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Chapter 1 (Intro)
1.1 Introduction

To become the leading international bank HSBC has combined the emerging markets through international connectivity and scale yet maintaining the strategy unchanged. To comply with the recent economic turmoil HSBC's strategy is apparently most appropriate one as the projected the return of total shareholders' equity remains achievable over full business cycle. Reinvestment of the capital allowed the company to maintain flexibility of direction in accordance with financial and regulatory environment. This can help the company to make the long term decisions supporting the brand values and the customer relationship and the growth to be consistent with the strategy.

The ‘Managing for growth' a diverse evolutionary strategy ranging from 2003 to 2008 for HSBC's growth and development across the globe addressing the areas where desirable and attainable improvement can be made; was an ultimate success. Unlike competitors, the consistent approach to grow within the emerging markets HSBC did not have to dispose any stakes in strategic investments to generate capitals. Depending on the customer demand and maintaining the strategic line while reviewing the emerging new opportunities, HSBC has successfully survived in the period of uncertainty. The company has increased the number of HSBC Premier Customers to 2.9 million, and the customer volume is increasing highly in the emerging market. During financial crisis and economic recession the global financial markets have suffered a serious impact. Very few banks have escaped unharmed by adjusting to shifts in the global financial and economic environment.

Market entry timing decisions are inherently difficult. A firm's managers need to consider the influence of so many factors both internal and external to the firm in deciding when to enter a market with a new product (Lieberman and Montgomery, 1991). Firms face a particularly difficult decision of planning when it is best to enter a market with a new product in response to a market introduction of a pioneering new product by a major competitor. Given that pioneering is no longer an option, is it better for the firm to enter the market quickly with a competitive new product or is it better for the firm to delay market entry for strategic reasons.

When the competitive stakes are high, it is clearly in a firm's best interest for its management to plan carefully such a market entry timing decision by giving careful consideration to a broad array of information including information on the competitor, the competitor's product offering, the market, and the firm's internal resources and product offerings. Considerable academic research has been conducted that suggests the desirability of certain market entry timing strategies for a wide array of conditions in the competitive environment (cf. Bowman and Gatignon, 1995; Brown and Lattin, 1994; Green et al., 1995).

The business world composed of organization and work becoming more demanding and wild. Facing organizations are now facing so many challenges. Among them globalization, customer awareness, higher revenue with minimizing the operational cost, strengthening the organizational capacity, renovation and change, technological implementation, maintaining diverse human capital, and confirming essential and constant change. Fortunately the degree of competition among industry rivals has significantly increased. Now most of the organizations can easily duplicate technology, industrial methods, production, and even strategy. To gain the competitive advantage in the long run, business houses need to establish their own organizational capability (Burke & Cooper 2004).

1.2 Background of The Study

HSBC is a prominent name in the global banking industry. This bank has been operating successfully all around the world as a local bank with its efficiency and effectiveness. The integrated strategy of HSBC and on time decision made it becoming a threat for other long lived bank in the industry. The strategy the bank had followed make it to cope up with all sorts of cultural barriers and to be along within the society and create the better brand value compare to the other rivals in the banking industry. The reason behind the on-going prospect of this bank is due to a reason which made is to gain the competitive advantage in the global money and investment market. Lately the economic crisis hit the global money market and retail banking industry injuring the performance of all the major players in the industry as the confidence and the trust of the customers were gone.

1.3 Rationale

This study is a requirement for the course I am enrolled in. This study will help me to utilize the acquired knowledge/theories and relate them to the applied business. The title was chosen as banking industry is one of the diverse industries and UK is one of the most competitive markets where the industry rivals constantly changing their strategies to adopt with the change and HSBC is one of the best performing banks in it. With the establishment of the purpose given, this study may be of importance to the purpose that have been discussed by fulfilling the objectives, the study will be helpful for researchers focusing on different strategies and innovative techniques with regards to the method of gathering the information. The findings of the research will be helpful for researchers in creating their own means of conducting their study. The significance of this study is the option that it may contribute the findings for the other studies that wish to examine factors for the success or failure of a study. Another importance of the report is to serve as a director for researches that emphasis on defining the effects of an integrated marketing strategy which made HSBC successful in the UK banking industry as well as globally.

1.4 Aim and Objective of the Study

The aim of the research to find the answer to the research question

“How can HSBC Continue to Maintain Its Competitive marketing advantage in the UK market?”

The objective of this study is to identify the reason behind the success of HSBC and the challenges the company may face in future and the potential strategy the company may follow so that it can maintain its leading position in the UK retail banking industry. So, the prime objectives of the study are as follows:

§ To identify how HSBC operates and what made it unique besides others

§ To identify the attitudes of the UK customers towards HSBC.

§ To identify the attitudes of the company staffs towards existing marketing system.

§ To identify the shortcomings (if existed) of the Strategy being adopted by HSBC

§ To identify the most effective strategy appropriate for HSBC in response to the current financial crisis in UK.

1.5 The Organization of the paper:

Unlike the conventional approach this paper is furnished with the industry analysis focusing on the UK banking industry in term of its performance, effective factors leading HSBC to become more successful, the changing switching tendencies of the customers, role of the SMEs in the industry and an overview on the investment criteria in the money market.

The study will initially gather information that will serve as introductory part of the study. The study will then gather related literature to prove the need for conducting the study. The literature review can help in determining what are the studies already done, what study needs to be corrected. The study will then determine the methods and means for data to be gathered and analyzed. In this part the data is being readied to be gathered and analyzed but the method to gather it will first be determined. The next part of the study is gathering, presenting and interpreting the data. In this part the validity of the hypothesis and ideas about the study will be proven. The last part of the study will be the part where conclusions and recommendations will be stated. In this part final statement about the study will be done.
The study will be organized in accordance with the following order

Chapter 2(Literature Review)

According to Porter (1985) it is the value chain through which a company can create and offer value to its customers by efficiently utilizing costs and effectively offering the product or services through a lower cost or a higher differentiation. Again Rajnandan (2007) said value chain not only seeks to do away with the activities that do not add value, but establishes the importance of other support activities, including infrastructure, technology, and so on, that play a vital role in providing the foundation for competitive advantage. The value chain also is useful in outsourcing decisions. Understanding the linkages between activities can lead to more optimal make-or-buy decisions that can result in either a cost advantage or a differentiation advantage. (Graeme J. Buckley, 2006) After defining the discrete activities marketers need to identify the linkages between activities. The relationship survives if the performance or cost of one activity affects that of another. Competitive advantage may be obtained by optimizing and coordinating linked activities. (Porter, 1985)

The developed opponent's expected strategy, where it participates in the marketplace, how it competes, and what it tries to achieve, should be distinct from any strategy pursued by any rival. Those executives charged with visualizing the developed rival's strategy should also be encouraged to go beyond the likely strategies of announced. It is necessary to communicate the competitive variables to the target market as that will force the buyers to prefer the products. Where marketing communications carries the meaning of the company's product attributes, aiding customers reach their goals and moving the company closer to its own goals.' (Lancaster, 2002)

Marketing efficiency depends on communications effectiveness. The market is activated through information flows. The way a potential buyer perceives the seller's market offering is heavily influenced by the amount and kind of information he or she has about the product offering, and the reaction to that information. Marketing, therefore, relies heavily upon information flows between the seller and the prospective buyer. (Thomas A. Staudt, Donald Arthur Taylor, 1976)

The firm's value chain links to the value chains of upstream suppliers and downstream buyers. The result is a larger stream of activities known as the value system. The development of a competitive advantage depends not only on the firm-specific value chain, but also on the value system of which the firm is a part. (Kiichiro Fukasaku, 2007) Dramatic changes due to globalization, deregulation, and technology have redefined the nature of business by increasing competition. Significant increases in the speed of competitive response and the number of competitive actions and price cuts have also resulted. Those indicators highlight the intensity of competition. (Gr, Cu, Le, Hu, Ken G, 2005)

Unlike the classical concepts, the marketing concept states that the nature of the marketing orientated organisation, whether product or service based, profit or non profit based, is the identification and genuine satisfaction of customers needs and wants, more effectively and efficiently than the competition. The marketing concept has been defined as ‘the key to achieving organisational goals' and the marketing concept rests on ‘market focus, customer orientation, co-ordinated marketing and profitability'. (Le, Ru, Lancaster, 2002). ‘Marketing Research is a systematic problem analysis, model-building and fact-finding for the purpose of improved decision-making and control in the marketing of goods and services' (Kotler, 1999)

Strategic capabilities that companies can use to support the strategy they have chosen to pursue. A strategic capability offers a company a sustained competitive advantage when substantial time and effort is required for competitors to develop the same capability. (Susman, 1992)

Game theory more specifically, non-cooperative game theory can be a useful tool for investigating a comprehensive model of competitive advantage in that it demonstrates the linkages between resources, competitive moves and responses, and advantage. (Gr, Cu, Le, Hu, Ken G, 2005)

The ability and speed with which a company can learn from experience is another strategic capability. The ability to learn is dependent, in part, on how the company captures and accesses information. Companies can simplify this process by minimizing the amount and complexity of information they have to process. (Susman, 1992)

Only by gaining a deep and comprehensive understanding of buyer behaviour can marketing's goals be realised. Such an understanding of buyer behaviour works to the mutual advantage of the consumer and marketer, allowing the marketer to become better equipped to satisfy the consumer's needs efficiently and establish a loyal group of customers with positive attitudes towards the company's products. (Lancaster, 2002)

Competitive advantage is a way of firm's gained advantage over its rivals. Competitive Advantage introduces a whole new way of understanding what a firm does. Competitive Advantage takes strategy from broad vision to an internally consistent configuration of activities. Its powerful framework provides the tools to understand the drivers of cost and a company's relative cost position. Competitive Advantage also provides for the first time the tools to strategically segment an industry and rigorously assess the competitive logic of diversification. (Porter, 1998)

The design stage determines the way in which a firm intends to differentiate its good or service from rivals. In this stage a firm makes choices to gain a competitive advantage over rivals. (William, 2004) For a single product or narrow group of products, a firm's competitive strategy refers to the weighted mix of price, product qualities and features, and service that differentiates its product from those of rivals. (William, 2004)

The Competitive Advantage model of Porter learns that competitive strategy is about taking offensive or defensive action to create a defendable position in an industry, in order to cope successfully with competitive forces and generate a superior return on investment. According to Michael Porter, the basis of above-average performance within an industry is sustainable competitive advantage. There are 2 basics types of CA: Cost Leadership (low cost) and Differentiation.

