HSBC Holdings: Operations, Objectives, Market Structure, and Competitive Strategy

This document provides an in-depth analysis of HSBC Holdings plc, including its operations, objectives, market structure, and competitive strategy. It also explores stakeholder analysis, PESTLE framework, and key performance indicators.

BUSINESS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK ONE......................................................................................................................................1
HSBC Holdings plc......................................................................................................................1
Operations of HSBC....................................................................................................................1
Main objectives of HSBC ...........................................................................................................2
Market structure of HSBC...........................................................................................................2
Competitive strategy....................................................................................................................3
TASK TWO.....................................................................................................................................3
Stakeholder..................................................................................................................................3
Shareholder..................................................................................................................................4
Stakeholder analysis of HSBC.....................................................................................................4
TASK THREE.................................................................................................................................5
a) PESTLE framework of HSBC.................................................................................................5
b) Porter's five force analysis of HSBC.......................................................................................6
TASK FOUR...................................................................................................................................7
Key performance indicators.........................................................................................................7
Recommendations........................................................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
A business involves the buying and selling of goods and services for the motive of
earning profits and wealth maximization of the shareholders. The current project shall be
undertaking the study on the HSBC Holding plc, which is an investment banking and financial
services company. The report shall be identifying the operations that are undertaken by the
company and the major objectives behind performing the business activities. Apart from this the
report shall also be highlighting the market structure under which the organization preforms its
duties and the behaviour of the organization in respect of achieving the competitive advantage.
Further the report shall be reflecting the conceptual understanding of shareholders, stakeholders
and stakeholder analyses. The stakeholder analysis shall be studied in respect of stakeholder
groups of HSBC to know the need and influences of them. The business environment of HSBC
shall be identified by conducting PESTLE and Porters five force analysis to ascertain the
competencies in the market. The PESTLE analysis shall be depicting the forces from the external
environment that are impacting the business operations within the company. Whereas the portals
five force is used to determine the internal environment and its factors contributing to the success
of the organization. Lastly the report shall be covering the key performance indicators as
specified in the annual report and the current developmental structure of the company.
TASK ONE
HSBC Holdings plc
Hong Kong and Shanghai Banking Corporation Limited is a British multinational
investment bank and financial services company. It is one of the largest banks in Europe which
was established in 1865 in Hong Kong. It has established a large global network covering almost
about 65 countries of the world and creating of about 38 million customers. The company has
been organized with four group Commercial banking, Global banking and markets, Retail
banking Wealth management and Global private banking. The legal structure under which the
particular organization operates is the public limited company who are free to offer their shares
to public at large in order to raise funds for the commercial purposes. For this purpose the
company has to be listed on the stock exchanges and stays highly regulated under the same.
Operations of HSBC
The vast array of the business operations that the company provides to its customer are
established around to provide the banking and financial services globally. It can be ascertained
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that the digital services that are provided are due to the advanced technological processes that the
company use combined with the innovation strategy used in their business model. They are
striving to transform the lives to make it better and sustainable. They have a strong
infrastructure, innovative solutions, strategic transformation programmes and other professional
services across wide global network which is easily accessible by the customers. It provides
potential opportunities to develop the careers of its potential customers. As mentioned above the
arena of its services are spread across four diversified regions Commercial banking, wealth and
personal banking, global banking, digital business services and the global functions are met by
the highly qualified employee base of the company.
Main objectives of HSBC
The HSBC Group is operating with the significant objectives and purpose in the market
of being the preferred financial partner for its existing as well as the potential client base.
Through capitalizing upon its various strengths, focusing on their strategic planning, backing
their value system the company aims to operate as the leading financial services provider around
the globe. Some most prominent objectives of the business are related to delivering the high
quality services and providing an outstanding customer experience by the easily accessible
services (Lo and Kwan, 2017). Apart from that it believes in the goal of extending long term
returns to the shareholders and a target of providing the maximum portion of the investments in
the form of returns to the shareholders of the company. The ethical practices and the corporate
governance affairs has been delivering value to the business and has been successful in
maximization of the profitability of the business.
