Understanding the Business Environment

This document provides an overview of the business environment and its impact on companies, using HSBC as a case study. It covers topics such as stakeholder analysis, PESTLE analysis, and Porter Five Forces analysis. The document also explores the purpose and market structure of HSBC.

Understanding the
Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................3
Task one..................................................................................................................................3
Task two.................................................................................................................................5
Task three...............................................................................................................................7
Task four...............................................................................................................................10
CONCLUSION..............................................................................................................................12
REFERENCE.................................................................................................................................13

INTRODUCTION
Business environment represents the aggregate of all internal and external elements that
impact the function of a company and how it operates, either directly or indirectly. The
combination of these elements determines the environment and condition of the company or
business organisation. The aggregate of all personnel, organisations, and other elements over
which a commercial firm has no control but on which the firm is nevertheless dependent since
they impact the overall performance and effectiveness of the firm. HSBC is taken as base
company. HSBC Holdings plc is a global investment bank and financial services holding
corporation based in the United Kingdom. It was establishes by Sir Thomas Sutherland in 1865
and it is the UK’s largest bank with total assets of $2.984 trillion (Nabi, 2018).
Task one
HSBC is among the major banking and financial services organisations in the world.
Through their worldwide businesses, Wealth and Personal Banking, Commercial Banking, and
Global Banking & Markets, they serve over 40 million consumers. Their network spans 64
nations and regions in Europe, Asia, the Middle East, and Africa, as well as North and South
America. The legal structure of HSBC is public limited company and this means that it is a
voluntary organisation of people that is incorporated and so has a separate legal identity, as well
as restricted liability for its members. Public limited corporations are listed on the stock
exchange and their shares are publicly traded such as HSBC is listed on Hong Kong Stock
Exchange and London Stock Exchange. Its establishment, operation, and termination are all
rigorously controlled by rules, laws, and regulations (Lobo, Samaranayake and Subramanian,
2019). The corporation obtains its capital through the sale of its shares and individuals who
purchase the shares are referred to as members. The sum collected is referred to as the share
capital. HSBC’s shares are openly listed and exchanged on a stock exchange market.
Shareholders of a public limited corporation are solely liable up to the amount they paid for the
stocks they possess. They are readily transferable between its members and stock market traders.
They are heavily regulated and are legally required to disclose their comprehensive financial
accounts yearly. This guarantees that they show their genuine financial status to their owners and
potential investors, allowing them to evaluate the genuine value of their shares.
Purpose of HSBC

Why we exist is explained by the fact that people open up a universe of potential (Ali and
Shabir, 2017). They are here to help their clients by using their unique knowledge, skills,
breadth, and viewpoints. They helps in connect together the people, ideas, and money that
encourage advancement and growth, assisting in the creation of a better future for their clients,
employees, shareholders, communities, and the earth we all share.
The tagline and business emphasis of HSBC show its goals. HSBC which brands itself as
The World's Local Bank continues to emphasise local investment as a driver of economic
growth. HSBC is in the business of making money. From its beginnings in rural Asia to its
current status as a worldwide organisation, HSBC has maintained a primary focus on
foundational concepts. By keeping to its beliefs and achieving its goals, HSBC has been able to
preserve both revenue and honesty and integrity. The mission of HSBC is to offers a wide
spectrum of financial services across an international network interconnected by advanced
technologies, including an increasingly increasing e-commerce capability: personal financial
services; commercial banking; corporate, investment banking, and markets; private banking; and
other operations. The vision is to strive to be one of the world's great specialized banking
companies, motivated by their dedication to their key principles and values. They respect
diversity seeking out various points of view. They are more effective when we work together
with cross-border collaboration.
Market structure describes how various sectors are classed and differentiated depending on
the extent and form of rivalry for products and services. It is based on the qualities that impact
the conduct and outcomes of businesses operating in a certain industry. Market structures can be
recognized by critically evaluating a variety of elements displayed by various participants. It is
usual to separate these markets based on variables such as the buyer structure of the sector,
customer turnover, the level of product diversification, and many more (Cosenz and Bivona,
2021). In context to HSBC, they are under the category of oligopoly market structure in the
United Kingdom. An oligopoly market is characterised by a limited number of significant
corporations that sell differentiated or similar items. Because there are some companies in the
industry, their competing strategies are interlinked. In an oligopolistic market, a few businesses
govern over many others in a certain market or sector offering comparable goods and services.
Because there are few companies in an oligopolistic market such as Lloyds banking group,
Barclays, RBS, Standard chartered and many more, competition is constrained allowing each