The Delta Model contains the following elements: Strategic Triangle: used for defining strategic positions that reflect fundamentally new sources of profitability (three strategic options: best product, customer solutions, and system lock-in), Aligning these strategic options with a firm's activities and provides congruency between strategic direction and execution (three fundamental processes are always present and are the repository of key strategic tasks: operational effectiveness, customer targeting, and innovation), and Adaptive processes: core processes of the company must be aligned to the chosen strategy in order to make progress against the strategic agenda and avoid a commodity-like outcome.

2.1 The Trends (Customer Focused)

E-trading and online customer services are becoming the key differentiators in every industry. The banking industry in the midst of a shift assisted and backed by the rapid technological advancement, internet and globalization. The transition is not an incremental one through which organizations, processes, and technologies evolve in linear fashion into more advanced, but still familiar models which is distinct from the earlier industry change. Industry observers anticipate that this transition will be much more radical and constitute a complete metamorphosis of banking's entire business model, realigning everything from its strategic business orientation to its technology architecture to its value proposition to its customers. (Balthasar, 2010)

2009 is a significant year forcing many private banking experts to remember. Privet funds failed to generate revenue as clients withdrew assets from private banks. The global financial crisis has fundamentally changed the investment pattern of the High Net Worth Investors and their wealth management business itself.

Growing Market

‘Many “new money” acquire their wealth through IPO. Brazil and China accounted for two-thirds of global capital raised in Q2 2009' (Ernst & Young, 2009) showing that there is a growing demand for private banking and wealth management service in the region as the economy is rapidly growing.

China's growth will outstrip US which is a good news for private banks who have a strong APAC presence, wealth management professionals should understand that the Chinese market is not easy to penetrate.

§ First of all, client advisors need to be fluent in Mandarin and have local connections.

§ Secondly, guanxi (relationships) still plays an extremely important role in the modern Chinese business community, private bankers without access to key relationship brokers as references will find it very difficult to convince Chinese HNWIs to open accounts. Private banks that hire locals will have a definite advantage over expats trying to cover Chinese clients. (Warren Buffet, 2009)

Responsible lending

Affordability assessment approaches vary across the industry. Responsible lending decisions require checks to be made concerning income and outgoings (typically using a combination of income multiples and affordability models) when assessing ability to repay now and into the future. Also the type of lending undertaken and the type of borrower (for example, applicants with impaired or low credit ratings) may require more detailed assessments to be carried out.

Other (unregulated) lending Mortgage lending is only part of the affordability picture. Under the auspices of Treating Customers Fairly (TCF), affordability assessments are equally relevant to other borrowing, including personal loans and credit cards, and a number of lenders are looking at how their affordability assessment processes may need to be strengthened for these types of credit.

In an effort to strengthen existing rules, new Banking Code guidance concerning assessing affordability in relation to unsecured loans (overdrafts and other borrowing) was issued by the Banking Code Standards Board in April 2006. Any assessment should now include at least two of the following:

§ Income and financial commitments

§ Repayment history

§ Credit reference agency information and past repayment history

§ Credit scoring.

It is also worth noting that the Office of Fair Trading's recent guidance (‘the OFT Guidance') reinforces the need for firms to have regard to its earlier guidance on non-status lending and confirms its intention to consider further specific guidance with regard to irresponsible lending and what this may mean in different market sectors and circumstances.

Responding to the concerns

The FSA has indicated that as part of its retail agenda it will continue to focus on quality of advice processes in the mortgage market. In responding to these concerns, firms will wish to consider how the results of the FSA's findings impact each of their lending businesses:

§ How extensive is the affordability process; does the advice process include an assessment of income and identifiable expenditure; anticipated changes in personal circumstances (income/expenditure composition); impact of interest rate changes and possible future increases in interest rates?

§ How can the consumer deal with mortgages extending into retirement?

§ What steps are taken to ensure that underwriting processes (including income multiples and affordability models) reflect the different characteristics and risk profiles of customers in different market sectors (for example, sub-prime; non-conforming)?

§ Is the recent assessment carried out to identify the affordability (including affordability decisioning models) to meet the regulatory as well as commercial drivers impacting the business?

§ What steps are taken concerning the assessment of the customer's ability to repay where ‘enhanced' income multiples are used (and where the firm may have insufficient, or outdated, data to measure the potential impact/risks of default)?

§ What MI does the consumer have to facilitate the identification of affordability issues on a timely basis (for example, the performance of loans where ‘enhanced' multiples have been applied; at the end of any discount period; the level of arrears and repossessions; lending introduced by intermediaries)?

Even for long-established product offerings, it is clear that nothing stays still. Aside from regulation by the FSA, the market still needs to respond to the challenges of competition investigation into the PPI market.

Household Leverage:

In the years leading up to the crisis, a combination of factors, including low interest rates, lax lending standards, a proliferation of exotic mortgage products, and the growth of a global market for securitized loans fueled a rapid increase in household borrowing. (Shedlock, 2010)

‘The recent financial crisis contributed to the longest and most severe economic contraction since the Great Depression. The rapid expansion in the use of borrowed money, or leverage, by households in recent years, is one factor that may help account for the virulence of the downturn.' (Shedlock, 2010)

‘The common patterns observed across countries suggest that, the unwinding of excess household leverage via increased saving or increased default rates could be a significant drag on consumption and bank lending going forward, possibly muting the vigor of the economic recovery.' (Shedlock, 2010)

2.2 Changing Nature of Consumer Behaviour (Higher Expectation)

‘Customers take control. Customers will be smart, informed and savvy users of financial services. They will only be interested in service providers that can meet their very specific individual needs.' (CMA Management, 2006)

Global banking leader for the Institute for Business Value, each bank must decide on a strategy that fits its customers' needs. Banks will need special strategies to cater to a far more discerning--and controlling--customer. Innovative approaches to business design, customer service, workforce management and IT will be critical to banks' future success. (Sunny Banerjea, 2009)

Banking customers will demand more advocacy, personal security and control in their banking relationships Banks will source products and services from many specialized and best-in-class service providers, including independents and other banks providing white-label products and services. Innovation in products, processes, relationships and business models will be the primary path to sustainable growth.

Furthermore, the modern banking industry has brought greater business diversification. Some banks in the industrialized world are entering into investments, underwriting of securities, portfolio management and the insurance businesses. Taken together, these changes have made banks an even more important entity in the global business community.

2.3 Globalization (Intense Competition)

‘By 2015, we will live in an intensely customer-centric market that is dominated by global mega banks and densely populated by specialist financial services providers. Fierce competition, global regulation and technology will reshape bank and non-bank structures.' (Rusty Wiley, 2009)

Banking is moving incrementally but unmistakably away from a model based on products, transactions, touch points, and internal departments toward one based on customers, processes, integrated experiences, and the enterprise-wide value of information. The new strategic centre is not an institution's asset size, market share, revenue growth, or operating efficiency, but the “customer experience” the institution provides to consumers. Whether a seismic departure in focus or simply a more pronounced emphasis on an existing strategy, many banks have decided this is their destination.

Many countries are now more alert after so many scams including The Bernard Madoff $65 billion Ponzi scheme exposed in 2009. To minimise and control the false trading activities and tax evasions, governments worldwide demand more oversight of banking operations influencing not only the investment banking business but also the private banking side. The account opening process, KYC and offshore banking activities are under tighter scrutiny than ever before. As a direct result, banks have to spend more money on compliance and risk management. (Investment Research, 2010)

Banks no longer think in terms of selling products and making transactions, but rather in terms of acquiring, satisfying, and retaining customers. They are realigning their system architectures to recognize, integrate, and monitor business processes that span departmental boundaries and consider customers from a company-wide perspective. The resulting systems provide customers with tools to conduct their own banking business on their own terms, in their own time, and through whatever channel they happen to access. (Balthasar, 2010)

This shift in strategic focus has already had a profound impact on the way that banking's role and value to its customers have evolved, leading to the second feature of the industry's transformation, which is that banking is no longer seen as purely a financial transaction, but rather in a broader and more significant way as a financial information business.

This distinction may sound like splitting hairs, but the eventual effect on the banking industry will be nothing short of transformative. To better adapt and accommodate this shift successfully, banks will have to recon and upgrade their entire IT infrastructures.

The excellent international reputation and the $300 billion private banking assets the region currently manages, the Singaporean government is aggressive in making the country more attractive to private banks and HNWIs worldwide. Singapore officials are planning to amend the Income Tax Act, which is likely to help the country to make Organisation for Economic Cooperation and Development's “white list”, further establishing itself as Asia's private banking stronghold. (Wall Street Arrow: Market Insights, 2009)

The competitive pressures that have squeezed the banking industry for the past decade show no sign of letting up, principally due to the banking industry's continuing consolidation. (Balthasar, 2009)

Many industry analysts are expecting another round of large bank merger announcements, with the additional element of international banks involved in cross-border mergers. We have seen the beginnings of that trend already in Europe, with the acquisition of Abbey National (U.K.) by Santander (Spain) and the protracted dispute between Dutch bank ABN AMRO and another Spanish bank over two Italian banks. One important ramification of the continued growth of leading banks will be their ability, based on their sheer size and higher efficiencies, to invest in world-class data storage, management, and analytical capabilities, thereby extending their dominance by the development of innovative revenue-generating products and services. The transition to banks as primarily an information source has helped lower the barriers to entry in the financial services industry, opening the banking arena to a host of new, non-bank players. The current alarm among banks and their regulators about Wal-Mart's efforts to obtain an industrial loan company (ILC) license in Utah is the most visible manifestation of that trend.

2.4 Technology (Customised Service)

Sharply focused technology. The enabler of all this change will be technology that supports rapid, accurate decision making and greater operational flexibility and efficiency. The successful specialists will be those who can track and analyze specific customer needs and speedily meet them with profitable, reliable products. (CMA Management, 2006)

The global trend of deregulation has opened up many new businesses to the banking industry. Coupling that with technological developments like internet banking and ATMs, the banking industry is obviously trying its hardest to shed its lackluster image. (Investopedia, 2010)

The major force driving banking transformation stems from the increasing commoditization of financial transactions. Banks can no longer distinguish themselves on the basis of product set functionality or operational excellence. Commercially available systems have perfected virtually all the important functions in basic transactions, including payments, deposits, funds transfers, and account reporting. The maturity of technology in these areas has made both functionality and pricing nearly uniform among leading vendors.