Market structure of HSBC
The company HSBC Holdings plc is operating in the varied business segments providing
the investment and the financial solution to the clients in the domestic as well as the international
markets. It operates in the varied type of market structure throughout the world and so has to face
the challenges associated with the competitive pressures and is surviving by applying the
innovative business model to transform the lives of the people.
HSBC Holdings plc which is established in UK and headquartered in London is within
the banking industry following the oligopolistic market structure. In this market there are some
highly dominant players who have capitalized over the market share of the company and there
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are some fringe banks that coexist with these giants. The market share of the company remains
unchanged with the entry of the small players in the market. The competition such industries is
usually over the quality of services provided and the capitalization of the strengths in the
business in order to assume the benefit of capturing the opportunities.
Competitive strategy
The market structure in which the company is operating highly affects its operations and
in the long run appropriate competitive strategy needs to be formulated in order to gain the
competitive edge in the market. It can be assessed that UK banking industry has also faced
several financial crisis and due to which these large dominant banks like Lloyd's, Barclay's,
Royal Bank of Scotland and the HSBC had to take steps like consolidation with the smaller
banks to form the largest bank (Lim, 2017). Another time also the Competition Commission
increased the regulations on these banks and stated that these banks are operating in the complex
monopoly environment and due to this the switching practice of the smaller banks took place to
whom the services are currently provided. Based on these complications related to the market
share of the company, efficient competitive strategy has to be developed by the companies in
order to survive in the business. The competitive strategy that is currently applied by the
company is they are aggressively branding for their services and also the tailored and customized
services are provided to the customers such that they retain and stay loyal with the banking
company.
TASK TWO
Stakeholder
The stakeholders in respect of any company can be defined as the group of people who
are associated with the organization and are having interest in the business affairs. They are the
ones who are affected by the operations of the business and their functioning in the market. They
shall be either gaining from the profitability of the business or the reputation and value in the
industry through the various activities in respect of the corporate social responsibility. The
stakeholders shall range from the customers, employees, shareholders, creditors, suppliers,
government and the society who are impacted by the business decisions taken by the bank.
It can be assessed that different kinds of stakeholders have different concerns and the
vested interest in the organization like the customers of the business shall be interested in the
quality of the services that are provided and the value for which such services are provided of
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whether they are fair or not. On the contrary the shareholders of the business shall be focused
upon the returns that are generated over their investments in the business in the form of
dividends and bonus. The suppliers and the creditors shall be interested in knowing the
credibility of the bank and its routine profitability that shall be leading to their timely and
effective payments. Lastly the government and the society shall be concerned about the
fulfilment of the social responsibility and environmental concerns and also the government shall
be seeing the compliance of the laws and the legislations. In this manner it can be evidently
noticed that the stakeholders of the business are highly interested as well as affected by the
prosperity of the business.
Shareholder
The shareholder of a company refers to the party who is holding at least one share in the
company. They are referred to the owners of the business who enjoys the voting rights in the
significant decisions of the company and also reap the benefits from the excess profitability
available with the company in the form of dividends (Aragrande, 2020). The shareholder can
either have equity or preference shares in which they have invested their funds in the company.
Their investment remains in the form liability for the business which they shall be repaying at the
time of winding up of the business. Shareholder are the owner but due to the concept of separate
legal entity they are separate from the business and do not own any of the assets and liabilities of
the company. The shareholder are the ones who have provided the long term finance to the
company in order to fulfil the growth prospects that can arise in the future. They get impacted by
the business performance as the additional profitability shall be extended to them in the form of
dividends and also the value of the business shall lead to wealth maximization of the
shareholders in the business.
Stakeholder analysis of HSBC
Stakeholder analysis is the systematic process of identifying the various interested parties
of the business and grouping them separately on the basis of their power, influence on the
organization, level of participation and interest shown in the affairs of the company. The power
interest grid is being formulated in order to know the significance of each of the stakeholders of
the business. Based on this importance that is provided to the stakeholders the company shall
then decide upon the strategic decisions that needs to be taken with respect to how these groups
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need to be involved and taken care of and how should the business communicate with them
effectively to further gain their corporation for the company.
