HONGKONG AND SHANGHAI BANKING CORPORATION (HSBC)

Introduction

Hongkong and Shanghai Banking Corporation Holdings PLC is a multinational corporation operating within the industry of investment banking and financial services. Its establishment is specifically to finance the growing trade between Asia and Europe. It is also one of the three commercial banks licensed by the Hong Kong Monetary Authority to issue banknotes for the Hong Kong dollar. To support the bank’s growth into a global financial institution, HSBC invested in new headquarters. Lord Norman Foster’s design is a demonstration of the bank’s commitment to Hongkong.

The company’s businesses range from the traditional High Street roles of retail banking, corporate banking, private banking, commercial banking, investment banking, and worldwide banking. It maintains several networks of around 600 offices in 20 countries in the Asia Pacific. They also own several HSBC banks operational in different countries and holding the stakes of the group, mainly in mainland China. It provides current and savings accounts, bonds, loans, mortgages, unit trusts, card products, deposit certificates, security products, and broking. In 2018, the company was ranked 7^th worldwide in the banking sector (Kynaston, David & Richard Roberts, 5). In Europe, it is among the largest bank.

The bank also provides the Hongkong Shanghai Banking Corporation net. This HSBCnet is an international service that caters to local businesses wants by offering specific functionality for different regions globally. The systems provide access to transaction banking functionality ranging from management of payments and cash to characteristics of trade services. The system, therefore, is put in use by high-end corporate and organizational clients of HSBC for the commercial banking and worldwide transaction banking divisions. The company assets are estimated at the US $ 2.558 trillion. HSBC is one of the major companies that compete for market share with the Industrial and Commercial Bank of China.

HSBC SWOT ANALYSIS

A SWOT analysis is a strategic planning tool that can be used by managers to do a situational analysis of any organization. Its framework entails the vital internal factors (i.es. strengths and weaknesses) and the fundamental external factors (i.e., opportunities and threats) (Sarsby 4). A SWOT analysis’s main objective is to analyze organizations’ strategies. This analysis can be used to identify and exploit strengths and external opportunities, counter threats while eliminating their weaknesses. A SWOT analysis can be used to ascertain the present Strengths (S), Weaknesses (W), Opportunities (O), and Threats (T) faced by HSBC within their current business atmosphere.

Strengths – Internal Strategic Factors

Being one of the leading firms in its industry, HSBC has numerous advantages that have seen it thrive in the market place. These strengths not only facilitate the protection of their current market share but also aids in penetrating emergent/new markets. The Hongkong and Shanghai Banking Corporation’s strengths are; It’s an active dealer community, whereby the company builds a tradition among its distributors and dealers. The dealers endorse the company’s products and also invest in training the sales team to explain to the customer how they can maximize benefits out of the products. A successful track record of developing new products through product innovation is also essential in ensuring the company stays at the top of its game. Highly skilled workforce who undergo successful training and learning programs are significant. They enable the company to come up with more innovations, which is to build the company’s image through its various products and services. The Hongkong and Shanghai Banking Corporation has been investing considerable resources in the training and development of its employees. This training results in a workforce that is both highly skilled and motivated to achieve more. Consistency of quality HSBC products and services that have enabled the company to scale up and scale down based on the demand conditions in the market. Good Returns on Capital Expenditure enables the Hongkong and Shanghai Banking Corporation is relatively successful at the execution of new projects and generating good returns on capital expenditure through the creation of new revenue streams. Its accessibility in the United Kingdom and the United States of America capital markets for future increase in the capital most definitely leads to the visibility and prestige of the HSBC. HSBC’s approach of diversification, both based on consumer groups and geographically, is also one of its strengths.

Weaknesses – Internal strategic factors

Fall in share prices and fluctuations in profits have been a problem for HSBC in the last few years. A lot of gaps in the product range provided by the company; this limited choice of range can give a competing company a gripping opportunity in the market. They have a low inventory turnover making them incur high costs in storage. This low turnover, in the long run, impacts the company’s cash flow. HSBC does not have an internal sales team feedback mechanism. it, therefore, shows a deficiency that counters challenges posed by new entrants, thus, losing small market share in the niche category. The profitability ratio and Net Contribution percentage of HSBC are below the industry average. Inefficient and poor financial planning. The liquid asset ratio and current asset ratio can be made to efficiently work for the benefit of the company than what they are doing at the moment. It’s branding, which is done using different names before, may have caused hurt in HSBC brand recognition. But they are trying to ensure all its corporations have the same name. The housing market’s bad debts are affecting HSBC due to the impairment charges of higher loans. These chares end up having an impact on the company’s credit opportunities portfolio.

Opportunities – External Strategic Factors

The opportunities section is used to identify untapped markets or emerging business opportunities that the Hongkong and Shanghai Banking Corporation Company can leverage. Opening up new markets. The adoption of the government’s free trade agreement has provided HSBC an opportunity to enter a new emerging market. The perpetually evolving technology has significantly opened up HSBC service delivery in terms of customer relationship management and supply chain management. New trends in consumer behavior can open up a new market for HSBC. It provides an excellent opportunity for the organization to build new revenue streams and diversify into new product categories too. Economic surge and increase in customer spending, after years of temporary economic decline and slow growth rate in the industry. This decline creates an opportunity for HSBC to capture new customers and increase its market share. HSBC has a chance to procure their products by the state and government contractors. This procurement has been made possible through the government green drive program. HSBC is the leading worldwide bank in Asia where the economies increase to extraordinary levels in the previous years. By capitalizing in these and additional emerging countries, the company can counterbalance problems it is set to have as expenses decrease in the United Kingdom and the United States. Another opportunity is for HSBC to transform itself from an international bank to a more differentiated worldwide financial services company, which is its objective.

