The company tries to responsible in the corporate level by acknowledging the preferences of the specific customer groups: private banking, personal financial services, corporate services and investment banking. The current branding policy of the bank has helped it in tiding over the competitors.

HSBC is following a strategic fit policy. Stewart and Zhao (2008) determined that the strategic stretch policies involve the task where the managers use its current resources in order to attain market edge. HSBC follows the strategic HRM policy in order to ensure that its staffs operate to meet organization’s objectives. The wealth management and sustainable banking policies of HSBC is focused to meet the organization’s objectives. However, the current strategy does not include the necessary task of adding fresh resources to meet the market demands. While the current competitors of HSBC follow fresh policies and new models, its corporate policies is more dependent on its present resources.  Soon the current corporate policies of HSBC might not be tangent with the changing market demands.

1.3 The competitive industry conditions and the compliance of HSBC, UK

Over the past few decades, the management of UK banking industry had majorly concentrated on the wealth of the shareholders. Mitchell and Coles (2009) mentioned that during the particular period of time the banking industry had enjoyed the monopoly market, as the customers were left with limited choices to decide on the tune of business. Therefore, the producer of the firm has to concentrate on the profit maximization policy in order to meet the extensive demands of the customers in the market of high volatility. Thompson and  MacMillan (2010) contradicted that the banks that fails to offer decent services to the loyal clients seems to shrink in the near future. Due to the fretfulness of the customers regarding the activities of the bank and tends to improve the welfare of the customer and the general public. On the other side, HSBC has been termed as one of the reputed bank in UK, which operates in the division of personal banking, corporate banking, wealth management and investment banking. Massy et al. (2011) mentioned that despite of the long term experience of the financial, HSBC has managed to accept the global challenges like competitions from other established banks and the other financial sectors.  

However, the economy of the bank is becoming more connected with the capital flow of the cross border to outstrip growth in the average domestic gross product. Keegan and Keegan (2006) suggested that over the next few decades, HSBC expects 35 overall markets to generate 90 % of the global growth with a similar degree of focus in the cross border capital flows. On the other hand, HSBC focuses on the clients who tend to embrace the alternative banking channels for example the usage of debit and credit cards for the transactions, internet and mobile banking. Pugh and Mayle (2009) suggested that HSBC has identified the fact that customer service is one of the major components that can enhance the customer base therefore, the bank has come up with the electronic platform which has enable the bank to serve proper services to the customers according to the customer preferences. HSBC is international banks that believe to extent the network correspondence with the market relevant to the international flows. Luk et al. (2002) suggested the access and exposure to the maximum growth and business helps the specified bank to maintain a strong balance sheet, in order to maintain a resilient stream of earnings. Thus, by inculcating such corporate strategies, HSBC has managed to gain the trust of the high net worth clients and therefore, to gain a competitive advantage over the other firms and maintain a decent customer base in the international market.

1.4 Relevance of portfolio market response or the exploitation of synergies

In the current scenario banking industry has been considered as the highly competitive industry. Geroski (2006) suggested that share holders have majorly capitalized the funds of the particular industry. Therefore, calculations show that corporate strategies needs emphasize on the exploitation of the synergies, in order to lead the brand with sufficient advantages. In majority of the industries, brands require to provide a local network in order to uplift the economies of scale. Grossman (2007) stated that local networks have introduced numerous number of local firms in the market. Therefore, the particular industry gets benefitted with an enhancement of the economies of scale and as a result, the synergized firms get to meet the profit margin over the breakeven point. On the contrary, Hoffman and Novak (2002) argued that the specific approach could be quite widespread, if there lies a high fixed cost in the industry, and elaborated that if the merger was a vertical merger, the scope for economies of scale seems to fluctuate for the specified firm. As a leading international bank, HSBC provides a bespoke investment banking solution for almost majority of the industries including financial institutions, resources and energies, chemicals, consumer and retail, healthcare and financial sponsors. Stewart and Zhao (2008) mentioned that depending upon the strength of the international network, HSBC has been facilitated with the customer base perceiving the cross-border transactions in the emerging market of banking industry. However, if HSBC manages to gain monopoly power from the merger, it does not require leading to high prices which sufficiently have been regulated by the government. Thus, HSBC attains the benefits of economies of scale where the loyal customers do not require experiencing the monopoly prices.

