The Hongkong And Shanghai Banking Corporation Marketing Essay

2730 words (11 pages) Essay

1st Jan 1970 Marketing Reference this

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HSBC stands for The Hongkong and Shanghai Banking Corporation. The company was found by Thomas Sutherland in the year 1865. HSBC logo and slogan is the world’s local bank. This bank is 137 years old and has the assets of over 600 billion dollars. HSBC is one of the largest banking and financial services organisations in the world. HSBC’s international network includes around 8,000 offices in 87 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. HSBC provides a comprehensive range of financial services such as personal financial services, commercial banking such as corporate, investment banking and markets, private banking and other activities (HSBC, 2010).

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Company such as HSBC are been known to always maintain a tightly built organizations that maintains a liberal view in terms of recruitment. Most of HSBC’s employees on its country branches are basically the members of the locality. This organizational structure provides more efficient management on the whole HSBC organizational structure. In HSBC, each members of the organizational structure has their own functions to contribute to the organizational performance in the company. The HSBC Board has 17 members that consist of 8 people who are independent. With the organizational structure, the strategy impose by HSBC can become more effective because it enables the management to plan, coordinate and control all activities smoothly.

HSBC not only have an effective organizational structure, but it also has its unique and effective organizational culture as part of their strategic management. In order to have strategic management that will enable HSBC to achieve competitive advantage and competitive position in global market, the company has heavily invested in it. The strongest organization culture that HSBC have is the coexisting with various subcultures. It enable the company into the central binding of force and can prevent it’s from becoming a conglomerate despite of its diversified situation.

Through the organizational culture, HSBC has been known practices the culture in its high regard for work-ethic endorsement. With these practices, it cans careful screening each of the employees with the necessary skills and high potential for improvement. Through this organizational culture, HSBC are able to create an effective workforce that is determined to succeed and is highly committed to work, family and to the company.

There are three types of MNC which are Multi-domestic Corporation, global corporation and transnational company. Out of the three MNC, HSBC is a transnational company. As a transnational company is usually has an actual operation or outlets in multiple countries. It also means that HSBC performs centralized and decentralized approach.

HSBC is a company with investments and activities that range international boundaries and with subsidiary offices, facilities and companies in several countries. It can be shown from the HSBC’s logo and slogan that say “The Worlds Local Bank” that stated trying to create a unanimous culture around the world giving people a similar sense of culture. For example, when you go to either Greece or Italy, you will be able to do banking with HSBC.

The macro environment analysis of the company

In order to make an analysis of the macro environment of HSBC, a PEST report certainly would be a best strategic to finish it.

Pest analysis is stand for political, economical, social and technological analysis. Such external factors usually are beyond the firm’s control and sometimes present themselves as threats (NetMBA, 2010). PEST analysis gives a logical structure, providing clear presentation for further discussions and proactive decision-makings. Below is the PEST analysis of HSBC.

Political:

Different government in the countries where HSBC are operating has been protected them by the regulations and policies formulated. In order to make sure that the HSBC will be able to carry out business operations successfully and effectively, HSCB has been stick to the policies given by each government. Furthermore, HSBC also creates their own protection strategies against any governmental restrictions and limitations. For an example, each financial service has different policies and it must be informed to customer (HSBC, 2010).

Economical

           HSBC have a constant and well economic stability as a world’s largest and competitive industry in terms of banking and finance. Although HSBC are running in different parts of the world, the management of HSBC has confident that they would be able to settle such strive and struggles to have a better economic condition. In year 2008, all the UK banks to be hit by the credit crisis. In spite of the financial crisis and stock market crashes, investor confidence in HSBC remains strong. HSBC has only lost 3% of its share value, compared to a minimum of 58% loss for Barclays, which is second place in terms of investor confidence (Tuner, 2008).

 

Social

Situation of the society in which HSBC are operating is affected them. Because of this, HSBC tries harder to give equal chances for each society to take benefit of the resources given by the organisation. HSBC aims to have a good reputation and relations in the society that they belong. HSBC, 2003 states that “Reputation is the key element of the brand proposition and cannot be overstated”.

Technological

            The appearance of information technology and internet affects how HSBC has been operating in the past years. HSBC implements different IT/IS systems and used internet to contact their customer all over the world and to know the most up-to-date trends in the global business. Apart from these, HSBC also uses facilities which helps them improved their productions and operations. In year 2000, HSBC started the first online operation in UK. By 2005, HSBC online service will be fully operational in up to 20 countries worldwide (Finextra, 2000).