The sheer volume and scope of regulatory requirements has imposed on banks an unprecedented need to develop transparent systems and processes, along with more effective and reliable means for collecting, storing, and manipulating information. Going forward, banks will need to develop an approach to their IT infrastructure that places a premium on flexibility, adaptability to rapidly changing market circumstances, and the ability to integrate information from multiple sources currently isolated from each other.

The competitive landscape has also shrunk considerably. In June 2008, there were 46 lenders offering unsecured personal loans, down from 58 in June 2007, however, by June 2009 this number had dropped further to just 37.

The real value proposition that banks offer now is in the information they can provide about financial services and transactions, from a perspective of accessibility, speed, convenience, granularity, analysis, and so forth. In other words, the important question to ask banks now is “how quickly, accurately, deeply, efficiently, transparently, and finitely can they capture, parse, store, identify, access, retrieve, sort, match, analyze, aggregate, present, share, distribute, and protect data?” Therefore, leading banks are basing new technology strategies on transforming and enhancing their command of information. Although they already sit atop vast amounts of data about their customers, banks in many respects are unable to identify and/or retrieve it with any degree of precision. With banking's future growth and profitability dependent on the ability to aggregate information across systems and reorient it by customer instead of product, technology spending decisions will henceforth be guided by how well a proposed solution furthers a bank's command of information. (Balthasar, 2009)

Data management

The command of information should be incorporated it into technology development by the vendors allowing them to capture (automatically as much as possible) descriptive and associative information about customers, transactions, and workflow circumstances as distinct data fields; to identify, access, associate, aggregate, sort, and display data from disparate sources; to exchange, transfer, compound, and deconstruct data freely across system boundaries; to normalize, integrate, and analyze that data for a specific purpose and for a specifically designated market segment; to drill down and parse data into ever more discrete units that can be segregated and analyzed; and to manage all of the above in near-real time through centralized database management and automated business processes with rules-based workflow and exception management.

Initiatives and architectures not built on a sophisticated data management core will provide only limited benefit, since sooner or later they will be unable to integrate fully into a bank's overall architecture scheme. Wasteful duplication of spending and resources will continue, thereby denying banks the operational efficiency they need to rebuild margins and provide meaningful value to their customers and shareholders.

Priorities in Banking Technology:

All of the strategic imperatives above will require banks to adopt flexibility, speed, and transparency across operations. This will require a technology orientation fundamentally based on horizontal integration and spanning multiple business lines, rather than vertical integration within individual business lines. The priorities for banking technology in the next several years will be data capture and management across geographies and business lines, mining and analysis of customer information to enable more customized service and profitable relationships, more efficient and scalable business processes, and nearly fool-proof regulatory compliance. Meeting these objectives will significantly reduce a bank's IT cost base through the use of competitive, low-cost technology and allow banks to move forward with architecture upgrade initiatives by replacing application modules rather than risking full-scale system replacements. While banks are still several years away from realizing these wholesale changes, there are a number of areas where technology is already beginning to enable a longer-term transformation. These are the hot technology priorities for banking in the short-to-intermediate future.

CRM Management

The maturity of transactional banking services is forcing transaction fees downward in tandem with narrowing interest margins and driving the need to understand customer profitability and risk more accurately, over and above the more direct objective of raising customer satisfaction and loyalty. Strengthening the overall relationship with the customer is one of the highest priorities for virtually all banks. Developing a single view of the customer with consistent and up-to-the-minute information across all business lines is driving the next generation of customer relations management (CRM) technology.

2.5 Economic Turmoil

Market corrections can easily become crashes as confidence is lost. The threat goes deeper than the possible extent of credit losses on complex asset and derivative products. This latest financial crisis could seriously affect business revenues and costs more widely. However, the US Federal Reserve Bank has cut US rates, stock market values have remained buoyant, and Bank of England auctions to provide liquidity, albeit at a price, have gone unused.

All firms will have to factor in the likely impact of a weakening economy and housing market on loan loss provisions and recoveries. Concerns remain that the liquidity crisis in the debt markets could spill over into the equity market and trigger a steep fall in prices (a fear that was unfounded at the time of writing this article as the FTSE 100 stood at over 6500, only 3% off the 12-month peak). For the moment, firms that hold good levels of cash and employ a spread of short-, medium- and long-term funding methods are largely unscathed by the credit crunch.

In the short term there may be casualties across all sectors among businesses that are reliant on short-term funding from the debt markets. But if rising mortgage rates undermine High Street spending, businesses that depend on consumers' discretionary spending will be impacted. Ongoing evidence from the US points to problems in the housing market, and elsewhere consumers appear to be showing greater willingness to manage to lower personal debt levels.

The ripple effect of the credit crisis on business (which, more accurately, is a shortage of liquidity and difficulties in pricing credit risk) that began to unfold in August 2007 could have the potential to be deeply damaging to the conduct of everyday business, to reputations and to attitudes to risk. And the full extent of the impact is still unfolding.

Yet this was a crisis long predicted, although the speed and severity caught almost everyone out. The roots of it go deep - into the dot-com crash of 2000 - when, around the world, the response was to keep interest rates as low as possible to encourage a return to economic confidence. Money became cheap and plentiful, and as a consequence, investors increasingly found themselves competing for assets, the pricing of risk became increasingly difficult as structures became more complex, and frequently investors underestimated the real risk. With low interest rates, benign inflation and rising asset prices, all was going well. As interest rates have risen over the past few years, the chickens have been coming home to roost.

Financial services companies will struggle with portfolio risk and complexity, the difficulty of fair valuing assets and the need to rapidly rethink strategy in the light of radically changed conditions. Banks and fund managers, in particular, face a rocky time working through the repercussions of investors' failure to fully understand the risks they were taking on.

Far fewer are now prepared to buy securities such as the commercial paper and certificates of deposit issued by banks and building societies to raise short-term money. And more institutions are reluctant to undermine their own strength by lending to others. The most popular home for cash is overnight deposits held by banks with the strongest credit ratings and where the funds can be called at any time. The market has already begun to differentiate much more sharply between issuers, to the benefit of those with the strongest balance sheets.

The UK remains one of the most expensive places for expats to live - and the recession has taken its toll. The UK emerged as an expensive destination in many categories. Compared with life in their home country, high proportions of expats in the UK claim they now spend more on their accommodation (79%), transport (68%), holidays (62%), utilities (61%) and entertainment (58%). In fact, expats in the UK spend more of their income on accommodation than expats living anywhere else in the world (85% of UK-based expats rank their home as their greatest expenditure). The second and third related item that they spend their cash on was found to be food and entertainment. (HSBC Bank International Expat Explorer Survey, 2009)

Expats in the UK were the worst savers/investors globally, with more than a quarter (27% the highest recorded in the survey) saying that they had reduced their savings and investments when compared with life in their home country.

The UK personal lending market has suffered considerably over the past year. Lending has declined across all product lines, and many lenders have left the market entirely. While some signs of recovery are on the horizon, the supply of credit is still restricted, and perhaps more importantly, consumers are reducing borrowing and debt obligations.

Datamonitor expects conditions to remain tough throughout 2009 and 2010 before improving in 2011. Datamonitor's expectation is of an overall contraction of around 12% in the market from £192.9 billion to £170 billion between 2008 and 2009.

HNWI clients are likely to remain extremely sceptical of private bankers and advisors in the midst of financial turmoil. How to rebuild trust remains a top priority for private bankers. Proper disclosure of conflicts of interests can address some concerns. True private bankers are professionals who should act like doctors, who can be relied on to give impartial expert advice. Private bankers who can in still confidence are likely to remain top performers.

Left Opportunities:

Corporate UK is still relatively lowly geared and companies are holding a fair amount of cash. This could be the moment to do deals. There is a backlog of deals to be done, as well as a great deal of money available to invest, with Asian growth and Middle Eastern oil dollars adding to the funds needing to find a home. Alongside the threats to business, there are opportunities, and money is still available for good quality propositions.

In the financial services sector, the short-term funding famine could accelerate the rate of consolidation. Certainly, from a long-term perspective, current market prices for bank stocks look low. And one consequence of the impact on the private equity sector of the credit markets turmoil is that backers of M&A deals are likely to be sitting on their hands. This gives strong trade buyers a chance to make strategic acquisitions without seeing prices driven up by private equity backers. Companies that have accumulated a war chest of funds for just such an eventuality will now be well placed.

Organisations can, and will, continue to make money where they manage risk effectively. Those that do well will be increasingly sophisticated, as discussed below. However, of critical importance is ensuring that there is adequate governance over the steps taken.

Chapter 3 (Overview)
Market Trends (Increased Competition)

Current issues faced by retail banks arising from this changing environment: revenue replacement, liquidity risk management, changes to processing systems and managing credit risk through the receivables management sector. Whether banks can again make the waterbed effect work to maintain overall revenues following pressure on unauthorised overdraft charges and payment protection insurance income streams.

The changing environment for core systems and demonstrate that leading banks are moving towards a more customer rather than product centric view of systems development, with many banks choosing a vendor strategy rather than an in-house IT development model. Transaction banking : Faster Payments Scheme but point out that there are plenty of further changes in the retail payments environment which need to be planned for to ensure that banks can continue to provide a great customer interface and experience for their retail transactions.

