HSBC has its roots back in China and was established in the year 1865 to finance the growing trade between China and Europe and the group is named after its founding member. HSBC provides a wide variety of banking and financial services like personal financial services, commercial banking, corporate banking, investment banking and markets, private banking etc. HSBC has been successful in expanding its business in over 87 countries making it one of the biggest financial organisations in this world.
HSBC has been widely accepted around the globe by its customer's as the 'Worlds Local Bank'. The organisation has received the customer's faith very well and has been committed to make better financial and banking products to cater their needs.
HSBC has made its mark as one of the biggest global online payment service providers, their global product known as the HSBCnet is undoubtedly the best and the most used payment products in the world. The HSBCnet allows the businesses to transfer and make payments all around the world in a hassle free and cost effective way. The other services of HSBC which are common in all the countries are HSBC Premier and HSBC personal banking. HSBC Premier is perhaps the most liked privilege bank accounts by the customers. The premier service of HSBC marks the elite class of the public and the Brand attracts more and more customers to the bank. In 2008 HSBC was honoured as the world’s most valuable banking brand by the banker magazine. The organisation has backed many other such prestigious awards in the past, few of the latest ones are:
The Best Consumer Internet Bank Award in November 2008 by Global Finance Magazine
Top World Bank Award in July 2008 by The Banker
Best Emerging Markets Bank Award in July 2008 by the Euro money.
Followings are PESTEL Analysis of HSBC Group.
There are certain political factors that affect HSBC Group and its operation in various countries of its operation. Each country has their own political system and hence a proper analysis of the same is important from the organisations point of view to rule out the possibilities of any unforeseen hardships.
For HSBC Group their outsourced business processing centres in various countries like India, China, Philippines is their major strength and the amount of money the organisation saves due to operating in an overseas land is massive and in certain countries the government is restricting the foreign organisations to start their outsourced business which could prove to be a major loss for the organisation. Also, countries like UK and America where in the major part of the HSBC's business is outsourced to India, there is an increase in protectionism among the people and hence there is a threat that the government may take strict decisions in regards to keeping UK jobs in UK and American jobs to their native land for their citizens. These few above factors could be few of those political factors that HSBC as a global organisation needs to analyse to withstand any crisis.
Economic factors:
There are many Economic factors that need consideration by HSBC as a Global Bank. The changes imposed by the government during their budget sessions on the Value Added Taxes can cause issues related to finance within the organisation.
The other major changes like the increase in rate of the government bank can impact in the change and modification of the interest rate of the savings accounts that HSBC provides in that country. For e.g. in India the changes in the base rates of interest by the Reserve Bank of India, created havoc, the rate of interest by the government post offices and Government banks were increases quite a lot and hence to retain the business the Multinational Banks had to increase their rates of interest as well. This kind of unpredictable governmental and political scenario could have adverse effects on the business.
The economic factors like the decrease in the base lending and mortgage rates by the government can prove to cause major losses to the bank. Especially, in today’s current market wherein the Banks are slowly recovering from recession phase that hit various countries like UK, America, etc. few years back. The banks are in full swing trying to recover the money they have lost due to the irresponsible UK and US spending pattern and it would be a major setback for the Banks if such economic factors arise at the moment.
Constant fluctuating stock markets can also be considered an important factor for the banks. The volatile stock exchanges like the NYSE, NASDAQ, BSE, London Stock Exchange etc., where HSBC is listed can result in major fluctuations in the profitability of the organisation.
Social Factors:
As society and behaviour changes HSBC should offer services that primarily focus on benefiting the needs of the masses. The organisation needs to keep up with the pace of constant change in the demand and should focus on making certain different products that fit the need of the changing demands of the modern youth.
HSBC has been quite innovative in analysing the social market change and have come up with various new products around the globe to meet the expectation of the present day society.
HSBC's launched a new account called Passport account for the International Students in UK, the account features a debit card, a travel insurance, free driving lessons, discount coupons and a lot of other attractive benefits from a student’s point of view for as little as £8 a month, as they recognised the potential opportunity to attract the students to join HSBC.
HSBC has also been generously contributing and volunteering for the betterment of the society.
Technological Factors:
HSBC is known for its use of hi-technology. However, in the past the group has been victim of identity fraud, online server hacks, customer's sensitive account data disc loss etc. The group should concentrate on eradicating such occurrences as these can hamper the image of the organisation and people would start losing their faith in HSBC.
When banking is considered, it’s all about money and a lot of customer's changed their banks during the period when the security disc with sensitive customer details was lost few years back. However, HSBC does take good preventive measures to stop and avoid such occurrences, but, these online threats are still inevitable.
HSBC also has the biggest corporate and business online payment product in the world known as HSBC net (as discussed above), wherein transactions worth millions take place every day. However, there hasn’t been any security threat reported in regards to this product which is quite commendable and proves HSBC's highly skilled IT staff and proper investment in technology.