The international consideration

The HSBC headquarters is located in London and their international network comprises at about 8,500 offices in 86 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. As HSBC operates in London, Hong Kong, New York, Paris and Bermuda stock exchanges, there are around 220,000 shareholders in 199 countries and territories are been holding their shares. HSBC also have their best-known subsidiary that operates at their primary area such as United Kingdom, France, US, Brazil, Mexico, Switzerland and etc.

When doing international business with other country, the companies have to evaluate the country before doing business with them. HSBC should evaluate the country political risk. If a country political is very high, HSBC should not do business with them so that they cannot risks their employee’s life by sending them to do business.

In addition, HSBC should evaluate the country economics stability. If the country economics is unstable, HSBC would probably have losses than profits. With evaluation of the country, it can help the company to reduce its losses. By evaluating the risk, the company will know that whether it is safe to invest in the country and how much capital should the company invest.

HSBC has joint venture with the Global Payments in the Asia-Pacific Region to provide payment processing services. The joint venture will eventually strengthen the Global Payments capabilities as they will get benefit from HSBC’s large and extensive footprint in the region. (PR Newswire, 2005). Furthermore, HSBC and Ping An Insurance (Group) Company of China has jointly acquire Fujian Asia Bank that is a Sino-foreign joint venture bank established by the Bank of China and BCA Finance in 1993. HSBC will get 50% from BCA Finance and Ping An company will get 50% from Bank of China in the Fujian Asia Bank. (Asialaw, 2004).

One of the problems that HSBC faced is the HSBC in Mexico is a large local bank and they wanted to take control of its decentralized IT environment. It could take months to manual deployment of the software applications and the security updates. Moreover, the company has lacked tools to monitor its IT resources effectively. It because the HSBC in Mexico had difficulties in responding quickly to the market demands which the customers continually wanting new features and services.

Solution: To solve this problem, HSBC Mexico implemented a centralized solution based on the Microsoft Windows Server 2003 that operating system and etc. With this Microsoft Windows Server 2003, the company can automatically install updates; get new financial services, cut IT travel, monitor systems in real time and plan for change and business growth. They also estimate that the IT resources will help to support up to 30% growth with its existing infrastructure. (Microsoft Case Studies, 2006).

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Additionally, HSBC also faced a problem that has them fined over £3m for data security failings. The HSBC bank losses disks and posted unencrypted customer details. They were been fined for their careless in handling and loss of confidential details of tens of thousands of its customers.

Solution: In order to solve the problems that have occur, HSBC has taken a remedial action including stronger processes to ensure all confidential data that is electronically transmitted or stored and transported on CDs and laptops is encrypted. They also are restricting their staff the ability to download data to portable devices. (Chapman, 2009).

The growth of business

1. Market Penetration

The market penetration strategy is implemented when an organization seeks to increase market share of its current products/services. This strategy is the least risky as the organization is already equipped with the experiences, capabilities and resources to market and support its products/services. If the market is a high growth market, simply maintaining market share would suffice. However, as the market reaches the saturation stage, a new strategy must be implemented. HSBC is able to use this strategy to gain market share from competitors that have lost confidence in banks that have failed in the recent sub-prime mortgage crisis.

2. Market Development

Market development is a strategy used to obtain growth by targeting new markets with existing products. New markets may include new market segments or new geographical regions. This strategy is good for organisations with products/services that are suitable for different target markets. Due to the organisation moving into a completely new market, market development is considered more risky than market penetration. China and India holds the biggest current account market that HSBC needs to implement the market development strategy. As the economic slowdown in these two countries is not as severe as in the advanced economies, HSBC may find it more profitable to concentrate resources to gain a better foothold in Asia.

3. Product Development

The product development strategy requires the organisation to develop new products for existing market segments. This strategy is suitable for organisations that have a good understanding of their customer’s needs and wants. Existing products/services can be used as a platform for cross selling new products tailored to a specific customer base. As with market development, product development carries more risk than market penetration. HSBC could use this strategy by developing a new prepaid card product that O2 has launched recently together with its current account. The new prepaid card would signal a change in the psychology of spending among customers and would likely portray HSBC as a more responsible financial institution that does not just encourage people to spend.

4. Diversification

Diversification is the strategy of diversifying into a completely new business by developing new products for new markets. Due to the uncertainty of untested products and potentially hostile new markets, diversification is the most risky strategy of the Ansoff matrix. Furthermore, the company may be trying to develop products and markets beyond the core competencies of the organisation. However, innovative products hold the highest potential for highest returns. This strategy is particularly useful should the organisation have the first mover advantage in entering the market. Diversification would not be a suitable strategy for HSBC in times when capital is tight and economic activity is deteriorating. Furthermore, new products in Asian markets are known to not perform well in the early years of development.