In this business the main factor that will clarify the existence of the fittest in the industry is making the right choice in the right time. After the devastating effect on the world economy, banking sector of UK has fallen apart and some of the organization in this industry has taken the position HSBC used to have. A business such as investment banking has its drawbacks in the field and it is also important to make sure the core of the decision making process that will enable the organization to return more profits to rather than counting the losses. The current situation of Banks in UK have overcome the obstacles to increase the performance level of the organization by creating more opportunities for their banking sector and more and more investment ideas which are becoming risk free rationally after conducting research thoroughly using all possible negative outcomes to cut the losses. Many research has shown that most of the time banks didn't take any precautions before investing into the market and the whole project ended up to be a total loss. In recent years UK banks have started to show more prospective on retail banking and some of the banks have taken serious benefits out of it. The current scenario of retail banking have the market value higher than any other investment banks have ever made in banking history. The most valuable asset in this part of the banking is that they have bigger market of small investments rather than making bigger investments in a smaller market. We all know that risk management has the characteristics to asses' risks in making investment way before it happens and mathematically it is quite accurate if it has been visualise in a segment of the market with facts with numbers. Risk management has always been an effective business tool in this industry. Most of the time this investment tool works as a key element for the organizations to make key decisions and to make sure that they gain competitive advantage in this sector by making proper use of it. After all the fate of the organizations depends on the outcomes from the decisions they are making make profit out of it.

In many organizations infrastructures are constant and it almost never changes. Sometimes though it changes when the organization needs to change under difficult circumstances. In recent years Banks transaction system often support different internal structure of the banks and also externally originated changes to the to the organization.

Industry Background (UK Banking)

‘Banks in the UK are under threat from increased scrutiny by economic regulators. Ongoing interest in issues such as the interchange fees that underpin card payment networks has been augmented by a focus on unauthorised overdraft charges (UOCs) and payment protection insurance (PPI).' (PWC, 2008)

During the early 1990s, Finland's banking system went through turmoil following the collapse of exports to the former Soviet Union. In 1998, the Federal Reserve was obliged to organise the rescue of Long-Term Capital Management, a large and prominent hedge fund that was on the brink of collapse. In 2000, the Turkish government sought assistance from the IMF after a series of banking scandals caused interest rates to rocket to more than 1,700% in just a matter of days. Just a few years later, China's central bank was forced to intervene to save the state banking sector from insolvency after the property market became severely overheated.

The recent nationalisation of Northern Rock proves that British financial institutions are not immune from crisis. A sizeable bank with what appears to be a prime residential mortgage book, Northern Rock was balance-sheet-solvent and adequately capitalised.

However, it was heavily reliant on the wholesale money market to fund its business and, following a significant fall in that market's liquidity, it was not in a position to refinance its payment obligations as they fell due on an economic basis. Had Northern Rock sought to generate additional cash by selling some of its assets, it would probably have been forced to incur substantial losses. Instead, it turned to the Bank of England for emergency liquidity assistance and eventually passed into public ownership.

The very nature of retail banking business - receiving short-term deposits but granting longer term loans - means that liquidity risk will always be an issue. To satisfy their liquidity needs, banks rely on ready access to the money and asset markets. However, problems can arise, even in a properly functioning market. On the one hand, doubts may arise about the creditworthiness of a bank or class of banks. On the other, a bank may prove reluctant to provide liquidity to another bank if it is uncertain about its own future liquidity requirements.

UOCs are now the subject of legal proceedings at the High Court between the Office of Fair Trading (OFT) and seven of the country's leading banks and the leading building society, as well as an ongoing investigation by the OFT. PPI is also being investigated by the Competition Commission. The stakes are high: it is estimated that the banks generate many hundreds of millions of pounds per annum in revenue from UOCs, and the Competition Commission believes that a similar amount is generated from PPI (the vast majority of which it considers to be excessive); and potentially fundamental changes to these markets are possible. The amounts at stake are much greater than was the case with the OFT ruling on credit card default fees and the article demonstrates that banks will need to have a good understanding of how competitors and customers will react to proposed price changes.

Company Background (HSBC)

At a glance

Type

Public

LSE: HSBA

Founded

Hong Kong (1865)

Founder(s)

Thomas Sutherland

Headquarters

London, United Kingdom

Area served

Worldwide

Key people

Stephen Green

Group Chairman

Michael Geoghegan

Group CEO

Industry

Banking

Financial services

Investment services

Products

Finance and insurance, Consumer Banking

Corporate Banking, Investment Banking

Global Wealth Management

Private Equity, Mortgage, Credit Cards

Revenue

▼ US$ 137.309 billion (2008)[1]

Operating income

▼ US$ 56.384 billion (2008)[1]

Net income

▼ US$ 6.498 billion (2008)[1]

Total assets

▲ US$ 2.527 trillion (2008)[1]

Total equity

▼ US$ 93.591 billion (2008)[1]

Employees

331,458 (9,500 offices in 85 countries and territories)

Subsidiaries

HSBC Bank plc

The Hongkong & Shanghai Banking Corporation

HSBC Bank USA

HSBC Bank Middle East

HSBC Mexico

HSBC Bank Brazil

HSBC Finance

Website

WWW.HSBC.com

Source: Internet

Before going into more details, this paper discovers the glorious milestones HSBC came across since it's evolvement from the Hongkong and Shanghai Banking Corporation Limited. The Hongkong and Shanghai Banking Corporation Limited was founded in 1865 in Hong Kong with offices in London and Shanghai and an agency in San Francisco, USA. The bank existed as an eastern force until mid 1950s. It began to create and acquire subsidiaries after that.

Since then HSBC came across some remarkable milestones to grow and reach today's position are as follows:

Year 1959: The Hongkong and Shanghai Banking Corporation takeover the British Bank of the Middle East. At that time it was called the Imperial Bank of Persia. The Bank is now called HSBC Bank Middle East Limited.

Year 1965: The Hongkong and Shanghai Banking Corporation Limited takeover a majority shareholding in Hang Seng Bank Limited, Hong Kong, now, the second largest bank incorporated in Hong kong.

Year 1972: The Mdland Bank acquires significant shareholding in UBAF Bank Limited (now British Arab Commercial Bank Limited)

Year 1978: The Saudi British Bank is established under local control to take over the British Banks of the Middile East's Branch in Saudi Arabia.

Year 1980: The Hongkong and Shanghai Banking Corporation Limited acquire fifty one percent of New York State's Marine Midland Bank (now called HSBC Bank USA, N.A.). Midland Bank acquires a controlling interest in eading German private Bank Trinkaus & Burkhardt KGaA (now HSBC Trinkaus & Burkhardt AG).

Year 1981: The Hongkong Bank of Caada (now HSBC Bank Canada) is launched in Vancouver, Canada.

Year 1982: Egyptian British Bank S.A.E. is formed, with the Group holding a forty percent interest. The HSBC group now holds 94.5% in the renamed HSBC Egypt S.A.E.

Year 1983: Marine Midland Bank take over Carrol McEntee and McGinley (now HSBC securities (USA) Inc.

Year 1986: Hongkong Bank of Australia Limited (which is now HSBC Bank Australia) is established.

Year 1987: The Hongkong and Shanghai Banking Corporation Limited acquires the remaining shareholding of Marine Midland and a 14.9% equity interest in Midland Bank Plc (now known as HSBC Plc).

Year 1991: HSBC Holdings Plc is established. The shares of HSBC Holdings are now traded in London and Hong Kong stock exchange.

Year 1992: HSBC Holdings purchases the remaining equity in Midland Bank this year.

Year 1993: The HSBC Group”s Head Office moves to London, UK.

Year 1994: Hongkong Bank Malaysia Berhad (now HSBC Bank Malaysia Berhad) established.

Year 1997: HSBC Group establishes Banco HSBC Bamerindus S.A. in Brazil (this is now called HSBC Bank Basil S.A. - Banco Multiplo), this year HSBC Group also acquires Robert S.A. de Invesrsiones in Argentina (now HSBC Argentina Holdings S.A.)

Year 1999: Shares in HSBC Holdings begin trading on New York stock exchange, third in its kind. HSBC take over New York Corporation (now integrated with HSBC USA Inc.) and its sister concern Safra Republic Holdns S.A. (now HSBC Holdings Luxembourg S.A.) Midland Bank acquires a 70.03% interest in Mid-Med Bank Plc. (now HSBC Malta Plc.) Malta's largest commercial Bank.

Year 2000: HSBC take over CCF (now HSBC Franc) one of the France's largets Banks. Shares in HSBC Holdings are listed on a forth stock market in Paris.

Year 2001: HSBC acquires Demirbank TAS now HSBC Bank A.S. Turkey's fifth largest private setor Bank and signs as agreement to purchase an eight percent stake in Bank of Shanghai.

Year 2002: Acquisitions include Grupo Financiero Bital, S.A. de C.V. (now Grupo Financiero HSBC, SA. De C.V.) one of Mexico's largest financial services group.

Year 2003: HSBC accuires Household International Inc. (now HSBC Finance Corporation); and Losango Promotora de Vendas Ltda in Brazil. Four French Private banking subsidiaries combine to form HSBC Private Bank France. HSB Insurance brokers Limited forms a joint venture, Beijing HSBC Insurance Brokers Limited. Hang Seng Bank acquires 15.98% of Industrial Bank Co. Ltd. A mainland China Commercial Bank.

Year 2004: HSBC acquires the Bank of Bermuda Limited and shares in HSBC Holdings are listed on a fifth stock exchange, in Bermuda. The Hongkong and Banking Corporation acquire 19.9% of Bank of Communications Limited, China's fifth largest bank.

Year 2005: HSBC acquires 9.91% of Ping an Insurance (Group) Company of China Ltd. Subsequently increased to 16.8%. HSBC Finance Corporation acquires Mertis Copanies Inc.

Year 2006: HSBC acquires the Panama Based Grupo Banistmo S.A. the leading Banking Group in Central America.

Year 2007: In Chin, HSBC is one of the first foreign banks to incorporate locally under the name HSBC Bank (China) Company Limited, and HSBC Rural Bank opens for business in Hubei Provience, In Vietnam, HSBC acquires ten percent of Bao Viet, the country's top insurer. In Taiwan, HSBC obtains agreement to acquire certain business and operations of the Chinese Bank Co. Ltd.

Year 2008: Chongqing Dazu HSBC Rural Bank Company Limited opens making HSBC the first foreign owned rural Bank in western China. HSBC icreases its stake in Vietnam's Techcombank from 14.4% to 20%.

From the milestones it is clear how HSBC expanded overtime keeping their strategy the world's local bank. Each of the cases HSBC enters into a new market through acquisition, which helped them to take on the local expertise to be a local bank. Comparatively it was easy to enter in these markets besides Canada and Australia.