The stakeholder analysis of the HSBC holdings plc is mentioned below:- Keep Satisfied – These are the parties who have high power but low interest in the
business. These can be the clients of HSBC Holdings to whom the organization is
providing the financial solutions. They shall obviously have high power as the market
share and profitability is determined by them. The low interest pertains to lack of growth
concerns for the business. Manage Closely – These are the most important participants of the business who are
exercising high power and equally have interest in the affairs of the company. They are to
be managed closely like the shareholders of the company who enjoy the power of
decision-making and also are interested in the profitability of the business. Monitor – The external parties like government, regulatory bodies, society etc. are the
ones who possess neither much interest nor much power in the business so are to be
decently monitored by the company in order to avoid any kind of interferences in the
smooth functioning of the company.
 Keep Informed – The stakeholders who are to be periodically kept informed and
communicated with are the creditors, suppliers, employees of the business who have
interest in the operations but not the required power to control the status.
TASK THREE
a) PESTLE framework of HSBC Political – The political forces in the external environment states that the higher is the
instability and uncertainty in the government of a country the higher shall be the impact
on the business in the economy. HSBC Holdings is operating as a bank in several
countries and so is exposed to high political system risk (Huhtamäki, 2020). The bank is
highly impacted by the regulatory bodies like central bank, legal framework, bureaucracy
and interference of government, pricing regulations and taxation are some of the policies
impacting the company. Economic – The economic factors like inflation rate, savings rate, interest rate, foreign
exchange rate, employment rate, aggregate demand and supply, investment cycle and the
industry growth rate are some of the important macro environment terms that are
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applicable for the business. HSBC being a bank is rather highly affected by the growth
rate, consumers spending, purchasing power etc. Currently due to the outbreak of corona
pandemic and also the implementation of the Brexit Policy the economy of UK has taken
a downturn because of which the banking business and its profitability has been severely
affected. Social – The social factors like trend, lifestyle, attitude and beliefs of the population are
the major factors that are affecting the prosperity of the business. The demographics of
the population where the company is conducting its business operations are also
important like the education level, employment, skills, attitudes, culture etc. The highly
educated population of the country shall be profitable for the business of HSBC as they
shall be seeking the investment and financial solutions from the banking company. Technological – The technology is one the strengths of HSBC as using the advanced
techniques has helped the company in successful implementation of its business model
leading to innovation and transformation of the lives of people. The company is engaged
in providing digital services to the clients around the globe making the services easily
accessible for the potential customers of the company. It has also impacted in improving
the cost structure of the banks and adding value to the financial sector of UK. Legal – The legal laws and legislations has also impacted the HSBC Holdings and its
operations in the market (Green and Lampe, 2017). These laws can be anti-trust law,
discrimination law, intellectual property rights, consumer protection act, employment
law, health and safety law and the data protection law.
 Environmental – The environment protection and fulfilment of the corporate social
responsibility is also a factor that has impacted the profitability and growth of the
organization. The motive of HSBC related to sustainable development of the society,
support for renewable energy and green and ecological products etc. are some of the
policies to satisfy the members of society and build brand loyalty interest among them.
b) Porter's five force analysis of HSBC Bargaining power of buyers – The bargaining power of buyers is high in such
investments and financial solutions company where the client wants high quality services
at minimum prices possible and also have ability to seek the discounts or better offers
from the banks (Hsbc Holdings Porter's Five Forces Analysis, 2019).
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 Bargaining power of suppliers – The bargaining power of suppliers is high in the
Foreign Money Centre Banks. This is because there are numerous suppliers staying in the
dominant position to lower down the profit margins of HSBC Holdings. Threat of new entrants – The threat of new entrants is high in the industry but these units
remain fringe portion of the banking industry whereas the major proportion of market
share is acquires by the giants like HSBC (Colombo, 2020). The innovation and
transformation strategy of HSBC are used to tackle these new entrants. Threat from substitute products – The threat of substitutes is high in the market as there
are various variants of financial products and service that can be offered to the clients by
the different banks.