New venture

Force 1: The Intensity of Rivalry

            It is said that HSBC has many rivals in the banking and financial sectors. The degree of rivalries among these firms enables HSBC to use efficient strategies to maintain its leadership position in the market. Furthermore, because of the capabilities of other rival companies, HSBC develops strategic plans to make sure that they are always be the number one choice of their customers in banking and finance industries.

 

Force 2: The Threat of Entry

            With the potentials of having high profits in this kind of industry, HSBC is subject to several threats of market entry. The threats of these new entrants sometimes make or break an organisation like HSBC. In this regard, HSBC has been able to establish some entry barriers to ensure that their competitive advantage.  The company also uses strong branding images to make sure that their customers will remain loyal to them.

 

Force 3: The Threat of Substitutes

            HSBC is also aware that their competitors will provide new products and services in the future. The threat that these substitute products gives to HSBC’s profitability allows the company to work hard to sustain its position.  Through the strategy of HSBC in focusing on four different customer segments, the company has able to provide needs of each customer group which lessen the impact of other substitute products.

 

Force 4: Buyer Power

            Accordingly, the buyer power is noted to be one of the two important forces which affect the occupation of the value established by an organisation. Herein, the vital determinants of this force include the size as well as the customer concentration. It can be said that HSBC has been able to manage their customers effectively which allows the company to gain customer loyalty and satisfaction. The strategy used by HSBC enables them to become the world leader in banking and financial sector.

 

Force 5: Supplier Power

            It is said that supplier power reflects to the buyer power. In this regard, the analysis of this force commonly focuses on the significant size and concentration of suppliers which is also relative to the competitors. It also focuses on the degree of differentiation in the materials being supplied (, 1980). It can be said that HSBC ahs the ability to charge their target markets different prices in accordance with the differences in the price formulated for each of the buyers. This usually implies that the audience is described by high supplier power.

Conclusion

Internationalization businesses are more likely preferred by companies. 80% of those surveyed consider their ventures to be profitable, while 84% believe international business to be beneficial to long term security and to have improved their businesses growth. Businesses that are not yet internationalise their business are much less positive about the benefits of it. Domestic businesses which yet not start internationalization business are afraid of the barriers and obstacles to do international trade though they have a view of going internationalisation.

Perhaps the most important advice for internationalise business is to be prepared of analyses. The analyses can help the business doing international trade troubles.

HSBC stands for The Hongkong and Shanghai Banking Corporation. The company was found by Thomas Sutherland in the year 1865. HSBC logo and slogan is the world’s local bank. This bank is 137 years old and has the assets of over 600 billion dollars. HSBC is one of the largest banking and financial services organisations in the world. HSBC’s international network includes around 8,000 offices in 87 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. HSBC provides a comprehensive range of financial services such as personal financial services, commercial banking such as corporate, investment banking and markets, private banking and other activities (HSBC, 2010).

Company such as HSBC are been known to always maintain a tightly built organizations that maintains a liberal view in terms of recruitment. Most of HSBC’s employees on its country branches are basically the members of the locality. This organizational structure provides more efficient management on the whole HSBC organizational structure. In HSBC, each members of the organizational structure has their own functions to contribute to the organizational performance in the company. The HSBC Board has 17 members that consist of 8 people who are independent. With the organizational structure, the strategy impose by HSBC can become more effective because it enables the management to plan, coordinate and control all activities smoothly.

HSBC not only have an effective organizational structure, but it also has its unique and effective organizational culture as part of their strategic management. In order to have strategic management that will enable HSBC to achieve competitive advantage and competitive position in global market, the company has heavily invested in it. The strongest organization culture that HSBC have is the coexisting with various subcultures. It enable the company into the central binding of force and can prevent it’s from becoming a conglomerate despite of its diversified situation.

Through the organizational culture, HSBC has been known practices the culture in its high regard for work-ethic endorsement. With these practices, it cans careful screening each of the employees with the necessary skills and high potential for improvement. Through this organizational culture, HSBC are able to create an effective workforce that is determined to succeed and is highly committed to work, family and to the company.

There are three types of MNC which are Multi-domestic Corporation, global corporation and transnational company. Out of the three MNC, HSBC is a transnational company. As a transnational company is usually has an actual operation or outlets in multiple countries. It also means that HSBC performs centralized and decentralized approach.

HSBC is a company with investments and activities that range international boundaries and with subsidiary offices, facilities and companies in several countries. It can be shown from the HSBC’s logo and slogan that say “The Worlds Local Bank” that stated trying to create a unanimous culture around the world giving people a similar sense of culture. For example, when you go to either Greece or Italy, you will be able to do banking with HSBC.

