Strategic Changes at HSBC within the Last One Decade
Every firm strives to maximize their operations in order to get the maximum amount of profits. According to Vidler (2002, p. 53), managements of various firms are always concerned with how to maximize their profits through strategic moves that are able to meet the current market demands. At HSBC, the management is aware that the best way to maximize profits is by lowering the costs of operations to the least levels possible. Productivity of operations has extremely close link to the efficiency of the operation. Using total quality management (TQM) as one of the strategies, this firm has been able to increase the productivity of its operations. One of the main factors to consider when implementing TQM is that it cuts across all the operational units of the firm. Total quality management starts from the top management unit as it flows down to other operational units. Schneider (2003, p. 67) says that this strategy starts in the mind. The need to improve the productivity of the firm through improved operational activities starts in the mind of the top managers. The management should organize the units of production in a way that they will generate the best benefit to the firm. BSBC knows that it has a number of competitors it has to face in the market. With its entry into the industry of banking, new competitors like the Barclays Bank and pose serious threats to the prosperity of this firm. The management must develop strategies that will improve its productivity.We will write a custom HSBC Holdings Plc’s Financial Services Development specifically for you
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HSBC is operating in an intensely competitive market. The market has various players who have different capacities based on a number of factors. The market has changed immensely. When HSBC was started in the United Kingdom, it was a single firm which operated within a single building in London. However, this firm experienced massive growth. The management of this firm has worked hard to ensure that this firm covers new territories outside United Kingdom. The firms operations increased as it expanded to the emerging economies in parts of Asia and African countries. The firm opened new branches within the United States. The inputs required by the firm increased. The volume of operations and output also increased. This could not be managed by the owners in an unstructured format as was practiced. The management realized that there had to be a clear system which could sustain the increased capacity of the firm.
The firm decided to maintain a close relationship with its customers despite the increased capacity of the firm. The management has to develop a mechanism through which it could attract customers to its premises despite still competition that was posed by other financial units within the United Kingdom. Customers were given close attention by the firm as a way of maintaining a personal appeal to every customer (Harper 2010, p. 29). The management embraced specialization and division of labor. It could no longer depend on individuals, to take care of varying tasks. It developed departments within departments which were responsible for different tasks. The management developed customer follow-up unit within customer care unit to ensure that customers post purchase dissonance is eliminated. The management was keen on eliminating cases of customer dissatisfaction. The banking industry was increasingly getting competitive due to the liberalized market. New firms were getting into this country, and this was posing a serious challenge to this firm. The management had to find a way of managing this competition (Wild 2003, p. 36). The infrastructural unit changed as time went passed. Technology played an extremely crucial role in the changes that took place in the infrastructure of this firm, especially information transfer from one unit to the other. As technology improved, there was an increasing need to ensure that firms served their products in the most efficient way. The emerging technologies presented this opportunity. The management of HSBC realized that it had to adjust its production system to reflect the new changes.
It employed new inventions and machines in its customer service process. It was also crucial that the firm popularize both their existing and products in the market. For instance, the new products that allowed customers to make transaction through the internet had to be popularized. Technology presented the firm with this opportunity. Another factor that encouraged changes in operational strategies of this firm is the changing tastes and preferences of the customers (Jain 2012, p. 118). The world is fast changing due to the new developments resulting from the emerging technologies. The business world has gotten increasingly competitive. The market in the financial sector has gotten highly competitive. Different competitors of HSBC are coming up with new products in the market that makes them gain competitive advantage. This has forced the management to come up with a unit within the production department that is responsible for developing innovative products in the market. It is now clear that a firm cannot manage this competition if it cannot develop proper competitive mechanism. These mechanisms will make the products appear positively unique in the market. This new unit has the responsibility of coming up with products that will be appealing to customers when they are presented in the market. HSBC has struggled to come up with means through which it can manage all these new changes. In order to understand how this firm has been fairing on in this market, a SWOT analysis in the section below would be appropriate.
Current Strategic Situation
The analysis given above shows that HSBC has a huge responsibility of managing market competition. The world is getting increasingly competitive, and it is important to find the best strategies to use in order to manage the emerging market trends. In order to develop an understanding of the current strategic situation of the firm, the following SWOT analysis would be very important.
SWOT analysis is one of the important tools that are very popular in analyzing a company. It helps in analyzing firms based on the existing internal and external factors. SWOT analysis would be very valuable in analyzing HSBC. In order to bring more understanding of the firm in this competitive market, a SWOT analysis would be appropriate (Mishra 2009, p. 117). It would help bring more insight to the opportunities and threats that this firm would face in the external environment. It would also help in understanding the strengths and weaknesses that the firm has.