Australia and Canada was protectionist and so was the Continent, in addition to being over-regulated and well served by its own talent. Central West Africa was saturated by British banks and, after independence; the new countries gave priority to domestic banks. Only the USA was attractive because it offered dollar assets in a dollar-hungry world (Laulajainen 2003). But before anything could be done about it, events elsewhere called attention. 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. 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 (Laulajainen 2003).

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 (Laulajainen 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 (Laulajainen 2003).HSBC sees the Internet as one of several exciting new media, to be incorporated as an integral part of its working. The bank has concluded that e-commerce will change the fabric of the financial services sector and sees it as a way of finding new customers all over the world and improving its services to existing customers. It intends to use e-commerce to reorganize the business so as to provide higher-quality customer services more efficiently. HSBC will be able to link its customers to the full range of international services and manage their processing wherever it chooses, which the bank sees as a considerable competitive advantage (Tansey 2002). HSBC has adopted a clicks and mortar strategy. This requires that customer Internet offerings must meet three criteria: customer needs and preferences come first; they must fit HSBC's existing distribution channels; and they must be multinational in scope. Recently the group has been reorganizing its work for the e-age and putting in place some major components of such a strategy. In 2000, over US$2 billion was spent on technology, including a significant proportion on dot.com initiatives. HSBC aspires to be one of the first to provide customers with facilities through the Internet on a multi-geographical and multi-product, basis (Tansey 2002).HSBC is one of the most successful banks of the world which serves different needs of the people and also business organizations. It has also helped the corporate business world and after certain time it has become the world's local bank. The reason why HSBC is the called the local bank is they managed to established business all around the world and they have more branches than the local banks. They also managed to become one of the most loyal service providers all around the world in this industry.

The red and white hexagon logo of the self-styled "world's local bank" - which first replaced Midland bank's familiar Griffin in 1997 - is found in 79 countries around the world, in which the bank employs 232,000 people and claims 210m customers. About 55,000 work in Britain, 40,000 in the branch business. Hong Kong, where the bank was founded in the 1860s and from which it took its name of the Hong Kong and Shanghai Banking Corporation, generated 25% of profits. The largest part - almost 34% of the total - is generated in North America, where HSBC has expanded rapidly through acquisition in the last five years.

Furthermore, HSBC operate as a meritocracy. It believes in developing its own talent - after all, the continued success of our organisation comes from drawing out the highest achievements from outstanding employees. So it always tries to highlight and promote exceptionally talented people to roles where their ability can have a far-reaching impact on business.

Chapter 4 (Research Methodology)
4.1 Research Objective:

The objective of this study was to examine the nature of the factors influencing the consumer behaviour and customer expectations in the banking industry in UK. Furthermore, the study intends to identify the initiatives taken by HSBC in UK market during the adverse economic condition and maintaining to get competitive advantage. Apart from that, the study will identify the influence of the implemented features like internet, technology, online banking etc. in the financial services along with an analysis of marketing mix. Disregarding the past adoption, the study is designed concentrating the present and potential trends and the factors which will be influential in banking industry. As the industry is getting more competitive with the advancements of the instruments used to conduct the operations and the adoption of these features by the industry rivals, the future of the industry is getting more uncertain and ambiguous. This study is intended to generate some idea about the potential trend of the banking industry in the UK.

4.2 Research Philosophy

The process of the study is planned to highlight different methods and to categorize the best of each when functional to different investor situations specifically in the Banking industry in the UK market. The philosophy is based on a mixture of qualitative and quantitative is critical to future research and opinions. The overall understanding was that both the qualitative and quantitative research is important to provide a significant outline to measure historic trends and returns. While conducting the research emphases were given to screening and maintaining the validity of the data in terms of characteristics, questions, and answer patterns. In this study, interest was to assess the performance of the HSBC in the investment banking, retail banking and others sectors particularly in different market conditions. While comparing the performance of HSBC with industry rivals, traditional industry sector classifications also used to accept significant comparisons.

The approach of the study is fortified by numbers of distinctive industry concerns including every competitor involved in the industry and this research can help determining appropriate products suitable for specific type of customers segment along with supporting evidence and steady outlook to retail, investment and others sorts of banking. As it is understood that earlier performance is not the determining factors for the future performance, so the report was combined with qualitative research rather than just quantitative research.

4.3 Research Design

The study is composed with a combination of quantitative and qualitative research to find out the feasibility of the proposed project. For the qualitative research, data was collected from secondary sources with reference to the concern industry. Again, by separate in-depth interviews of four individuals from different segments of age and survey of focus groups was also conducted.

For quantitative research, general surveys of 100 customers of the company were carried out. The quantitative data helps to compare between different groups of participants.

From the document analysis of different companies and successful completion of interviews and focus-group, the findings were sorted out for drawing the recommendation and conclusion of the qualitative research. Again, separate findings were dug out from quantitative research which included survey of 100 clients, and a hypothesis testing regarding the marketing research problem. Finally all the findings, out of both qualitative and quantitative research were merged to refer the ultimate activities the company may take into account to maintain its competitive advantage in the varying world.

4.4 Data Collection

4.4.1 Secondary Data

To collect the data from the secondary sources, the preference was put on the national dailies focused on the last 5 years performance of the banking and financial industry. Furthermore, the analysis of the key players are in the UK banking industry was also carried out. Apart from that the company annual reports and journals from financial analyst are also considered to get a clear picture about the industry. To collect the secondary data emphasis were put on the internet due to the ease of accessing information.

Findings from the secondary research: Lately the disastrous attack on the US housing market, where HSBC was forced to write off billions due to the credit crunch, has lead the management to persuaded to return in the Far East mostly in the emerging economy. (W Richard, 2009) The decision made by the bank regarding the purchase of the Household International in the US in 2002 was a wrong one, as the share prices went down to almost a fifth to 399p. HSBC, the world's third-largest bank, was the biggest faller in the FTSE 100, which closed 5% lower (Stephen, 2009)

Due to the credit crunch HSBC had become the last bank to surrender and is forced to raise its fund from the investors. Furthermore, unlike the increase in the past 15 years, the bank had cut its dividend- with a view to reserve capital in the worst downturn since the Second World War. (T Jill, 2009) HSBC insisted that the proceeds of the cash call were not designed to plug an existing capital shortfall, but would give the bank a competitive advantage over rivals. But two weeks later it announced 1,200 redundancies as part of a review of operations to make it more efficient. (T Jill 2009) The government, after cleaning the Northern Rock and the two sets of branches to be spun out of Lloyds and RBS would be sold to new players. New contestants in the UK banking industry have been created through the internet and telephone.

Very few have been able to get access to branch networks with the exception of Spanish bank Santander, which owns Abbey National, Alliance & Leicester and parts of Bradford & Bingley (T Jill 2009) There will soon be three new banking groups to compete with the long established players and the newly created Lloyds Banking Group, formed when Lloyds TSB rescued HBOS last year. (T Jill, 2009)

Barclays is ahead in the UK banking industry compare to the industry rivals. Barclays Capital investment bank - bolstered by the takeover of the Wall Street operations of Lehman last year - made pre-tax profits of £1.4bn for the first nine months of the year out of total group profits of £4.54bn. (T Jill, 2009)

Banking customers in the UK are even more satisfied with their bank than before the onset of the credit crunch, although some institutions do little to inspire consumer confidence. Still Despite the credit crunch and the fall of Northern Rock, overall confidence in the UK banking sector is up, according to the retail banking customer satisfaction (Source: Annual Survey by the annual JD Power and Associates)

Among all the banks Abbey was the worst rated of all the banks, while HSBC, Bank of Scotland, Barclays and Clydesdale Bank were all rated below average by the survey's consumer index. The banks were rated on six factors: transactions, account opening/product offerings, fees, account statement, problem resolution and convenience.

High levels of customer satisfaction inevitably impact the number of positive recommendations that customers are willing to give, which in turn vastly reduces potential acquisition costs and positively impacts the bottom line for banks. In descending order, the banks were ranked in the JD Power survey in the following order: the Co-op, Nationwide, RBS, Alliance & Leicester, Halifax, NatWest, Lloyds TSB, Yorkshire Bank, HSBC, Bank of Scotland, Barclays, Clydesdale Bank and Abbey.

Bank customers will enjoy the availability of more branches with extra closures and but the charges will be higher than before, though the United Kingdom government planned to increase competition. Though the treasury is planning to sell off almost 1,000 high street branches owned by the taxpayer, it is feared many will fail to find buyers to conclude the sell. (M. Brian, 2010)

4.4.2 Primary Data

The primary data is collected by using questioners, interviews, etc. unlike the secondary sources. The information collected by primary data provides raw information needed to be analysed and to use them to generate the conclusion regarding the industry. This category of data has been helping businesses over the years and these data will help business to develop their strategy in different levels.

The primary data of the research was collected by the both qualitative and quantitative data. During the data collection process the main focus was to identify the customer satisfaction level in the overall banking industry and the level of expectations of the customers in terms of the banking service.

4.4.2.1 Qualitative

Two types of qualitative research were conducted. They are as follows:

In-Depth-Interview

At this stage understanding the importance of the influence of each level of customers segment, the four in-depth-interviews of the people representing 4 different segments of age were conducted. From this, attitude towards the Customer centric banking compare to the traditional marketing were uncovered.

Objectives of In-Depth-Interview: To identify the gap between the customer expectations and the traditional banking.

Techniques Followed: Laddering techniques was followed to find out the attitude of the customers in regards to the delivered services by HSBC. Laddering techniques (means-end-chains) was selected as it is a popular technique in terms of its use as a means of understanding consumers' motivations for retail, and investment banking product choice.

Differences were attributable to administration, which in turn was interpreted to be attributable to differences in participants' cognitive processing, specifically: memory recall versus recognition. The hierarchical value map was difficult to interpret and, contrary to previous literature, the results question the use of memory recall when a concise consideration of complex product preference in the retail and investment banking industry is the aim of the study.

Findings: Internet and online banking along with the credit facilities and benefits are some popular terms in the consumers mind.

Focus Group

Focus group is helpful to generate insight of any particular issue, another form of qualitative research where group of people are asked about their opinions, beliefs, perceptions and attitudes towards a product, advertisement, service, concept, idea, or packaging etc. Questions are asked in an interactive group setting where members can openly communicate with other members of the group.

Objectives of Focus Group: To identify the attitude towards traditional banking.

Techniques Followed: Respondent-Moderator group of 6 personnel were observed for 1 hour. All the respondents were informed about the objective of the event.