business to compete with each other. This will affect the behaviour of the organisation in terms
of completive edge as business in an oligopolistic industry closely monitors the actions of its
competitors. As oligopolistic companies compete among a small number of competitors, actions
taken by one business always influence others. Also they tend to keep pricing largely stable,
seeking to engage in methods that do not need price changes.
Task two
A stakeholder is an entity who has an involvement in a firm and can potentially influence
and then be influenced by it (Li and et. al., 2018). A company's key stakeholders are its investors,
workers, customers, and suppliers. Stakeholders in a business can be both inside and external to
the company. Internal stakeholders are those who have a significant position in a firm, such as
employment, ownership, or finance. External stakeholders are individuals that do not directly
work for a company but are influenced in certain way by its activities and consequences.
External stakeholders include suppliers, creditors, and public organisations.
A shareholder is also known as a stockholder is an individual, corporation or institution
who holds at least one share of equity in a corporation. Because shareholders are basically
proprietors of a corporation, they profit from the success. These benefits take the shape of higher
stock values or financial earnings given as payments. A majority shareholder is a single
shareholder who actually owns more than 50% of a company's outstanding shares, whereas
minority shareholders possess less than 50% of a company's shares. There are many companies
issue two kinds of stock: common stock and preferred stock. The vast majority shareholders are
common stockholders, owing to the lower cost and greater availability of common stock over
preferred stock (Darics and Koller, 2017). While common stockholders have right to vote,
preferred shareholders normally do not have voting rights because of their preferred status,
which gives them first hands on payouts before common shareholders shares.
Stakeholder analysis involves the study of recognizing those individuals before the
project begins, categorising them based on respective levels of involvement, interest, and
influence in the project, and choosing how to effectively include and communicate with each of
these stakeholder groups along. In context to HSBC, their objectives and aims are defined in
order to fulfil the stakeholders. HSBC incorporates the views and perspectives of stakeholders
such as the government, shareholders, and consumers into company decision-making procedures.

HSBC comprised of both internal and external stakeholders. Internal Stakeholders are those
individuals or groups who engage in the company's management (Woermann and Engelbrecht,
2019). The organisation will not be able to exist in the long term if internal stakeholders are not
present. As a result, they have a significant influence on the organisation. Moreover, those are
the ones that who are aware to all of the entity's secrets and auxiliary functions. These include
employees, owner, board of directors, managers and investors. External Stakeholders are
involved individuals who have not been part of the management team but are indirectly affected
by the company's operations (Schniederjans, 2018). They analyze the firm's financial information
to understand about its operation, revenue and cash flow. External Stakeholders do not engage
and forth during the operations of the firm, but their actions are influenced by the company's
actions. They have external interactions with the firm. They have no awareness of the company's
internal affairs. It includes suppliers, customers, competitors and so on. Both categories of
stakeholders are critical to the organization's success. Internal stakeholders are crucial to an
organization's success.
Stakeholder analysis model:
LEVEL OF INTEREST
Low High
Low
POWER
High
Keep satisfied
Directors
HR
Customers
Manage closely
Decision making gropus
Monitor
Suppliers
Keep informed
Media
Promotions
It is essential to recognize that not every stakeholders has the equal impact or influence on a
business, neither would they be influenced in the same way. It could be determined by looking at
stakeholders in terms of organisational structure, geography, or engagement in different phases
of the task or results. Is this a well-organized stakeholder, are they a well-coordinated group? are