On the other side, Mitchell and Coles (2009) argued that a new firm might have to undergo the diseconomies of scale, thus, after the merger, a new might lack to balance the degree of control and might struggle to motivate the employees. Hence forth, the firms the producer of both the firms need to come out with effective corporate strategies in order to appeal the loyal and the existing customers. In case of any pitfall, the goodwill of the brand might lead to diminish. Moreover, the manager of bank can follow the practices like virtual marketing and search engine optimization in order to get hold of the internet trafficking.  Sometimes the bank can adopt the strategies like creating a page on the public portals and have the virtual conversation with the frequent customers and hence can promote the product line of the particular bank.  Such networking will facilitate the bank to maintain a base of high net worth customers and gain the competitive advantage over the other international bank and hence to uplift the brand value.

1.5 Significance of creativity in the strategic thinking and leadership in the organization

Effective strategic innovation often serves a brand with new technological advances that continues to serve the existing customers to drive the market growth. However, eventually counts on a large number innovative and competent individual who not only serve to implement on the new product but also to contribute on the profit margin. Pughand Mayle (2009) argued that if the firm fails to count on the demands and preferences of the customers, then the firm might have to endure the slaughter of the customer base. On the other hand, Grossman (2007) stated that creativity in the financial services often forms the structure of the identified products and discover an innovative way of interacting with the potential customers for which the firms heavily relies on the fresh technologies. Such practice will lead to narrow the gap between the organization and its customer and co-operate the mechanism between the market players. Such practice can facilitate the firm from attaining the collaboration through the strategy of complementariness, attaining cost reduction, achieving stronger credibility and accessing new resources and networks. The soul motive of the firm is to mitigate the profit margin. Therefore, such approach will facilitate the firm to enhance its brand value and hence to maximize the profit margin. The introduction and acceptance of various creativity and innovations requires accelerating with the measured alliance and interaction between the customer and the specified brands.

On the other hand, leadership can be considered as one of the major important component that a firm requires to lead the business strategies to the derived notion.  A single leadership style might not be effective for implementation at all conditions (Geroski, 2006). In other words, the leadership styles of companies vary with respect to the current workplace condition. HSBC might follow for any of the leadership approaches in order to motivate its employees during organizational change. Grossman (2007) determined that the authoritative leadership style is has been followed during any crucial decision making. In events when HSBC has to soon decide on the issues or undertake quick changes, authoritative leadership styles can be used. The chances of time loss in crucial decision making are prevented, hence forth, giving place for quick action as per current needs. However, several employees might not prefer the present style as they might hate dominance. Moreover, A teamwork approach can be followed by leaders of HSBC as it encourages the involvement of all the employees in corporate decision making (Geroski, 2006). The chosen leadership style is considered to be effective to make its employees effective enough to count on the responsibilities. Democratic approach is acceptable to the teamwork and is often preferred by staff. However, the latter approach consumes much time in decision making and might not be suitable during essential or swift decision making.

1.6 Components between global strategies and localizations

Globalization refers to the expansion of trade ad investment, supported by the expansion of the international business and the enlargement of economies worldwide. Globalization can be described as the procedure of adoption of the techniques in the global markets by introducing different types of invented products and services. With the support of international process theory, HSBC has become successful to penetrate in the emergent market, thereby, the the introduction of product line is effectively beneficial. Hence, the strategy has proved to be extremely beneficial for HSBC to improve the demand and profitability of the brand (Stewart and Zhao, 2008). Due to which, the globalization tends to create a new demand in the market by introducing advanced product line, after evaluating the preferences of the potential mass.

On the other side, localization can be termed as another vital factor important for the business expansion. However, the specific notion of the proprietor is to provide the product or services with the look and feel of having been created for the target mass to minimize the local customer base. Thus, the accurate localizing of the product will serve HSBC wit handful of customer base and with a wider opportunity of business expansion, as a result, the business will get the support to have a wider spread in the market.   

1.7 Conclusion

From the above study, it could be concluded that HSBC has undergone several strategies and cultures to mitigate the market edge. However, the manger of the particular bank has understood the importance of globalization and localization to maintain a wider customer base in the market.  Thus, effectual strategic innovation often serves a brand with new technological advances that continue to serve the existing customers to drive the market growth.