Findings: All the respondents were fount happy with the traditional system but they have intension to get the flavour of new internet banking and online payment. Most of the participants are positive towards the internet. Single participant was apathetic towards internet as well technology in terms of the reliability.

4.4.2.2 Quantitative

A questionnaire survey of 100 respondents was carried out. To get the 100 respondents 140 questionnaires were distributed through e-mail, and in-person. The respondents were selected at a random basis; still apart from the email respondents all of them are from London. The targeted age group was from 18 above having a HSBC bank account.

The questionnaire were formulated with the respondents demographic information followed by questions regarding their level satisfaction in terms of HSBC's customer service compare to the industry rivals. The questionnaire covered the queries about the performance of Customer Service Representatives, Integrated Voice Reply (IVR) system, Internet Banking services, fees and commission, variety of the products, Credit Card Features, Brand Values, Service efficiency, Availability of branches etc.

4.5 Survey Design

This is one of the most important part for any research that will be conducted to look for any kind of solution for problems. This plays a vital role for the research because if the research design is not correct or we can say that if the research design doesn't match the purpose of the research it won't provide the answer researcher is looking for and maybe it will guide the researcher into the wrong track. It's all about timing. Sometime researchers get confused about timing and the purpose of designing a survey. The best time to design a survey would be after making sure what the researcher wants and what methods researcher followed to conduct the data collection process. What kind of data researcher is looking for? After all these factors satisfy the needs of the research project it is time to design the survey.

Somehow a question could be asked; why someone needs to design a survey? The best answer for this question would be: to get one step closer to the research and to know the precise timing for the next step. The more sufficient use of time will bring effectiveness in the whole process.

4.5.1 Questionnaire design

As we all know that this is part of the survey design and also plays a vital role in the research. The researcher has to understand the purpose of the questionnaire. This design is very important in order to get the perfect data which will lead to research findings and a proper solution. After all these information which will have the research successful at the end of the day. In this part of designing the questionnaire researcher will have to keep it in mind that it has to have five parts. The first part of the questionnaire will have to have the general enquiries about the participants. After the general enquiries the researcher will have ask the questions about the subject of the research and their view about the subject. On the part after this researcher will have to ask their point of views about other organizations in the same industry which means the comparison between the subject and the other organizations. This will tell us what they think about the organization. The final part of the questionnaire will have the questions about the subject, what they know and what they expect from the subject.

4.5.2 Interview design

Interview must be well designed to acquire correct information and to make sure the information the researcher is getting through this process is not bias. The researcher will have to make a very formal approach to the subjects of the interviews. The researcher will have to choose the interview subjects carefully because the information the researcher is going to get are qualitative very important to come to a conclusion.

4.6 Sampling issues

Sampling has to done before the survey. The researcher will have to choose which market segment the researcher is going to target to get the information. How many of the targeted market they are going to take as a sample for the research. the size of the interviewees the researcher is going to interview.

4.7 Reasons for selecting the Data Collection Technique

The data has been collected from both the primary and secondary source. The primary data will represent the level of customer satisfaction in terms of HSBC's delivered services. And the secondary data will help us to identify the industry trend and the customer expectations which will be helpful to identify what should be the key focus of HSBC to preserve the competitive advantage. Furthermore the data collection methods are comparatively convenient compare to other ways.

Focus Group has been considered in this study because it helped to obtain impressions of HSBC's new products, to generate new ideas about older products in the financial industry, to develop creative concepts and copy material for Marketing communication and competitive advantages, to obtain preliminary consumer reaction to specific marketing programs. Furthermore it helps to define the problem more precisely along with alternative course of action and most importantly to obtain information helpful in structuring consumer questionnaires for the quantitative research.

In depth Interview was also considered to get the detailed understanding of complicated behaviour by probing of the respondent. This technique is helpful to map the properties by establishing the reliability and validity whose findings can be generalized. Finally the findings of all these three type of method helped to draw the final conclusion.

4.8 Data Conversion and Analysis

Microsoft Excel has been used to convert the respondents' responses into quantitative data. Afterwards the analysis has been formulated with the statistical data to identify performance of HSBC and the customer expectations along with the gap between these two and the comparison of the industry players in terms of the customer satisfaction. This study is to evaluate the performance of HSBC in terms of the customer satisfaction, loyalty and the effectiveness of the HSBC's strategy in the UK. Afterwards the findings will be generalized beyond the confines of the particular context and from sample to population.

4.8 Validity and Reliability

Researcher will also have to do a crosschecking of the data just to make sure that information acquired through the survey is valid and reliable. There are different methods to find out the reliability and validity of the data. At the start of the survey researcher will have to choose a method for the cross checking of the data so that they can check the validity and the reliability of the data as soon as it comes in the hand of the researcher. Researcher will also have to make sure that he chooses the right method for the reliability and validity checking of the data because sometimes some methods produce bias which the researcher intends to avoid strictly.

Chapter 5 (Findings & Analysis)
5.1 Finding from the Secondary Data

According to Forrester Research Trends, regarding Building stronger customer relationships it shows that only 37% of UK customers trust the advice banks give them and only 39% of UK customers think banks keep their promises to them. Consumer confidence has been hit by market turbulence in the UK economy. This fear could result in lower spending on the high street and increased savings. Customers are not happy about the treatment they get from the bank in terms of fairness and honesty. Only 24% of UK customers expect banks to treat them fairly and honestly, compared with 34% of customers across seven European countries.

Some degree of on-going discomfort still in the industry, and still some banks, funds and other investors have to overcome the disaster, but now markets are more capable of trading their way out of just about anything. The US mortgage market and its impact on unsecured delinquency performance could become increasingly important in predicting and being prepared for what could happen in the UK market.

Recently the banking sector has seen increasing scrutiny from competition authorities assessing the reasonableness of prices and practices. This has been under both consumer and competition law and at the national and EC level. It is fair to say that banking is well and truly in the ‘cross-hairs' of the competition authorities.

While some of HNWIs prefer to deal with their advisors face to face and seldom use email, it is easy to see why the “new money” group, often in their mid-thirties and forties, are increasingly turning to online self-service. Many mid-tier Swiss based private banking firms, especially boutiques, are not up to speed in this area. Their e-trading capabilities and the online statement functionalities cannot be compared to more established private banks. It is logical to predict that private banks that provide comprehensive and user friendly online services will continue to stand out, while those that are ill-equipped will find themselves having difficulty to attract and retain clients. (Wall Street Arrow: Market Insights, 2009)

The UK has been at the forefront of this trend. The first foray by the UK competition authorities into this sector in 2021 led to the imposition of an onerous price control remedy. Since then, the UK authorities have challenged credit card interchange fees, credit card default fees, store cards, unauthorised overdraft charges (UOCs), home credit, payment protection insurance (PPI) and the general state of competition in both current accounts and credit cards.

There is a clear domino effect going on: in 2005 the Office of Fair Trading (OFT) wielded the Unfair Terms in Consumer Contracts Act in anger at credit card default fees, resulting in these fees being cut in half. The OFT has since looked to ‘cut and paste' this approach to regulate unauthorised overdraft charges: but mindful of potential knock-on effects, in particular the risk of ending ‘free banking', it has widened this inquiry to look at competition in current accounts (an area already criticised by the Competition Commission (CC) in respect of Northern Ireland). The fairness of UOCs is now also being thrashed out in court.

Small and Medium Sized Enterprise (SME) or Business houses customers are an important segment of the customer base for many retail banks, and indeed the nature of these customers means that the key challenges in meeting their needs are very similar to those presented by personal customers. As such, the emotional and psychological aspects of the relationships between banks and their SME customers are coming under further investigation as banks work to maximise their ability to retain and attract customers.

UK banks are engaging their effort to increase their share of the SME market. It is likely that the majority of this growth will come from customers who switch their business from a competitor. This market already faces two challenges: buyers who are less sophisticated than their counterparts in the major corporate banking environment; and limited resources with which banks can build relationships and tailor their products. This has led to the search for mass customisation at low cost.

In the period of 2002-2003 around 15% of UK ‘small businesses' switched banks. ‘Human factors' are significant in decisions about switching banks, as highlighted in the research commissioned in 2004 by the Federation of Small Businesses which identified the top six reasons for switching banks as:

Avoid/reduce bank charges
Poor quality of service received
Search for better terms
Poor quality of advice received
Earn a higher rate of interest
Change of bank personnel

The same research identified the six main reasons for not switching as:

ü Happy with the services provided

ü No real difference between banks

ü Competence of bank staff I deal with

ü Convenience of the bank's location

ü Reliability of bank in meeting the financial needs of the business

ü The bank understands my business

These findings suggest that two key factors are at play: financial and human.

Problems with fees may represent only the ‘final straw' that fatally breaks a relationship. At this edge banks should manage the human factors as well as they do the nature and pricing of their products. Many SME customers have had, or maintain, retail banking relationships, as do their families, friends and acquaintances, and it seemed sensible therefore to consider the picture in the retail market.

Under stress, SME banking relationships may founder due to breakdowns in credibility, rapport and trust, most of which may be associated with the banking industry as a whole but not all of which will arise solely from SME banking experiences. A high-profile public relations failure (for example, in the way a retail bank handled errors in customer accounts) or a customer experience retold in the pub or around the dinner table will, we contend, significantly influence SME decisions around switching banks.

If bank-customer relationship is compared to the situation of a personal or work relationship, such as unfair treatment, unreliable advice, broken promises and an adversarial stance when things go wrong, it may results with unhappy, sometimes fraught, often stagnant relationships. But a threat exists: if an attractive alternative to this existence one day presents itself, and switching to it now looks easy, free of negative consequence and perhaps enjoyable.

Many bank-SME customer relationships are in the same condition as that unhappy personal or work relationship. Trust and emotional engagement between customers and retail banks seems to be low, and many apparently ‘satisfactory' relationships are in fact at risk - compare the statistics for ‘customer satisfaction': 70%+ UK retail customers were either very satisfied or satisfied.