Strength of this firm that would translate to increased profitability is a positive image in the market due to its environmental friendly projects. The world is increasingly becoming sensitive of the impact of various business units on the environment. The concern is emanating from the fact that it has been confirmed beyond any reasonable doubt that various multinational companies are polluting the environment at a very dangerous rate Chaston (2009, p. 98). Various environmental conservation projects are expected to give this company a different image in the market. This company will be seen as a firm that is smarter in its environmental strategy. The market will be convinced that this company is not just interested in making profits, but also turning the society into a better place. The firm will easily attract additional customers who are determined to make a positive difference in their society. This is because they will view the firm as one that helps in conserving the environment. They will consider the purchase of the firm’s product as part of environmental conservation. Because of this, the firm will develop a strong base of loyal customers. This firm may also take this advantage to reach out to the international markets. The project would give this company a moral right to claim that it is a champion of a clean environment in the entire world. The firm has a team of dedicated and qualified staff who are able to front all the interest of the firm both in the local and regional markets (Fasnacht 2009, p. 117). This team also supervises capital that is assigned to it in order to realize the best outcome for the organization.Get your
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Despite the above strengths, this firm has some weakness. The first weakness that this firm has is the discontent customers in some region such as the India. The fact that some of the employees are not satisfied with the way they are managed makes it very difficult for this firm to increase its profitability in these markets. The initiative of managing the environment is very challenging financially. It would cost this firm, large sum of money if it would sustain such projects over the years it expects to operate in this market (Galloway 1996, p. 38). The members of this firm expect to work in collaboration with other firms in order to clean the environment. The team may not have the capacity to rid the environment of all the electronic wastes, unless it is supported by other agencies within the local society. The local government must be convinced to participate in such projects actively. Other environmental agencies would also be invited to take part in the elimination of such wastes as plastic materials. The fact that such projects would involve partnership with other firms; success of the entire process may be jeopardized. Success would be pegged on how determined the other partners are in fulfilling their duties. The firm has also been accused of hiding what many have referred to as black money. This allegation has made it be seen as a firm that works with criminals. This has given it a negative publicity.
The firm has a number of opportunities in the external environment. In the local market in Europe and other European countries, this firm has managed to build a large base of loyal customers. The governments of United Kingdom and other European countries have strongly appreciated the move of this firm to help improve the environment of these countries, a fact that has earned it a large base of customers. The British government, and other governments where this firm operates, has maintained a very stable political environment. This means that the business environment is free from any political unrest that may disrupt normal business operations within the market. This has created a business environment that is very peaceful to various firms in the country. The firm also enjoys an economic growth in this region that has increased the purchasing power of the consumers. This increased purchasing power has helped the firm to increase its operations to regions beyond its borders. The emerging technologies have also helped HSBC in its operational strategies. The firm has adopted the emerging technologies in its operations, a fact that has helped it increase its efficiency (Gerber 2008, p. 17).
This firm faces a number of threats in its operations. Threats may not be predictable in this industry, though the firm may try to reduce the possibility of occurrence. The first threat that this firm faces is price wars in the market. The local firms may notice the strategy of the firm to charge lesser prices for its products, especially to those special consumers such as children or students. This may be in the form of reduced or elimination of withdrawal fee, or increased interest on earnings on deposited money. There is a possibility that the competitors may consider this move as a strategy that this firm uses to charge cheap prices for their products. The impact of this is that the competitors may respond by equally lowering their prices in the market. Such price wars are always dangerous to the prosperity of a business. The initiative may fail to make any serious sense. HSBC stores also face the threat from the emerging technologies. The emerging technologies are beneficial to the firm. However, they can pose serious challenge to the firm if it fails to select the appropriate technology to apply. Applying a wrong technology may cause serious negative consequences to the firm. Late application of the emerging technologies may also render such a firm less competitive in the market. The economic recession around the world is another threat that this firm must find a way of addressing.
Analysis of the Firm by Porters Five Forces
According to Bissoondoyal (2006, p. 28), the banking industry has been on a constant rise in the last two decades. Emerging technologies are changing the social structure of societies around the world. People, especially the youths, have come to appreciate the importance of having a bank account even before getting formal employment. HSBC has been keen with its marketing strategy. According to Ferrell (2011, p 95), one of the most powerful tools that a firm has in the market is the ability to reach out for the customers with the desired message in the best way possible. The management of HSBC has come to realize that this is one of the strongest tools that competitors like Barclays Bank, City Bank and Standard Bank among others are using today as a way of developing competitive advantage in the market. HSBC comes out as one of the leading financial institutions not only in European and the American markets but also in the world. With a market share of about 19% in Europe, this firm is the largest financial institution in the current British market. However, the recent incidents are poised to change these figures. The emerging trends are favouring some firms while hurting others. HSBC is one of the biggest beneficiaries of the emerging technologies in this industry (Gountas & Mavudo 2008, p. 89). It has become very popular, especially among the college students and businessmen.