The macro environment analysis of the company

In order to make an analysis of the macro environment of HSBC, a PEST report certainly would be a best strategic to finish it.

Pest analysis is stand for political, economical, social and technological analysis. Such external factors usually are beyond the firm’s control and sometimes present themselves as threats (NetMBA, 2010). PEST analysis gives a logical structure, providing clear presentation for further discussions and proactive decision-makings. Below is the PEST analysis of HSBC.

Political:

Different government in the countries where HSBC are operating has been protected them by the regulations and policies formulated. In order to make sure that the HSBC will be able to carry out business operations successfully and effectively, HSCB has been stick to the policies given by each government. Furthermore, HSBC also creates their own protection strategies against any governmental restrictions and limitations. For an example, each financial service has different policies and it must be informed to customer (HSBC, 2010).

Economical

           HSBC have a constant and well economic stability as a world’s largest and competitive industry in terms of banking and finance. Although HSBC are running in different parts of the world, the management of HSBC has confident that they would be able to settle such strive and struggles to have a better economic condition. In year 2008, all the UK banks to be hit by the credit crisis. In spite of the financial crisis and stock market crashes, investor confidence in HSBC remains strong. HSBC has only lost 3% of its share value, compared to a minimum of 58% loss for Barclays, which is second place in terms of investor confidence (Tuner, 2008).

 

Social

Situation of the society in which HSBC are operating is affected them. Because of this, HSBC tries harder to give equal chances for each society to take benefit of the resources given by the organisation. HSBC aims to have a good reputation and relations in the society that they belong. HSBC, 2003 states that “Reputation is the key element of the brand proposition and cannot be overstated”.

Technological

            The appearance of information technology and internet affects how HSBC has been operating in the past years. HSBC implements different IT/IS systems and used internet to contact their customer all over the world and to know the most up-to-date trends in the global business. Apart from these, HSBC also uses facilities which helps them improved their productions and operations. In year 2000, HSBC started the first online operation in UK. By 2005, HSBC online service will be fully operational in up to 20 countries worldwide (Finextra, 2000).

The international consideration

The HSBC headquarters is located in London and their international network comprises at about 8,500 offices in 86 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. As HSBC operates in London, Hong Kong, New York, Paris and Bermuda stock exchanges, there are around 220,000 shareholders in 199 countries and territories are been holding their shares. HSBC also have their best-known subsidiary that operates at their primary area such as United Kingdom, France, US, Brazil, Mexico, Switzerland and etc.

When doing international business with other country, the companies have to evaluate the country before doing business with them. HSBC should evaluate the country political risk. If a country political is very high, HSBC should not do business with them so that they cannot risks their employee’s life by sending them to do business.

In addition, HSBC should evaluate the country economics stability. If the country economics is unstable, HSBC would probably have losses than profits. With evaluation of the country, it can help the company to reduce its losses. By evaluating the risk, the company will know that whether it is safe to invest in the country and how much capital should the company invest.

HSBC has joint venture with the Global Payments in the Asia-Pacific Region to provide payment processing services. The joint venture will eventually strengthen the Global Payments capabilities as they will get benefit from HSBC’s large and extensive footprint in the region. (PR Newswire, 2005). Furthermore, HSBC and Ping An Insurance (Group) Company of China has jointly acquire Fujian Asia Bank that is a Sino-foreign joint venture bank established by the Bank of China and BCA Finance in 1993. HSBC will get 50% from BCA Finance and Ping An company will get 50% from Bank of China in the Fujian Asia Bank. (Asialaw, 2004).

One of the problems that HSBC faced is the HSBC in Mexico is a large local bank and they wanted to take control of its decentralized IT environment. It could take months to manual deployment of the software applications and the security updates. Moreover, the company has lacked tools to monitor its IT resources effectively. It because the HSBC in Mexico had difficulties in responding quickly to the market demands which the customers continually wanting new features and services.

Solution: To solve this problem, HSBC Mexico implemented a centralized solution based on the Microsoft Windows Server 2003 that operating system and etc. With this Microsoft Windows Server 2003, the company can automatically install updates; get new financial services, cut IT travel, monitor systems in real time and plan for change and business growth. They also estimate that the IT resources will help to support up to 30% growth with its existing infrastructure. (Microsoft Case Studies, 2006).

Additionally, HSBC also faced a problem that has them fined over £3m for data security failings. The HSBC bank losses disks and posted unencrypted customer details. They were been fined for their careless in handling and loss of confidential details of tens of thousands of its customers.