Factors driving loyalty and inhibiting switching

Services adapted/aligned to company's needs to serve the purpose of the company. Fees/charges perceived as good value for money where the perception of consistent competence (can't recall many mistakes). Trust at one-to-one and group-to-group levels with consistent stream of positive ‘moments of truth' (i.e. good experiences at a person-to-person level) in areas such as:

v Ease of access

v Speed of response

v Being listened to

v Given information that proves reliable/accurate

v Esteem and recognition

v Tailoring and personalisation of approach

v Courtesy and appropriate style

v Evident understanding of the business

v Location of the bank

Appropriate social interaction and bonding (a) on a one-to-one basis (b) across customer and bank teams and appropriate ‘soft ties' i.e. additional non-banking services offered to help the company's development, standing or success, Sense of shared values/beliefs/principles (e.g. ethics, social responsibility),Positive brand association, Tradition/longevity of relationship, Age of the owner of the business (older less likely to switch), Views on loyalty/switching of family members, social peers, Positive experience as retail banking customer with same bank (past and current, own and others'), Valued incentives to remain loyal, Perceived or actual negative consequences of switching (time, effort, cost, uncertainty), Perception that there is no more attractive alternative supplier or that all banks are the same. (PricewaterhouseCoopers, 2007)

Factors driving switching and inhibiting loyalty

ü Services poorly aligned/adapted to company's needs

ü Fees/charges perceived as poor value for money

ü Doubts about competence (can recall many mistakes)

ü Limited trust, breakdown of trust

Apart from the above factors, consistent stream of negative ‘moments of truth' (i.e. bad experiences at a person-to-person level) from the operating bank, Inappropriate/lack of social interaction and bonding at one-to-one or across-team levels also affects the customers to switch. Departure of key relationship holder (especially if to competitor), Lack of/inappropriate ‘soft ties', Sense of divergent values/beliefs/principles (e.g. ethics, social responsibility), Negative brand association, views on loyalty/switching of family members, social peers, negative experience as retail banking customer with same bank (past and present, own and others'), valued incentives to switch, age of the owner of the business (younger more likely to switch) and trust, promises and support: Statistics from retail banking.

Customer demand at the basic level remains constant and it is the ability to undertake a transaction using an instrument of choice, in a channel of choice and at the time of choice. At the more advanced level, this means the ability to self-serve, transparency of key terms and information throughout the process. It also means being serviced in new channels and with new technologies such as mobile telephony or contactless payment cards.

5.2 Finding from the Qualitative Research

The findings from the qualitative research about the industry suggested the industry is apparently safe after collapses of multiple banks and building societies. The scale and depth of the sub-prime crisis will be measured and depending on that liquidity will return to the short-term debt markets. The market is now filled with a deeper, broader distressed debt and impaired asset market than ever before. Privet funds, brokers, vulture funds and activist investors can price just about anything that smells like a deal, and there is more data on downside risks as well as upside.

Internet and online banking along with the credit facilities and benefits are some popular terms in the consumers mind.

All the respondents were fount happy with the traditional system but they have intension to get the flavour of new internet banking and online payment. Most of the participants are positive towards the internet. Single participant was apathetic towards internet as well technology in terms of the reliability.

5.3 Finding from the Quantitative Research

Part 01 (Comparison with the five UK banks)

01. Apart from HSBC Which Bank (or banks) do you bank with?

Lloyds TSB

Barclays

Halifax

Alliance & Leicester

47

66

21

10

Among the 100 respondents (having a bank account with HSBC), 66 respondents bank with Barclays, 47 bank with lloydstsb, 21 bank with Halifax and 10 bank with the Alliance & Leicester. 5 of the respondents do not have any bank account apart from the HSBC.

02. Please Write down what type of Bank account with following banks?

Bank

Current AC

Business AC

Student AC

Savings AC

HSBC

46

19

22

12

Lloyds TSB

33

15

17

10

Barclays

35

12

0

35

Halifax

13

9

34

13

Alliance & Leicester

5

4

23

19

It is observed that among all the respondents most of them maintains currents account with the banks and the current account of Lloyds TSB and Barclays bank Plc are popular among the respondents. But the savings account of Barclays is the most famous higher than HSBC as well.

03. Which bank do you think is the easiest to open a bank A/C??

HSBC

Lloyds TSB

Barclays

Halifax

Alliance & Leicester

21

33

26

11

9

In term of opening an account, the respondents voted for lloydstsb (33%) followed by Barclays (26%). Though all the respondentd are HSBC customers, only 21 out of the 100 respondent selected HSBC in terms of opening a bank account.

04 Which bank do you think brings on the offers for the new customers?

HSBC

Lloyds TSB

Barclays

Halifax

Alliance & Leicester

6

12

19

41

22

In terms of the new product, 41% respondents voted for Halifax where HSBC is only 6% . Though Halifax has severely suffered due to the credit crunch, it was trying to gain the competitive advantage by offering significant attribute to their products.

05. Which Bank is the best In Terms of Quality of Customer Service?

HSBC

Lloyds TSB

Barclays

Halifax

Alliance & Leicester

41

12

23

13

11

HSBC has been successful in the Customer Service as maximum number of respondents (41%) voted HSBC in terms of the quality of the customer service. As the respondents are HSBC customers, indirectly lead the result in favour of the HSBC. Still in terms of the customer service the impression of the bank is comparatively good compare to the other banks.

06. Which Bank is the best In Terms of Internet Banking Facilities?

HSBC

Lloyds TSB

Barclays

Halifax

Alliance & Leicester

11

34

30

13

12

Lloydstsb is leading in terms of the internet banking facilities voted by 34% respondents where HSBC got only 11% vote of the respondents. This is due to the user friendly and less complicated interface offerred by the LloydsTsb.

07. Which bank do you think best In Terms of over draft, Credit/Loan Facility

HSBC

Lloyds TSB

Barclays

Halifax

Alliance & Leicester

14

11

31

39

5

In the Credit/loan Facilities section maximum number of respondents voted for Halifax (39%) followed by Barclays (31%). HSBC is holding fourth position by achieving 14% vote of the total respondents.

08. Which Bank Do you think have the better Brand Image?

HSBC

Lloyds TSB

Barclays

Halifax

Alliance & Leicester

40

22

25

8

5

Though HSBC performed poor in the facilities and internet banking, it has strong brand image in the customers' mind as it got 40% vote of the total respondents. This is due to its past performance which was successful in the investment and retail banking.

09. Which Bank do you think have better self service banking facility?

HSBC

Lloyds TSB

Barclays

Halifax

Alliance & Leicester

72

9

9

6

4

HSBC has the upper hand with their self-service activities on all other banks. In the study, it was understood that, most of the respondents prefer HSBC's Self Service Banking rather standing in front of the counter.

10. Which bank do you think have the best activity for the customer?

HSBC

Lloyds TSB

Barclays

Halifax

Alliance & Leicester

41

17

24

16

2

The over all customer satisfaction of 41% takes HSBC on top comparing to other banks such as Barclays with 24% and Lloyds TSB with 17%.

Part 02 (The Level of satisfaction with the HSBC)

11. Type of bank account with HSBC?

HSBC Plus AC

HSBC Premier AC

HSBC Passport AC

Student AC

Graduate AC

Business AC

Savings AC

34

8

2

22

2

19

12

‘HSBC Plus A/C' is the bestselling product for HSBC bank as 34% people voted for this whereas HSBC Premier A/C follows with 8% votes. Another significant findings is that the Business AC holders are holding 19% of the total respondents.

12. How easy to open an account?

(Very Satisfied)

(Satisfied)

(Don't Know)

(Unsatisfied)

(Strongly Unsatisfied)

60

31

3

5

1

60% people agreed that they are very satisfied with HSBC and 31% people were satisfied with the ease of opening the account with the bank.

But compare to the other bank HSBC was holding the 3rd position with only 21% vote of the total respondents. This indicates that all the respondents are happy with the issues involved to open a bank account with HSBC. Still the respondents found others banks much easier while opening a bank account.

13. In terms of security of the money?

(Very Satisfied)

(Satisfied)

(Don't Know)

(Unsatisfied)

(Strongly Unsatisfied)

80

13

7

0

0

80% people feels secured with their money banking with HSBC. This finding coincides with the brand image of the bank holding within the customers.

14. In terms of customer service?

(Very Satisfied)

(Satisfied)

(Don't Know)

(Unsatisfied)

(Strongly Unsatisfied)

32

49

3

12

4

49% of A/C holders for HSBC are satisfied. But 32% of A/C holders are very satisfied with banking with HSBC. This is a good sign as the bank was successful in terms of gaining the customer satisfactions.

15. In terms of product and promotion?

(Very Satisfied)

(Satisfied)

(Don't Know)

(Unsatisfied)

(Strongly Unsatisfied)

10

32

18

29

11

HSBC's products and promotions managed to earn 32% customer satisfaction. But at the same time 29% customers are unsatisfied with their products & promotions. This findings shows that the customers expectation is higher that the level of perceived benefit out of the HSBC products.

16. In terms of Internet banking?

(Very Satisfied)

(Satisfied)

(Don't Know)

(Unsatisfied)

(Strongly Unsatisfied)

10

48

15

13

14

Internet banking is satisfactory to the HSBC customers (48%). But only 10% of the respondents are very satisfied with the internet banking service of HSBC.

17. In Terms of over draft, Credit/Loan Facility?

(Very Satisfied)

(Satisfied)

(Don't Know)

(Unsatisfied)

(Strongly Unsatisfied)

5

30

10

27

28

Over Draft & credit/loan facilities from HSBC is satisfactory to their customers. Still huge portion of the unsatisfied and strongly unsatisfied customers are also holding a huge chunk of the pie, which show that customers are not happy with the credit and loan facilities offered by HSBC.

18. I will recommend for HSBC AC to my friends or family?

(Strongly agree)

(agree)

(Don't Know)

(disagree)

(Strongly disagree)

14

56

10

11

9

14% customer strongly agrees to recommend HSBC A/C to their Friends and Family. But 56% agrees to the same.

19. HSBC maintains a transparent policy with its customer?

(Strongly agree)

(agree)

(Don't Know)

(disagree)

(Strongly disagree)

17

44

18

12

9

44% a/c holders agreed that HSBC maintain transparent policy with the customers.

20. As a HSBC customer your overall satisfaction level?

(Very Satisfied)

(Satisfied)

(Don't Know)

(Unsatisfied)

(Strongly Unsatisfied)

19

40

11

22

8

Overall satisfaction for HSBC is satisfactory as 40% customers voted for the satisfaction. Even though 22% customers are unsatisfied but 19% are very much satisfied with the overall services.