Porters Five Forces
There are factors that this firm has to take care of. New firms will be entering this industry very frequently, especially due to the attractiveness of the industry. As mentioned above, Barclays Bank, Standard Bank and Citibank are some of the main competitors of this firm (Viardot 2004, p. 122). To tackle the threat of new competition, this firm has been keen on developing new products to rival those of new competitors. It has been keen to introduce new products in the market to counter any possible threat. Threat of Substitutes also threatens operations of this firm. To manage the threat of substitute products; this firm has developed different lines of products to satisfy different markets so that they may not be adversely affected if substitute products invade one line.
To increase their bargaining power with the buyers, this firm has continued to produce high-end products with qualities that make it easy for the customers to appreciate their high prices. In so doing, this firm has been keen to ensure that the lower end of the market is not assumed (Hooley, G 2008, p. 48). To increase its bargaining power with the suppliers, it has created a scenario where it is single buyer with various sellers. Merger is one of the ways of achieving this. This makes it able to dictate the terms of buying the products. To counter the intensity of competition, it has been able to acquire a special niche in this market, rendering their competitors irrelevant as their products are turned into mere substitutes of the company’s products.
Analysis of the External Business Environment (PESTEL)
Environmental scanning can be done using PESTEL Analysis. This involves the analysis of political, economic, social, technological, environmental, and legal environments. Politically, various firms in the United Kingdom have experienced a relatively stable government. The country has experienced a long period of political stability that has made it conducive for business (McLaughlin & Aaker 2010, p. 18). It has a very stable government that is supportive of business operations. The government of this country has ensured that the political environment of the country is peaceful enough to encourage business operations. Lack of political stability would mean that various businesses are not in a position to conduct business normally. Some may even be forced out of the market with huge losses in case the instability is accompanied by looting and arson.We will write a custom
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Economically, various firms in this country, including HSBC, have had difficulties. The firms have been faced with economic recession that hit various countries in the world, especially the US and European economies that had direct effect on various economies in various other nations (Hill & Jones 2010, p. 60). This had serious negative effects on the firms’ revenues as many of the customers considered the products as non-basic, and therefore there was more withdrawals that depositing. When the economy of a country is on a decline, the purchasing power is reduced, and this reduces the viability of various businesses. They will be forced to cut down their operation levels, as the market will have a reduced capacity to sustain them. During such times, weak firms are always faced out of the market.
The socio-cultural environment of this country is diversified. This is because this country has people from all over the world. There are those countries that cherish equality, and women have equal economic strength just as men. In such countries, the firm does not segment the market based on sex, but age. The United Kingdom is one such country. However, in other countries where this firm operates, like the Kingdom of Saudi Arabia, women are subordinates to men. It forces this firm to target the male members of the society because they the custodians of wealth.
The technological environment that firms in this country have to operate in is very dynamic. Technology inventions and innovations, especially in the field of communication have been the main challenge and strength of this firm at the same time (Graves & Parry 2008, p. 98). While this firm is left with nightmares of trying to guess what its competitors in the market are going to come up with overnight, it has used this technology to emerge as the leader in the market. Technological changes are so unpredictable and firms are struggling to come terms with these changes. The dynamism of technology in this sector has forced some firms out of the market.
Legally, this firm has not faced major challenges. The laws that govern trade in the United Kingdom and many other countries in the world have been very favorable to this firm. However, some firms have faced serious litigation cases for failure to follow some of the industry rules and regulations. It is important to note that although the largest market for this firm is made up of Christians, portions of the market are Muslims. Failure to follow the industry and national laws and regulation may not only lead to serious fines imposed by the government on the firm, but even a total closure of the firm.
There are some environmental concerns that would be considered a challenge for the firm. The United Kingdom is one of the developed nations in the world. However, other markets have poor infrastructure and this causes serious problems to HSBC, especially in distributing its products. Although these governments have made efforts to improve their infrastructure, others still need serious improvement in order to be considered as of the right standards. This jeopardizes the security for the subsidiaries of this bank in such regions. The facilities at various institutions of higher learning also need improvement for them to be in a position to churn out fully capable employees.
The main threat that firms in this country have had to deal with is competition. The market has gotten increasingly competitive. According to Montiel (2011, p. 67), many firms have come up with products, which are close substitutes of those that are offered by other firms in the same market. This scholar notes that there is lack of creativity in various countries. Various firms that come into the market are not creative, but just copy cuts. They come to the market with similar products as those of existing companies, and this brings about serious competition in the market. HSBC must come up with a strategy that can help it overcome this challenge.