Solution: In order to solve the problems that have occur, HSBC has taken a remedial action including stronger processes to ensure all confidential data that is electronically transmitted or stored and transported on CDs and laptops is encrypted. They also are restricting their staff the ability to download data to portable devices. (Chapman, 2009).

The growth of business

1. Market Penetration

The market penetration strategy is implemented when an organization seeks to increase market share of its current products/services. This strategy is the least risky as the organization is already equipped with the experiences, capabilities and resources to market and support its products/services. If the market is a high growth market, simply maintaining market share would suffice. However, as the market reaches the saturation stage, a new strategy must be implemented. HSBC is able to use this strategy to gain market share from competitors that have lost confidence in banks that have failed in the recent sub-prime mortgage crisis.

2. Market Development

Market development is a strategy used to obtain growth by targeting new markets with existing products. New markets may include new market segments or new geographical regions. This strategy is good for organisations with products/services that are suitable for different target markets. Due to the organisation moving into a completely new market, market development is considered more risky than market penetration. China and India holds the biggest current account market that HSBC needs to implement the market development strategy. As the economic slowdown in these two countries is not as severe as in the advanced economies, HSBC may find it more profitable to concentrate resources to gain a better foothold in Asia.

3. Product Development

The product development strategy requires the organisation to develop new products for existing market segments. This strategy is suitable for organisations that have a good understanding of their customer’s needs and wants. Existing products/services can be used as a platform for cross selling new products tailored to a specific customer base. As with market development, product development carries more risk than market penetration. HSBC could use this strategy by developing a new prepaid card product that O2 has launched recently together with its current account. The new prepaid card would signal a change in the psychology of spending among customers and would likely portray HSBC as a more responsible financial institution that does not just encourage people to spend.

4. Diversification

Diversification is the strategy of diversifying into a completely new business by developing new products for new markets. Due to the uncertainty of untested products and potentially hostile new markets, diversification is the most risky strategy of the Ansoff matrix. Furthermore, the company may be trying to develop products and markets beyond the core competencies of the organisation. However, innovative products hold the highest potential for highest returns. This strategy is particularly useful should the organisation have the first mover advantage in entering the market. Diversification would not be a suitable strategy for HSBC in times when capital is tight and economic activity is deteriorating. Furthermore, new products in Asian markets are known to not perform well in the early years of development.

New venture

Force 1: The Intensity of Rivalry

            It is said that HSBC has many rivals in the banking and financial sectors. The degree of rivalries among these firms enables HSBC to use efficient strategies to maintain its leadership position in the market. Furthermore, because of the capabilities of other rival companies, HSBC develops strategic plans to make sure that they are always be the number one choice of their customers in banking and finance industries.

 

Force 2: The Threat of Entry

            With the potentials of having high profits in this kind of industry, HSBC is subject to several threats of market entry. The threats of these new entrants sometimes make or break an organisation like HSBC. In this regard, HSBC has been able to establish some entry barriers to ensure that their competitive advantage.  The company also uses strong branding images to make sure that their customers will remain loyal to them.

 

Force 3: The Threat of Substitutes

            HSBC is also aware that their competitors will provide new products and services in the future. The threat that these substitute products gives to HSBC’s profitability allows the company to work hard to sustain its position.  Through the strategy of HSBC in focusing on four different customer segments, the company has able to provide needs of each customer group which lessen the impact of other substitute products.

 

Force 4: Buyer Power

            Accordingly, the buyer power is noted to be one of the two important forces which affect the occupation of the value established by an organisation. Herein, the vital determinants of this force include the size as well as the customer concentration. It can be said that HSBC has been able to manage their customers effectively which allows the company to gain customer loyalty and satisfaction. The strategy used by HSBC enables them to become the world leader in banking and financial sector.

 

Force 5: Supplier Power

            It is said that supplier power reflects to the buyer power. In this regard, the analysis of this force commonly focuses on the significant size and concentration of suppliers which is also relative to the competitors. It also focuses on the degree of differentiation in the materials being supplied (, 1980). It can be said that HSBC ahs the ability to charge their target markets different prices in accordance with the differences in the price formulated for each of the buyers. This usually implies that the audience is described by high supplier power.

Conclusion

Internationalization businesses are more likely preferred by companies. 80% of those surveyed consider their ventures to be profitable, while 84% believe international business to be beneficial to long term security and to have improved their businesses growth. Businesses that are not yet internationalise their business are much less positive about the benefits of it. Domestic businesses which yet not start internationalization business are afraid of the barriers and obstacles to do international trade though they have a view of going internationalisation.

Perhaps the most important advice for internationalise business is to be prepared of analyses. The analyses can help the business doing international trade troubles.

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