Summerized Findings:

The UK banking industry is now overcming the last credit crunch with a careful strategy along with fortification of the investment and retail banking. Banks are now looking to close their funding dependency on the credit markets and this could result in higher savings rates offered to customers and further subdue consumer spending. Now the retail banking industry in UK is in uncertainty and the degree to which this will hit retail banks and their customers is subject to debate.

The government is also rearranging the factor influencing the industry more carefully making the market more competitive. Banks are also redesigning their strategy to comply with the regulatory factors imposed by the government.

Mostly of the banks are adopting the latest technology to hold a fair position in the competition.

The customers are now more aware, careful and knowlegable regarding their right and have sa many alternatives then ever due to the increased competition.

Banks are now focusing on the customers service with better customer satisfaction.

Though some of the clients did not have with some of the above mentioned banks, they have supported the bank in terms of over draft, credit/ loan facilities. This is due to the promotion and communication of the bank regarding their features and benefits compare to the industry rivals. Some times the customers find understand the facilities offered by the industry rivals are much more than HSBC.

But compare to the other bank HSBC was holding the 3rd position with only 21% vote of the total respondents. This indicates that all the respondents are happy with the issues involved to open a bank account with HSBC. Still the respondents found others banks much easier while opening a bank account.

Due to the features offerred by the Barclays bank Saving account it is leading in this area among all the banks.

Though Halifax has severely suffered due to the credit crunch, it was trying to gain the competitive advantage by offering significant attribute to their products. Still its position is not found that strong compare to the cometitors.

Though the respondents sopported that the facilities offered by HSBC is less featured than other banks, they selected HSBC having best Brand Value compare to the rivals. This is due to its past performance which was successful in the investment and retail banking.

Chapter 6

(Recommendations & Conclusions)
6.1 Recommendation:

As long as the wider economic situation remains doubtful, it is advisable for HSBC to adopt a wait-and-see approach - and a careful look at their businesses, stress testing them for both economic downturn and full-blown recession. And it would be useful to factor in the wider commercial and operational impacts through combined risk, valuation, economics, operations and HR teams. Certainly, for financial services firms like HSBC, crisis management still necessary in the form of asset and portfolio revaluation on a mark-to model basis for both management and constitutional accounting purposes - and this may need some independent validation.

Within the last decade the best consumer bank HSBC garnered awards along with soaring rankings. This was just one of those awards won by the HSBC in its excellent performance. Such achievements, rankings, and awards can be directly resulting from HSBC's business strategies. As the last decade's success is not ever lasting due to increased competition in the industry facilitated by globalization, trade liberalization rather is become more difficult for the corporation to maintain its leading position through offering the excellence in the service. The company needs to add diverse values to its strategy to establish its position in the target segment.

The UK government is amending its regulation in an aggressive manner to secure the industry from the future crisis. Operating environments in the economy have continued to improve as the effects of government and central bank policies work through the system and it may be that HSBC has passed, or are about to pass, the bottom of the cycle in the financial markets. Reducing branded activities that present high risks has become a key governing issue for the retail banking industry. After the crunch, the key challenges the banking industry facing is the shortages of capital liquidity/lack of funding, high credit costs, and global price volatility. HSBC may modify its strategy to comply with the economic down-turn and the tightened regulation.

Financial projecting and strategy may need careful reappraisal as many expectations supporting HSBC's strategies, plans, budgets and transactions could well need revision and material change might also have to be disclosed under regulatory, statutory or stock exchange obligations. A comprehensive contingency strategy to overcome disaster and business continuity need to be organized to gain a transparent understanding of decision making process in the case of sharp market fall. Plenty effort may need to be considered to establish changes to models, policies, processes and operations in response to lessons learned. HSBC needs to be organized to comply with the next ‘once in a lifetime' financial shock.

The UK government, which has been widely criticised in the wake of the near collapse of the Northern Rock, wants to reform the current system by imposing new rules and regulation. HSBC may follow a flexible strategy where it can easily adopt the regulation maintaining the higher customer satisfaction level. As the crunch could well shake out further changes in regulation, or prompt further demands for change from stakeholders. Reviewing risk model adequacy by transparency of exposures or by back-testing of model assumptions on asset volatility, correlation, and liquidity may be carried out by HSBC to maintain the safeguard.

HSBC may check policies, procedures and availability of skilled people to respond quickly and effectively to serious market volatility or disruption to stem losses (or even make profits). It may also review the adequacy of: Limit framework; reporting framework; Stress-testing procedures.

HSBC needs to play their pricing strategies very carefully; as it has generated many hundreds of millions of pounds per annum in revenue from these charges. Review operational capability to handle the situation, with particular focus on: effectiveness of the process, infrastructure along with functional capacity (front, middle, back office) and straight through process/workflow evaluation.

As the Crucial Official Government and Agency Economic and Financial Data are of highly questionable in terms of validity; HSBC may educate itself about the realities of the marketplace using Alternative Data Sources. Collecting and staying familiar to genuine information about the market can save one much financial grief as well as positioning one for profit. As technology plays an important role in the Banking industry, HSBC may integrate the latest features in their operational strategy to get the competitive advantage. Technology helps the company to introduce differentiation among the industry where it can help the bank to charge extra if that technology adds values to the customers.

Customers Satisfaction by providing customized service to establish the bond with the customers so that they can rely on the Bank's activities. By redesigning product with additional facilities HSBC can attract the lower and the mid-level customers. Customer-facing business requirements are also more easily accommodated, and if these principles are applied, operational productivity and operating performance can both be raised. The key to success relies on the quality customer interface and experience, with identifying the need to offer people/individuals something they want to be identified with; fits in with their own brand choices; gives them a sense of control; and is easy for them to use at the time that they want to use it.

The expectations of the Customers of the Retail Banking industry towards the service providers is getting higher to get their transactional needs right for every time. With minimizing the tolerance level for error, politicians and regulators championing consumer rights and editors being ready to run headlines about banking mistakes, it is a must for HSBC to have resilient, available and effective transactions processing and management systems. These systems and the change environments within which they are maintained must also be capable of meeting the needs of the current and emerging market needs. It is observed that non-banks have achieved high levels of personalisation in their engagement with customers, and new entrants to the retail market such as PayPal have established the competitive standard. Although PayPal is now a bank, it has achieved a financial performance to rival that of a global bank's transactions business by providing an interface to bank services, having an effective launch strategy and giving to customers the things that they valued: convenience and the ability to keep their financial accounts private. HSBC may create new channel to get the competitive advantage over the industry rivals.

Small and Medium Enterprises have become key players in the retail banking industry as its segment it getting bigger day by day with the globalization and increased competition. A careful selection of SMEs and product modification to attract those SMEs can help HSBC may generate increased revenue.

As interest rate is a parameter which plays a key role in the banking industry and investment industry, HSBC can tailor its product in a way where the customer will be attracted and communicate the benefit of the product to the target market to gain competitive advantage. Economic profit may be easier to manage though the environment is more competitive than before by simplifying the investment decision and clarifying the accountabilities.

6.2 Conclusion

Traditional views on competitive advantage have highlighted such barriers to entry as economies of scale, patent protection, access to capital, and regulated competition. More recent views have highlighted different aspects of competitive advantage, a firm's human resources and human capital. New demands facing organizations as a result of heightened competition, globalization, and technological advances have put a premium on creativity and innovation, speed and flexibility, as well as efficiency.

Due to the deregulation of the financial sector, over the last decade there has been an increasing convergence between the activities of investment and commercial banks. Now, most of the investment and commercial banking institutions are involved competing directly in money market operations, private placements, project finance, bonds underwriting and financial advisory work. Still the banking industry does not operate in the same manner all over the world. All the banks have now divided there operations in two major part. Commercial banking - banking that covers services such as cash management (money transfers, payroll services, bank reconcilement), credit services (asset-based financing, lines of credits, commercial loans or commercial real estate loans), deposit services (checking or savings account services) and foreign exchange. Investment banking - banking that covers an array of services from asset securitization, coverage of mergers, acquisitions and corporate restructuring to securities underwriting, equity private placements and placements of debt securities with institutional investors.

Reviewing the adequacy of the reporting system, focusing on the transparency, rationality and strength of valuation models; accuracy and quality of underlying reference data; adequacy of controls on model use and maintenance; consistency in the bases and assumptions of risk and valuation models (particularly as assumptions may not reflect recent experience); and effectiveness of risk escalation procedures in the event of serious market volatility or disruption.

Specifically, in response to a competitors' pioneering new product introduction, academic research finds many conditions that suggest a greater desirability of immediate market entry while many other conditions suggest a greater desirability of a delayed response. The areas where there is a consensus among decision makers with the academic literature, as well as areas where views differ from that of the literature. Changes and discusses insights gained into the decision making processes of managers for market entry timing decisions. The study can help managers in follower firms achieve greater success in formulating market entry timing strategies by reducing ambiguity in the timing implications of many internal and external conditions, as well as by drawing attention to potential action biases.

Results for the affected banks are definitely substantial which damage to their good will, opportunity loss of potential revenue and also the cost of modification and remediation. For the people involved in managing the incident it was an uncomfortable time: dealing with imperfect and incomplete data while trying to provide coherent and reliable information to many internal and external stakeholders.

At this time all the organisations now understand the importance of knowing their customers as individually and uniquely as possible. This means understanding individual needs and then being able to relate those individual needs to the actual priorities of each customer at any given point in time. Few systems have the ability to provide insight into a customer lifecycle or into current customer priorities as transactions' systems do.

In mature markets with high barriers to entry and which display stable market share, data mining can be vastly effective in generating new revenue streams and in establishing a differentiated service proposition. Successful data mining will include the use of refined cross-examination tools and a periodic ad hoc analysis along with data warehouse. Success is determined by integrated process management, detailed transactions analysis and alignment with a clear customer segmentation and strategy.

Understanding the value of the customers and identify the sacrifice the bank will have to make to that is the vital issue. Investing in understanding and developing this aspect of their service to customers is a parallel, to develop new products, services, markets and pricing strategies. Operational and business interactions may be obtained by bringing the transactions management at the same place, and these scale efficiencies may also be applied to effective risk and incident/ disaster management.

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