Environmental factors:
HSBC has made numerous contributions to the environment. The organisation has partnered with the Earth-watch institute, wherein the selected employees from the organisations worldwide go to various locations worldwide to study the environmental issues in that particular region, analyse what causes the environmental concerns and find solutions to fight it. The organization is also keen on conserving electricity by preventing the misuse and abuse of electrical appliances. In the annual report of HSBC Holding plc its mentioned that HSBC has contributed to the planet largely, just by following the best practice of switching off the computers and lights when they are not in use.
HSBC was the first banking organization to become carbon neutral. Soon after that the other organisations started following its footsteps.
HSBC also organises various campaigns in India wherein the employees go around the city and spread the awareness regarding environmental issues.
Legal Factors:
There are various legal factors effecting the external operating environment of HSBC. There are some fixed rules and regulations set by the government which the organization needs to abide with and failing to perform within those legal norms may lead to legal proceeding against the group.
Porter’s Diamond of national competitive advantage focuses on four main variables i.e. the nature of home demand, of national and created factor endowments, of inter-firm rivalry, and of related and supporting industries and two which influence these, chance and government (Safarian, A.E., 1993). Michael E. Porter used a diamond shaped diagram as the basis of a framework to illustrate the determinants of national advantage. This diamond represents the national playing field that countries establish for their industries and organizations.
Porter's Diamond of National Advantage
Followings are SWOT Analysis of HSBC group.
The biggest strength of HSBC is it brand name. The organisation has been functional in the banking and financial field from the last 150 years and has thus been successful in making a huge brand name.
The brand name of HSBC has great reputation in the market with the customer's and due to which HSBC has a strong loyal clientele.
HSBC has a huge clientele including the top businesses round the world like McDonalds, Subway etc. and these company share a long and good reputation with the organisation. The bank has been thus far successful with its customer satisfaction. The customer satisfaction surveys rate HSBC at the top.
The organisation also has a great customer focus; they make products round the world, which suite the customers need. The bank has numerous banking products for the people belonging to all sections of the society.
HSBC Premier Service of HSBC marks the high standards and high standard customers. The account comes with features like a platinum card with huge global benefits, free cash withdrawals worldwide and other more attractive benefits.
HSBC flaunts its business worldwide and calls itself the 'Worlds Local Bank'. HSBC has over 140 years of experience in China, which also helps to build up the trust of their customer’s, making it one of the oldest banks in the world.
One of the major problems that HSBC is facing in the UK is protectionism, due to it complete outsourcing of its banking back office work and call centres to Asian countries. The fact that UK is left with fewer employment opportunities due to the major outsourcing of such a huge bank has caused an emotional unrest among the people of UK. The customer's do not prefer their bank account details to be accessed by people from other countries and quite a few are losing their faith in the bank due to this.
The other threat due to outsourcing is that the customer's face numerous problems due to HSBC's having their call centres abroad in non-English speaking countries. Wherein a lot of customers have reportedly complained that the people taking the calls do not understand them and this has increased the number of customer complaints in UK and America.
There was a sensitive customer data loss by HSBC and their servers have been hacked by hackers make it quite vulnerable to online fraud and other fraudulent activities. These issues have actually weakened the strong brand loyal customer's of HSBC.
HSBC underwent a major crisis while it acquired HFC in the US under the leadership of Sir John Bond only to realise that HFC was the subprime lender in the US and this merger led to the shutdown of HSBC Finance in the US leading to major losses and huge job cuts. Careful consideration and analysis should be done by the management before taking these acquisitions decisions.
Furthermore, HSBC has been facing multiple issues globally with the retention of theirs staff in the main areas of their organisation. The company suffered huge losses due to high attrition rate among the skilled employees. The employees felt that they have become the first victim of the company’s new mantra of ‘Lean Mean and Hungry’ and working in the ‘Leanest way possible’.
HSBC's opportunities are vast, the organisation can grow further globally, it has its presence in 87 countries already and on its mission to become truly the world’s local bank. The other key opportunities of the organisation include further mergers and acquisitions.
In the past HSBC has been actively involved in acquiring smaller and larger banks across the globe. One of the biggest acquisitions so far by HSBC was in 1992 when it acquired the Midland Bank PLC. In the year 1999 HSBC took another major leap in acquisitions by taking over Republic National Bank of New York in USA.
A major threat that HSBC faces is in establishing itself and sustaining in the new countries despite the huge cultural differences in respect to the customer’s need and its operational environment within the new country. HSBC has been and will be facing many such issues and they need to identify the threats and try to maintain their image of being the ‘World’s Local Bank’.
HSBC needs to prepare itself to face economic turmoil’s and recessions. The bank needs to make important changes in their lending rules in UK and US, as many surveys suggest that the recession hit the market as people bought unnecessary goods for unnecessary people that to in credit from banks, which they were unable to pay for. Hence, to rule out the threat of major losses which actually lead to the recession HSBC needs to make major reforms in terms of their Credit Card lending conditions and Mortgage terms and conditions. The bank has suffered downfall in the US mortgage market as well.
HSBC has been facing issues with the employee satisfaction as well. During the period of recession the company faced high attrition as many skilled employees left the organisation, as they were not paid the promised bonus. HSBC needs to focus more on the needs of it employees and try employee retention techniques.
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