The Role Of The Hsbc Group Commerce Essay

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The HSBC Group is considered to be one of the largest financial and banking services organizations in the global market. The Group's international network has around 7,500 offices in 87 nations and territories in Asia-Pacific Region, Europe, the Americas, the Middle East and Africa and provides a comprehensive range of financial services to over 100 million customers through four customer groups and global businesses: Personal Financial Services (including consumer finance); Commercial Banking; Global Banking and Markets; and Private Banking. With over 146 years of successful history, HSBC is regarded as a financial Group of acknowledged status and experience and this is the reason why it has repeatedly been recognized and cited as the top global banking brand by The Banker magazine and the company Brand Finance (HSBC).

HSBC Bank plc Greece (HSBCG) was founded in 1981 and is currently one of the most successful key players in the Greek financial market. Applying its valuable international experience and high caliber expertise to the special needs of the Greek market, HSBCG offers banking services to individuals as well as to corporate and institutional clients, guiding them towards the best available opportunities.

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This assignment aims at providing a critical strategic analysis of HSBCG - author's former employer - and presenting an evaluation of the key strategies that the organization is pursuing. Furthermore, this assignment aims at identifying the actions that HSBCG needs to take in order to address the major issues and concerns raised in the present report, based on the wide range of concepts and ideas contained in the Strategic Management II module.

SECTION 1: Understanding and Expressing Context

Figure 1: Elements of HSBCG's strategic context

Technological forces

Social

Forces

Economic Forces

Political Forces

Threat of New Entrants

Style

External Partners

Competitive rivalry

Substitute products & services

Customers & clients

Systems

Structure

Skills

Staff

Vision

Mission

Shared Values

Strategy

Source: Author's creation

Strategic context analysis is an effective method for analyzing the environment in which an organization operates. Environmental scanning mainly examines the macro environment of an organization; however, context analysis considers the entire environment, both the internal and external environment in which the organization operates. Analysis of the strategic context is basically a process of gathering, analyzing, and providing information for strategic purposes. It concerns the monitoring of key macro-environmental forces (political, economic, socio-cultural technological) and significant micro-environmental factors (customers, competitors, external partners, substitute products and services, new entrants) that affect the organization's ability to implement its strategies and, thus, earn profits.

Figure 1 presents the elements that constitute HSBCG's strategic context, an analysis of which is going to be provided below:

Table 1: Environmental scanning (PEST Analysis)

Political Forces: Greece is currently in the midst of a harrowing crisis and a deep economic depression. The country finds itself fighting to survive against bankruptcy over soaring deficits (14% of GDP), astronomical debt (130% of GDP) and a collapsing productive sector. The wrath of Greek people is directed against the ruling system itself as the economic and financial crisis has finally brought to the surface all the perversions and deformities of a political culture that thrives on graft and corruption, thanks to the existence of a paternalistic state where kickbacks constitute routine practice for the provision of public services (Polychroniou, 2010).

Economic Forces: After a long period with high rates of growth, the Greek economy is currently in contraction. As a result, harsh austerity measures of wage cuts, pension reductions and sharp tax hikes were introduced, further depressing spending and leading to severe job losses, an economy that is already facing double digit unemployment rates (Polychroniou, 2010).

Social Forces: Greece by now ranks among the most unequal societies in the world, with around 20% of its population living below the level of poverty, and its social services resemble those of an under-developed rather than those of a developed country. The harsh austerity measures introduced for facing up the long-lasting structural problems of the Greek economy are already hurting workers, pensioners and the poor and dismantling an already inadequate welfare system.

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Technological Forces: Information Technology (IT) is a sector where Greece cannot claim to have been a front runner. Infrastructure and knowledge related to IT were totally inadequate a few years ago. The human capital was always present, but lack of an organized IT sector prohibited the employment of such personnel within the country. However, one cannot neglect the fact that a trend of significance has appeared in the last few years: Greece is developing its IT sector at a far faster rate than Western Europe, quickly approaching the most advanced countries. Not only is infrastructure improving, but use of IT becomes even more widespread, making a positive impact on the wider society (Perez & Koutsoukos, 2001).