they in favour of the venture or are they opposed to it and so on are kinds of questions that need
to be addressed in order to offer a thorough analysis.
Task three
a) It is imperative for HSBC to analyse the business environment it faces as it assists the
company in maximising its strengths, minimising its weaknesses, taking advantage of
opportunities and minimizing threats. This allows the company to thrive and develop in a
dynamic business environment (Leiß and Zehrer, 2018). Secondly, it will helps in making
the most use of scarce people, environmental, and capital resources systematic studies of
the business environment assist the firm in reducing waste and making the best use of the
resources. Along with this, it will also help organization in developing strategies and
procedures that will aid in the simple achievement of certain organisational objectives.
PESTLE analysis
PESTLE analysis is it referred to as a framework for analysing and monitoring all
the macro environmental elements that have a significant influence on the performance of
the organisation. In context to HSBC, PESTLE analysis is mentioned below:
Political factors: These are the factors on which the government intervenes in the
economy. The factors include such as political stability, foreign trade policy, Labour law
and many more (Doppelt, 2017). In context to the selected organization, they are
operating globally and they have been exposed themselves to different types of political
environment. Before entering into a particular market they analyse different types of
factors such as taxation policies, intellectual property protection, Bureaucracy and
interference in bank industry by government and many more. The Britain’s exit from
European Union has given attention in geopolitical as well as also has the possibilities of
changing Political agenda (Cosenz and Noto, 2018). Due to this, the needs and demands
of the consumers are affected which directly impact to the organisation.
Economic factors: In context to HSBC, they are considered to be the world's
largest banking and financial organisation and the growth is totally depends upon the
economic factors. The economic factors include changes in the exchange rate of
government, unpredictability in interest rate notably in Asia and South Africa prolong
and worsening recession and variation in the employment (Olalla and Merino, 2019).

Social factors: This factor are especially vital for the businesses where it comes
to targeting certain clients. The population's class distribution is critical will be difficult
to offer a premium product to the broader public if the largest ethnic group was of a
lower class instead, they will have to concentrate on highly specialist marketing.
Technological factors: These elements are related to technological advancements
that may have a positive as well as negative impact on the industry as well as markets
operation. These considerations may affect choice to enter or not to enter in these specific
sectors for launch or not launching specific goods and to outsource manufacturing
operation to the foreign entities. HSBC has been the target of several Internet scams
(Rossignoli and Lionzo, 2018). Because technology is so important in financial
institutions, they must be assembled with up-to-date integration services processing. The
technical deficiency and inaccuracy led in the loss of valuable customer data, which
clearly violated privacy regulations. However the data that was stolen did not have a
terrible effect on the organization's performance but it did have a serious impact on the
customers' trust.
Legal factors: It include factors such as health and safety, consumer rights and
laws, equal opportunities and many more which are important for an organisation to trade
successfully (Chang, 2018). In context to HSBC, the government has established certain
established legislation and norms that the organisation must follow and failure to do so
may result in legal action being taken against the organisation.
Environmental factors: These have gained prominence as a result of the
shortage of raw materials, pollution limits performing business with integrity and
sustainable manner and government mandated carbon footprint reductions. HSBC has
collaborated with the Earth Watch Institute and the company send their staff to other
nations to study, comprehend and promote environmental concern.
b) Porter Five Forces
The Porter Five Forces Analysis is a strategic management methodology used to
examine industries and identify the underlying revenue drivers in a certain business. In
context to HSBC, porter five forces are mentioned below:

Threat of new entrants (Low): Tesco, Sainsbury, among several other retailers
are considering entering the banking industry due to the large profits that the industry
provides. Large retailers in the United Kingdom want in, unaware to the reality that such
threats have the ability to ruin HSBC. Despite significant market dangers, HSBC was
able to establish great expectations for rival (Peake and Marshall, 2017).
Threat of substitutes (Medium): The introduction of new goods and services by
competitors is a challenge for HSBC. This threat presents an opportunity for the firm to
work hard in order to keep its position. HSBC's strategy revolves upon four key
consumer categories.
Bargaining power of customers (High): This force's job includes client
emphasis as well as size. HSBC handled its clients as a method of consumption client
loyalty (Battistella and et. al., 2017). When buyers significant bargaining power, they
attempt to drive down prices, limiting HSBC wholesale's potential to generate long-term
profits. HSBC's strategy has provided them with the potential to become a world leader in
the banking industry.
Rivalry among competitors (High): In the banking and financial industries,
there are several rivals and HSBC used successful tactics to retain its market-leading
position among competitors.