Strategic Direction for the Future
Choices Available for the Company’s Strategic Move
HSBC is one of the leading financial service companies not only in Europe, but the entire world. This firm has been able to manage market competition, and other challenges within this industry. According to the discussion in the two sections above, it is clear that this firm has been successful over the past one decade. However, this firm has the responsibility of coming up with a better strategy that will enable it overcome new challenges brought about by the emerging market trends. As Greasley (2008, p. 72) states, the world has a lot of dynamism and it is important that a firm understands these dynamics, and develops mechanisms through which it can emerge as a competitive firm. HSBC has a number of choices available in its quest to coming up with a strategic route forward.Not sure if you can write
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The first choice among an array of strategies that this firm should come up with is specialized products for its customers. It is factual that this firm has categorized its products to different categories of customers; and then modeled them for those particular groups. However, the management should go beyond this. There have been new groups arising from the already existing groups. For instance, among the youths in United Kingdom, recent research shows that there is striking difference that separates different categories based on such factors as age, level of education, area of residence, race, and religion among other factors. As such, it is common to see a situation where a product which is popular among a given section of the youth, is disliked among other group (Sáez 2010, p. 93). This further specialization of the products also helps in advertising. When advertising a product, HSBC should have a clearly defined group. The way a Muslim youth would view an advertisement may be different for the way a non Christian will because of the religion. This firm should therefore, identify specific groups to target groups, and develop proper strategies that will be able to meet the demands of different markets.
The second choice that this firm should consider making is increasing its presence in the emerging economies. It is a fact that developed economies, especially in Europe, China and the United States make a very attractive market. However, these markets are almost saturated with the products offered by this bank. The bank must consider venturing into new markets, especially in parts of Asia and in Africa. According to Griffin and Moorehead (2012, p. 118), HSBC, unlike Barclays Bank, has not heavily invested in the developing economies, especially in Africa. This is contrary to the move taken by Barclays Bank. Barclays Bank has numerous branches in various cities in Africa. HSBC should consider this move because when it captures the global market, it is able to spread its risks. The firm will also have an increased customer base which will automatically translate to increased profitability.
The Arabic markets still remain very attractive option for this firm. Most of the Arabic nations produce oil. Oil is a very precious commodity in the world market. The richest firms in the world are oil companies (Mahadevan 2010, p. 90). Various American financial firms were forced to move out of some of the Arabic nations following the tension which was growing between the United States and the Arabic world. Citibank was forced to quite its operations in Saudi Arabia, with the subsidiary changing its name to Samba Financial Bank. HSBC should take this advantage and try to assert its presence in this market following the fallout of major American firms. This bank should make an effort to replace the American firms which left, or are still considering moving out of these markets.
The above choices are made based on some assumptions. According to Handlechner (2008, p. 58), social science is based on a number of assumptions. This is so because social science specifically deals with human being. This scholar notes that a human being is very unpredictable. As such, it is always important to make some assumptions when formulating policies that relates to a human being. In the first choice, the major assumption made was that United Kingdom is a cosmopolitan country where all the races and ethnic groupings are found. For this reason, all the groups talked about in this first strategy are easily found here. It is therefore, assumed that if this firm develops products for these groups, it will be able to attract these customers.
In the second strategy, the assumption was based on the research of a number of scholars who noted that HSBC is yet to make its presence be heavily felt in the emerging economies. The assumption was that this firm has made an effort to ensure that it captures some of the leading economies in the world (Mahadevan 2009, p. 121). The assumption was also that the emerging economies are still able to sustain more financial firms. This firm will be in a position to attract a huge market share. It is also assumed that these international markets have free markets where this firm has freedom of entry and exit. As such, this firm is able to venture into these markets without much restriction from governmental bodies.
In the third strategic recommendation, a number of assumptions were made. The first assumption was that the markets in the Arab countries are still unfriendly to American financial firms, and as such, American firms consider it a hostile market. This creates more opportunities for HSBC to increase its market share in this region. It is also assumed that most of the Arab countries are producers of oil.
HSBC is one of the leading financial institutions in the United Kingdom and even in the world. This financial firm has been able to operate with a lot of success, especially within the European market. It has managed to capture a large market share, especially due to a good external environment. An audit of the external environment shows that this firm has been enjoying a peaceful political environment in most of the markets it has been operating in for the last several years. It is also clear, that the external environment has had a number of opportunities that this firm has maximized which has made it reach its current position. However, this has not been without threats. The market has been characterized by a number of threats which has jeopardized growth of the firm at a rate that was desired. Competition in the market has been the main threat that HSBC has had to deal with. However, due to some internal strength of the firm, it has been able to overcome these threats to emerge as one of the largest financial institutions.
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