Figure 2: Porter's 5 Forces Framework

THREAT OF NEW ENTRANTS (Low)

Entry/exit barriers (high)

Learning curve (high)

Capital requirements (high)

Fixed and operating costs (high)

DEGREE OF RIVALRY

(high)

Market concentration (high)

Stiff competition (high)

Number of institutions (high)

Market maturity (high)

SUPPLIERS'

POWER (low)

No significant suppliers in the banking market

CUSTOMERS' POWER (high)

Switching costs (low)

Changing customer needs

Price sensitivity (high)

THREAT OF SUBSTITUTES (high)

Price sensitivity (high)

Switching costs (low)

Similar products/services

Source: Author's creation

SWOT for HSBCG

Figure 3: SWOT Analysis

Strengths

Diversification

Global reach

Knowledge/expertise

Sound financial performance

Brand identity

Prudent credit policy

Global Reputation

Exceptional resources and capabilities

Member of one of the biggest financial organizations globally

Weaknesses

Liquidity

Exposure to global instabilities

Operating margins

Opportunities

Innovative distribution channels

Upgrading of processes

Innovative products/services

Mergers and acquisitions

Threats

Current economic recession

Competition by big Greek banks

Political situation

Austerity measures

Source: Author's creation

SECTION 2: Eliciting and Evaluating Strategy

Identification and description of HSBCG Key Strategies

In an environment of extreme uncertainty as well as non-linear and unpredictable change, strategy development is crucial for banking institutions, as it enables them to firmly set a clear direction by defining consistent and long-term goals, provides a profound understanding of the competitive environment and gives an objective appraisal of their resources (Grant R. M., 2005). A key organizational strategy needs to set direction, concentrate effort and provide consistency, but at the same time, it needs to ensure organisational flexibility.

Though banking institutions are confronted with rather similar challenges and changes, their responses vary significantly. This is due to possible variations in their strategic orientation, which derive from divergent organisational structures of individual banks and dissimilar characteristics of national markets. The corporate governance and capitalisation of banks play an important role in the selection of an appropriate banking strategy. Country specific factors comprise customer preferences, the degree of competition and formal legal frameworks, among other things (Groeneveld & Wagemakers, 2004).

HSBCG key strategies aim at establishing its image as one of the safest and best managed financial services organizations in the Greek market, and at achieving a sustainable business development over the long term. The Bank's sustainable development strategy defines its operational focus, and sets strategic operational and institutional goals that open new paths for HSBCG to exercise its comparative strengths within the specific dynamics of the Greek economic context.

HSBCG pursues its strategic agenda and strives to make the greatest positive impact on the region's challenges by placing emphasis on the following distinct but complementary actions:

Leverage and integration of existing strengths and improvement of weaknesses.

Development of a customer-centric culture, giving extra care to the customers.

Development of an innovation framework for the design and delivery of products and services.

Adoption of prudent investment practices.

Enhancement of internal and external efficiency by wise use of technology.

Improvement of operational efficiency through smarter processes and controls.

Increased emphasis on stakeholders' interest and statutory compliance.

Contribution to wider society by acting responsibly and realizing environmentally sustainable growth.

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Tight control over operating costs and rationalization of operations.

HSBCG recognizes that the most meticulous strategy plan can still derail without the guidance of core values (Lemanski, 2011); thus, the Bank's core values have a key role in its strategy, and the clear communication of them to customers, shareholders and employees is considered to be an essential part of HSBCG's strategy plan. These values put an emphasis on:

long-lasting customer relationships

responsible and sensitive management of all business activities

a shared sense of ambition that leads to excellence

being global in outlook and character

integrity

creativity, innovation and customer-centric marketing

HSBCG's growth strategy is aligned with the Group's worldwide strategy that focuses on its four customer groups: Personal Financial Services; Commercial Banking; Corporate, Investment Banking and Markets; and Private Banking. As a bank with international reach, HSBCG also values diversity and its strategy is based on the premise that people of different ethnic backgrounds and cultures can contribute to its success.