Bargaining power of suppliers (High): Customer power is an inverse of supplier
power. This force focuses on two critical places. The first is the enormous quantity and
density of suppliers and the second is the variety of materials available. HSBC has a
method of charging markets with varying pricing based on the price variances of each
customer.
Task four
It is considered to be the world's leading bank which provides banking and financial
services. Recently, due to COVID-19 outbreak, the company has been impacted along with their
customers. As government of all the countries has imposed lockdown in which no person was
allowed to step out of their houses which leads in shutting down of many industries. That’s
creating a huge loss to the people as well as their employment in the organisation. This leads in
creating impact on the short term as well as long term goals of the organisation (Nabass and
Abdallah, 2019). The outbreak greatly affected an increasingly diverse trade and regulatory
environment affecting business investor morale around a moment of enhanced current US China
tensions and raiding discussions between the UK and the EU.
Key performance indicator (KPI) is a measure used to assess an organization's progress
toward a specific goal. The aim of KPI is to measure progress toward achieving the desired
object, which is often viewed in independent strategic vision. The financial KPIs are often
focused on the income and on the cash budget factors while they may also show changes in the
sales growth and spending areas. The financial performance of HSBC was $6.1 billion which
was profit after tax. Non financial performance measurements provide data on a company's
success in non monetary and non money terms. Non financial metrics cannot be expressed in
monetary terms yet they can be qualitative as well as quantitative.
In context to HSBC, in non financial, sustainable finance and investment was $93 billion. In
the financial performance, the basic earnings per share is $0.19 with a common equity tier one
capital ratio of 15.9%. In the non financial performance, seven out of eight customers are
satisfied with the organization performance and five out of eight commercial banking market
sustained top three ranks and improve their customer satisfaction (Bani-Hani, Tona and Carlsson,
2018).

Financial performance measurement often focuses on a company's short-term success
elements. These metrics are primarily concerned with the company's sales, profitability, and cash
flows. Non-financial performance measurement, on the other hand, identifies inadequacies in
those areas of business that might impair an organization's long-term organizational direction.
As the aim of these metrics is the identification of problems inside a business's internal
systems, the primary focus of non-financial performance measurement is that company's
management. Financial performance metrics have a restricted scope in terms of long-term wealth
maximisation for shareholders. Non-financial performance indicators on the other hand, not only
take into consideration all components of a firm that might develop a well-grounded
organisational strategy, but they also have a lower risk of exploitation and fabrication if correctly
developed, executed, and assessed.
In the financial performance, the basic earnings per share are $0.19 with a common equity
tier one capital ratio of 15.9%. In the non financial performance, seven out of eight customers are
satisfied with the organization performance and five out of eight commercial banking market
sustained top three ranks and improve their customer satisfaction.
The short term goal of HSBC is that, the Board of Directors has set a three-year term ending
December 31, 2023. They are assured that a forward-looking evaluation of the Group for this
timeframe allows for a fair declaration of viability. Furthermore, the Group's stress testing
programmes, as well as its internal forecasts for performance, core capital ratios, and debt ratios,
span this time frame. The goal is to be the customer' chosen worldwide financial partner and
increasing corporate growth through cultivating a culture of sharing. Along with this, they also
have a goal to achieve a balance of profitability amongst strong, established economies and
faster-growing which is considered as their long term goal.
The balanced scorecard is a balanced collection of measurements used by corporations to
encourage employees and assess performance. It is divided into four perspectives such as
financial, internal business process, learning and growth and customers (Audebrand, Camus and
Michaud, 2017).
Recommendations
From the financial and non financial performance of HSBC, their performance is not well
balanced and in order to balance, they can increase their gender diversity so that all the
employees in the organisation can work together as well as get the equal wages as their target

was to increase the gender diversity of women in leadership roles by 30% and they received
30.3% by the end of the year. As COVID 19 is still present in the world, the bank can keep using
social distancing in the organisation so that customers can be safe and also create a positive
impact that organisation is taking all the precautionary care that leads in satisfying the customers
with the services and care. Also, the organisation can breakdown the long term goal into short
ones in order to easily achieve the goal.
CONCLUSION
From the above discussion, it can be concluded that business environment refers to all of the
external variables that influence company choices. It includes mostly of social, economic,
political and technical aspects. All of these elements affecting the business environment are
outside of the control of business success. In this report, it includes legal as well as market
structure of the organisation and stakeholder analysis and business environment analysis using
PESTLE analysis and Porter’s five forces model. At last, key performance indicators are
explained which assists in evaluating the financial and non financial performance of the
organisation.

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