 Competitive rivalry – HSBC Holdings operates in the highly competitive market where
the level of competition is intense among some of the huge players in the market. To
fight this the highly effective competitive strategy is developed by the management of the
company.
TASK FOUR
Key performance indicators
The key performance indicators are the quantifiable measures that are used to identify the
results and performance that is generated by the company during the financial year. There are
some essential indicators of the performance of HSBC like the revenues generated during the
year, the operating expenses, the non operating incomes, value of the fund, balances of assets
and liabilities, employee attendance ratio, customer retention rate, client service score, profit
margin, asset under management etc. are reviewed by the management of the company.
Through the attendance rate of the employees it can be assessed that the level of
satisfaction that is received by the workforce and their willingness to work for the business. Also
the company needs highly qualified employees so that the process of innovation and
transformation in the business can be effectively handled. Also since the company operates with
high level of technology so it needs full motivation level of the employees in order to govern the
successful implementation of the business operations (Johannes, Dedy and Muksin, 2018).
Apart from that it can also be assessed that the results in respect of revenue and
profitability of the business shows the current financial position of the business and also helps in
discovering the chances of the future growth prospects for the company. Another major indicator
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is the client retention rate of the business which also depicts the satisfaction ratio of the clients in
the business. This can help in knowing the positioning of the business in the minds of the
customers and due to which their loyalty and trustworthiness with the business can be
determined.
Recommendations
 In order to capitalize on the UK market share the company can plan consolidation
strategy with the small businesses which shall also benefit them in terms of driving
synergy to the organization.
 It should plan to close down the divisions which are unprofitable and loss making
ventures for the company like currently some of its retail and commercial banking sectors
are in degrading stage.
 The company should shrink its global footprint to the extent in the countries where they
are not able establish profitable market.
CONCLUSION
It can be summarized that HSBC is one of the leading banking business that has
formulated effective strategies in order to capitalize over the opportunities provided by the
market, gain the competitive advantage in the industry, capture the required market share and
through an effective business model ensure that through innovation the lives of the clients are
exposed to betterment generating better career opportunities and overall sustainable development
of the society. The business has been efficiently working on the strengths possessed by the
company like global footprint, market leadership and brand equity to generate growth and future
prosperity for the business.
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REFERENCES
Books and Journals
Johannes, R., Dedy, D. and Muksin, A., 2018. The Preparation of Banking Industry in
Implementing IFRS 9 Financial Instruments (A Case Study of HSBC Holdings Plc Listed
on London Stock Exchange of Year 2015–2017). International Journal of Economics and
Financial Issues. 8(6). p.124.
Colombo, N., 2020. HSBC Holdings and Others v Commission: Fining Methods under the
Spotlight (T-105/17 HSBC Holdings). Eur. Competition & Reg. L. Rev.. 4. p.40.
Green, E. and Lampe, J., 2017. Under Western Eyes: Foreign Banks’ Archives Relating to
Central and Eastern Europe Between the Wars Edwin Green (HSBC Holdings plc,
London). In Crisis and Renewal in Twentieth Century Banking(pp. 69-79). Routledge.
Huhtamäki, M. J., 2020. HSBC Holdings and Others v Commission: Reasoning is Everything
When It comes to Fines. Journal of European Competition Law & Practice. 11(1-2).
pp.50-52.
Aragrande, G., 2020. Case Study 3: The HSBC Scandal and Its Reporting Across Europe.
In Fascinating Transitions in Multilingual Newscasts (pp. 165-183). Palgrave Macmillan,
Cham.
Lim, R. E., 2017. Reviewing recent developments in China’s capital markets and assessing the
relevance of the Proposed Shanghai International Board. Capital Markets Law
Journal. 12(1). pp.78-93.
Lo, K. Y. and Kwan, C. L., 2017. The effect of environmental, social, governance and
sustainability initiatives on stock value–Examining market response to initiatives
undertaken by listed companies. Corporate Social Responsibility and Environmental
Management. 24(6). pp.606-619.
Online
Hsbc Holdings Porter's Five Forces Analysis. 2019. [Online] Available through:
<https://casestudyrescue.com/ivey/hsbc-holdings/porters.php>
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