Implementation of key strategies and potential barriers

The ability of an organization to implement strategies successfully is of paramount importance. This part of the assignment focuses on the strategy implementation process of HSBCG, identifying potential barriers that have still to be overcome.

Against a background of adverse economic conditions, HSBCG manages to respond to the challenges it faces and consequently implement its strategy of sustainable business development. In successfully executing HSBCG's key strategies, some factors play a decisive role (Ott, KZatz, & Thomas):

HSBCG's organizational structure: Being quite functional and consistent with the Bank's strategic direction

Its top management: assessing the prominent environmental variables, their relationship to the organization, and the appropriateness of the organization's response to these variables; shaping the perceived relationships among organization components; designing the organizational structure and controlling the organization's reward and incentive systems

the Bank's human resources that represent its most important asset: being highly skilled and diverse with international experience and knowledge, determining HSBCG's ability to meet clients' ever-increasing demands

the prudent use of advanced information and communication technologies

the adoption of a strategy of continuous organizational learning

its organizational culture deriving from its long history and international background: being influenced by the values, actions and, beliefs of individuals at all levels of the organization

effective communication and role clarity

According to a Harvard Business School professor and a senior organizational fellow at McKinsey & Co, potential barriers to successful strategy implementation and organizational learning could be the following (Beer & Eisenstat, 2000):

A top-down senior management style: Unless this barrier transforms into a capability, none of the further barriers can be turned into capabilities

Unclear strategy and conflicting priorities

An ineffective and inefficient senior team

poor vertical communication

poor coordination across functions, businesses, or borders

inadequate down-the-line leadership skills and development

According to Beer & Eisenstat (2000), the first three barriers together undermine an organization's quality of direction; a lack of vertical communication interacts with the other barriers to block quality of learning; and the last two barriers cause poor quality of implementation. However these barriers do not currently represent a threat for the Bank's key strategies as it excels in all the said areas. The only significant barrier is the macro-economic instability, uncertainty, and general crisis in the Greek market that leads to the contraction of the domestic economy and creates adverse long-term effects for the wider banking industry.

To be more effective in achieving its key strategies, HSBCG monitors and evaluates its work in a measurable way, taking appropriate actions when necessary based on results. The Bank effectively monitors its institutional performance through the development of results frameworks, which include performance indicators and quantified targets, in its main corporate reporting and planning documents. This results framework successfully tracks progress in long term collective development outcomes, as well as in specific activities and outputs in relation to achieving HSBCG's strategic priorities.

Strategic measurement significantly contributes in implementing the Bank's strategic plan. At HSBG, measures act as operational definitions of the plan as well as increase the focus of the strategy, aligning the employees around specific issues. By utilizing the specified measures, HSBCG is able to identify the critical focus points for the organization, and reward their successful achievement. When used to guide the organization, these measures represent a competitive advantage, as they drive alignment and common purpose across the organizational boundaries, focusing everyone's best efforts at the desired goal (Ott, KZatz, & Thomas).

Areas where core competencies are utilized

Distinctive or unique capabilities that cannot be imitated or obtained by others are regarded as determinants of a firm's success and growth and are considered to be the fundamental basis for the creation of a sustainable competitive advantage. Prahalad and Hamel (1990) call this the concept of core competencies. They describe it as the "...collective learning in an organization, especially how to coordinate diverse production skills and integrate multiple streams of technology..." (Prahalad & Hamel, 1990). There are at least three tests that can be used for identifying a core competence. A core competence should:

provide potential access to a wide variety of markets

make a significant contribution to the end-product benefits, and

be difficult for competitors to imitate

Barney (1991), emphasizes the close relationship between core competencies, sustainable competitive advantage and superior performance and suggests that "a firm is said to have a sustainable competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors and when these other firms are unable to duplicate the benefits of this strategy".