Threats HSBC Facing – External Strategic Factors

Competitor companies’ development of new forms of technology poses a severe threat to HSBC. HSBC may have a variety of liability laws given the diverse market laws in existence in the different countries within which it operates. They also face the threat of counterfeit and low-quality products, especially in uprising small income markets. The inconsistent supply of new and innovative products. This inconsistency leads to extreme highs and lows in the number of sales. A prediction on the downturn in spending of the American housing market collapse and fears of an impending recession. This collapse will, in turn, cause less reliance on consumer credit and more on their saving skills to get by. This drop In the American spending will be bad for company expansion in other countries.

HSBC Proposed Company Strategies

One of the strategies that HSBC can use is to build on its brand and trademark. This branding would make its products and services easy to identify. Such a differentiation strategy would prevent any possibility of counterfeiting by the new market entrants. Possibility of mimicking and imitating HSBC products by new entrants into the industry would significantly reduce by a well-established brand, log, or trademark. Increased competition in the sector could prompt such counterfeit products or services. Improve capital efficiency by making financial decisions that aim at increasing the profitability rate and net contribution of the company.

On account of the present opportunities within the market, HSBC has not exploited the available gaps in the product range. HSBC products and services are only within the scope of traditional ceremonies or products; they offer day to day banking, insurance, investing, and borrowing. This diversification is comparable to the competitors within the industry. It is, therefore, prudent for the company to venture into new product options to accrue the benefits of product differentiation.

Business success usually is to associate their products with the extent of customer satisfaction. This fulfillment of the consumer will always result in repetitive buying behaviors. HSBC, therefore, should put its focus on improving its customer care services. Tapping into their existent market share and ensuring a continued dealership community ensures the customers return. This expansion maintains the company’s existent market share. HSBC customers associate with the brand’s strengths and qualities. When introducing new products and services into the market, the company should analyze their existent product qualities. Based on these qualities, they can set a bar for their latest products and services. New services or products will lead to the elimination of any form of inconsistency on their end. The disparity in products and services poses the threat of fluctuating sales and revenues.

The primary basis of any company is to ensure they have a competent workforce. For HSBC, their strategy to maintain the standards of their workforce would be to conduct employee appraisals and indulge them in continuous training. These standards will take a couple with the advent of Information Technology (ITd), a growing, dynamic field. Ensuring their workforce is continuously at par with the industry standards gives the company a competitive edge.

Strategy levels and types to maximize the firm’s competitiveness and profitability

Cost Leadership

According to D. Banker et al. (892), cost leadership strategies geared towards ensuring business sustainability. In this strategy, a company’s focus is on providing standardized services and products. Such standardization characterizes by the prevailing circumstances within their industries of operation. By implementing standardization in their products and services, their products would be able to minimize the cost of sales. The company also enjoys the benefits of being competitive in the market. Considering HSBC already provides products and services that are offered by other companies, they have an advantage over them. This strategy is an effective way for companies to focus on core competencies across products and business units that allow the firm to produce products with differentiated features at lower prices.

Downsizing

This downsizing is cutting down on costs and focusing on profitable products, thereby saving on the resources, which ultimately increases competitive advantage and profits. To benefit from such a strategy, HSBC ought to cut down on the sectors of its operation that do not attract high levels of revenue. Refocusing the finances directed to these sections of their business to the ones with more enormous potentials and income would increase their levels of profitability.

Product differentiation

By highlighting the firms ‘product superiority in technology, features, styling, pedigree, and price. Consumers can be able to spot the specific product from numerous competitor firms, therefore, making the firm stand out and gain profitably. Aside from offering industry standardized products and services, the company can invest in innovativeness through their employees and ensuring they offer new and better outcomes. This strategy would set them aside with their competitors

Gaining technological advantage

HSBC can competitively increase its profitability by earning a technological edge over its competitors. In a fast-moving world, this advantage translates to improved productivity, better sales, and market domination.

Despite the development of the bank outside of Hong Kong, it still maintains a commanding presence there since China is the place to want to be at present for banks and businesses.HSBC benefits for being the most trusted by people from China and an old company in China. The good news for the Hongkong and Shanghai Banking Corporation is that as other corporations develop, it does too. This growth is because it acquires fresh clients and fresh worldwide prospects daily. HSBC has the largest network of any foreign bank in China and profoundly understands the Chinese market and consumer. At some point in the not distant future, HSBC will gain stature as an international financial center when it is more open financially. HSBC, therefore, is a worrisome competitor for the Industrial and Commercial Bank of China. As many regards the demonstration of the willingness of China to maintain the economic dynamism and stability of Hongkong. The ICBC’s high profile makes HSBC want to improve its banking services within the territory.

Having endured virtually every kind of crisis in the most volatile environments, the Hongkong and Shanghai Bank Corporation emerges older, stronger, and wiser. Its excellent relationship with the government of China inevitably places it in a preferred position to lead future investment in ventures of the Chinese people.

Works Cited

D. Banker, Rajiv, Raj Mashruwala, and Arindam Tripathy. “Does a differentiation strategy lead to more sustainable financial performance than a cost leadership strategy?.” Management Decision 52.5 (2014): 872-896.