 

 

References:

Agarwal, S. and Ramaswami, S. N. (2010) “Choice of Foreign Market Entry Mode: Impact of Ownership, Location, and Internalization Factors,” Journal of International Business Studies, 23(1), 1-27.

Araten, M., M. Jacobs Jr., and Varshney, P.  (2004). “Measuring LGD on Commercial Loans: An 18-Year Internal Study.” The Risk Management Association Journal, 86: 96–103.

Asiedu, E. and Esfahani, H. S.  (2008) “Ownership Structure in Foreign DirectInvestment Projects,” Review of Economics and Statistics, 83(4), 647-662.

Biemans, W.G., and Harmsen. H. (2005) “Overcoming the Barriers to Market-Oriented Product Development”, Journal of Marketing Practice: Applied Marketing Science 1(2), 7-25.

Black, R. P., (2010) “A Proposal to Clarify the Fed’s Policy Mandate.” Cato Journal 5 (Winter 1986): 787—95

Brynjolfsson, E. and Smith, M. (2004) “Consumer decision-making at an Internet shopbot”: Brand still matters. Journal of Industrial Economics XLIX(4), 541-558.

Caldwell, C. and Hayes, L. A. (2007) ‘Leadership, Trustworthiness, and the Mediating Lens’, Journal of Management Development, 26, pp. 261- 275.

Crossan, M., Vera, D. and Nanjad, L. (2008) ‘Transcendent Leadership: Strategic Leadership in Dynamic Environments’. The Leadership Quarterly, 19, 569-581.

David, W., Chin, H. O. and Victor, K. (2002). “Strategic Human Resource Management and Organizational Performance in Singapore.” Compensation and Benefits Review, 34, pp. 33-4

Geroski, P. A. (2006) “What Do We Know About Entry?,” International Journal of Industrial Organisation, 13, 421-440.

Grossman,H. I. (2007) “Money, Real Activity, and Rationality.”Cato Journal 6 (Fall 1986): 401—8

Hoffman D.L. and Novak, T.P. (2002), “Marketing in hypermedia computer-mediated environments”, Journal of Marketing, 60, 50-68.

Keegan, W. and Keegan, W. (2006). Global marketing management. Englewood Cliffs, N.J.: Prentice Hall.

Krykilis D. and Pantelidis P. (2003) “Macro Economic Determinants of Outward Foreign Direct Investment”, International Journal of Social Economics, 30(7), 827-836.

Luk S., Chan, W.  and Li, E. (2002), “The content of internet advertisements and its impact on awareness and selling performance”, Journal of marketing management, 18(7/8), 693- 720

María-Teresa, M., Miguel-Ángel, G. and Domingo, R. (2012) ‘Governance, entrepreneurship and economic growth’, Entrepreneurship & Regional Development: An International Journal, 24(9-10), 865-877

Massy, W., Montgomery, D. and Morrison, D. (2011). Stochastic models of buying behaviour. Cambridge, Mass.: M.I.T. Press.

Meyerhoefer, C. Chad D. and Samuel H. Z. (2008). The shape of demand: What does it tell us about direct-to-consumer marketing of antidepressants? The B.E. Journal of Economic Analysis & Policy, 4, 8(2), 1-32

Mitchell, D.,and Coles, C. (2009). :”The ultimate competitive advantage of continuing business model innovation”.  Journal of Business Strategy,  24, pp.  15-21.

Pugh, D. and Mayle, D. (2009). Change management. Los Angeles: SAGE.

Seddon, P. B., Lewis, G. P., Freeman, P., and  Shanks, G. (2006). “The case for viewing business models as abstractions of strategy”.  Communications of the Association for Information Systems,13, pp. 427-44

Sosna, M., Trevinyo-Rodríguez, R. N., and  Velamuri, S. R.(2010). “Business models innovation through trial-and-error learning:”  The Naturhouse case. Long Range Planning, 43, pp. 383-407

Stewart, D. W., and  Zhao, Q. (2008).”Internet marketing, business models and public policy”. Journal of Public Policy and Marketing,19, pp.  287-296.

Thompson, J. D., and  MacMillan, I. C.(2010). “Business models: Creating new markets and societal wealth”. Journal on Long Range Planning,43, pp.  291-307

Tags

top
error: Content is protected !!