A core competence of HSBCG which distinguishes it from its competitors in the Greek market is its unique international pedigree and its global access. The valuable experience and high-caliber expertise, gained by HSBC Group throughout its long history, provide HSBCG with the necessary tools and knowledge to respond successfully to many changes in the broad financial environment. In addition, the fact that the Group is not just at the centre of financial developments around the world, but it actually plays an active part in shaping those developments, generates continual improvements in services and facilities, providing the maximum satisfaction for the needs of each individual customer. Areas in which HSBCG uses these core competencies include Business and Corporate Banking and International Services. With its global reach and expertise, the Bank offers a range of comprehensive, cross-border products and services and is best placed to help any business maximize local and international opportunities wherever the business is located. The Bank has a team of Global Relationship Managers that connect to its network around the world and liaise with its business clients, providing advice and support to make full use of HSBC Group systems and products.

Another core competence that distinguishes HSBCG from its rivals in the Greek market is its commitment to innovation and the deployment of advanced technology. Since its establishment, HSBCG has been a trend-setter in the use of technology, always striving to make its systems more sophisticated, to deliver the best possible service for its customers. As a member of a global Group, HSBCG has a considerable advantage in this respect as it is able to stay abreast of the latest technological developments, wherever they occur, and to use them in the most effectual way. The fact that HSBC operates a global network linked by cutting-edge technology enables HSBCG to perceive new needs and requirements quicker than its domestic rivals, developing flexible, alternative services and innovative networks such as the "Express Banking Service". This offers the ultimate in contemporary banking services, providing customers with fast, easy and secure transactions 24 hours a day, seven days a week, wherever they are (HSBCG). Even within the Bank's branches, the specially designed Express Banking areas make transactions more comfortable and much easier.

HSBCG has built its strategies based on its core competencies and has a clear vision of the role these competencies should play within the organization. HSBCG's core competencies represent its competitive strengths relative to other organizations in the industry and provide the fundamental basis for the provision of added value to its customers. Adopting a strategy of organizational learning, that is "a dynamic process of creation, acquisition and integration of knowledge aimed at the development of resources and capabilities that contribute to better organizational performance" (Lopez, Peon, & Ordas, 2005), HSBCG manages to achieve and sustain real advantages against the background of unfavorable economic conditions in the market.

SECTION 3: Strategic commentary

In 2009, after 13 years of dynamic and continuous economic growth, Greece was unavoidably affected by the enormous financial crisis that prevailed in both Europe and internationally. Two years later, the country is in deep economic recession and sharp economic contraction, struggling to avoid bankruptcy. The magnitude of the situation requires the immediate and effective confrontation of Greek economy's structural weaknesses and the improvement of the country's international competitiveness. In achieving this goal, banking institutions operating in the Greek market have a significant role to play.

HSBCG, as a part of a global Group that over its long life has followed and responded successfully to many turbulences in the international financial environment, knows how to adapt in order to ensure its successful operation. To deal with the adverse economic conditions and the unstable domestic environment, HSBCG needs to redefine its corporate strategy, setting clear and attainable strategic operational and institutional goals.

HSBCG needs to improve its corporate responsiveness, meaning that it should find ways to be even more responsive to its customers' needs and ever-changing demands. In addition, it should redesign its organizational structure to be more flexible, to best promote synergies between different departments within the Group, and to utilize the experience and best practices of all units. Under this initiative, HSBCG's centralized business and support units, should engage in a more active role and acquire joint responsibility with the management teams in each country the Bank operates. HSBCG should also seek to enhance its already sufficient risk management operations and to improve the information provided to shareholders by strengthening the role of the CEO.

By relying on its strong brand name, its superior organization and its top-class personnel, as well as on the long relationships of trust with its clients, and on the conservative risk underwriting policy it applies, the Bank will be able to sustain its competitive advantages and successfully implement its strategic goals. This makes sure that when the recovery sets in HSBCG will be in a valuable position to resume its dynamic and outward looking growth (Bank, 2009).