HSBC Bank's Foreign Direct Investment in Switzerland: A PESTLE and Porter Five Forces Analysis

This report examines the potential for HSBC Bank to invest in Switzerland through foreign direct investment (FDI). It analyzes the Swiss business environment using the PESTLE framework, considering political, economic, social, technological, environmental, and legal factors. Additionally, Porter's Five Forces model is applied to assess the competitive landscape and identify opportunities and threats. The report concludes with recommendations for HSBC to capitalize on the Swiss market and achieve sustainable growth.

Business Assignment – Section 2
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Table of Contents
Introduction................................................................................................................................3
Background information............................................................................................................4
Background information on the business environment..............................................................5
Analysis of business scenario.....................................................................................................7
Conclusion................................................................................................................................11
References................................................................................................................................12
Appendices...............................................................................................................................14
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Introduction
The surrounding condition in which business enterprise performs its functions and operates
other business practices is known as a business environment. All countries have their
different business environment which regulates business enterprise to operate their function
in a particular manner. Switzerland is considered one of the most innovative countries. This
country provides such a flexible business environment for the organisation so that they can
operate their day to day functions in most effective as well as in a systematic manner. There
are lots of business opportunities which can help Switzerland based banks in getting a high
level of financial profit. The current business report would be based on the HSBC bank which
wants to explore business opportunities through foreign direct investment in Switzerland.
This report will include the different external business factors which can affect the future
growth of HSBC bank in Switzerland. Also, this report will highlight different business tools
and frameworks which are helpful in analysing the business environment and its possible
impacts on the banking industry.
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Background information
HSBC is one of the most popular banks in Switzerland which is specialised in providing
services like wealth management, investments, and banking services. Also, this private bank
provides wealth management services to people as well as their family members. Apart from
this, it provides investment vehicles like corporate and sovereign bonds, derivatives, equities,
foreign exchange products, insurance, wealth advisory services and many more. The private
banking of HSBC helps its high-net-worth clients in managing as well as preserving their
wealth for the long time period. The HSBC bank meets huge growth opportunities because it
gives core attention to the business environment in which it operates its business functions as
well as practices. The HSBC is one of the leading multinational banking companies which
are considered the world's seventh largest bank total assets wise. This organisation provides
both private banking and corporate banking services. The HSBC bank was first established in
British Hong Kong. In the present time, it has its headquarters in London, United Kingdom.
at the present time, this organisation is providing its banking and financial service all over the
world. HSBC is such a large organisation which can be a determined number of its
worldwide employees which is near around 228,687. Apart from this, it has total assets of
US$2.521 trillion which makes it world seventh biggest banking firm.
In the present time, HSBC bank has more than 3900 offices in more than 67 countries such as
Europe, Asia, Africa, South America and North America. There are four groups of HSBC
which are global private banking, global banking, and markets, commercial banking, retail
banking and wealth management. This organisation is listed on the London stock exchange as
well as the Hong Kong stock exchange. Presently, the net income of HSBC is near about
US$111.879 billion and operating income is US$14.792 billion. The owner of HSBC bank is
Sir Thomas Sutherland who is one of the biggest bankers of this world. This organisation
wants to make a decision on foreign direct investment in Switzerland but before making the
huge investment it will take help of different business tools and techniques for analysing the
internal and external business environment. Basically, FDI is the type of foreign portfolio
investment. Also, it is considered an investment which is a form of controlling ownership in
which business is controlled by the company of another country.
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Background information on the business environment
The business environment is consists of two environment which is the internal and external
environment. The business enterprise can deal with the internal business environment but not
with the external environment because it involves those forces which can only control by
external aspects like customers, government, and environment and so on. Before making any
kind of business decision it is very much important for an organisation to analyse the external
environment and its different factors otherwise it can suffer from the huge financial loss. The
HSBC is one of the biggest banks of the world so it is very much important for it to cooperate
with each and every force of external business environment (Botha, et. al., 2014). In the
present time, this organisation wants to invest its money in foreign direct investment and it
has selected Switzerland which is the vast economic and considered as one of the innovative
and powerful countries. There are various factors which should be considered by HSBC bank
while making a decision on foreign direct investment in Switzerland and these are followed
as under:
Political factors: For having better growth and development, it is very much important for a
business enterprise to consider the political forces of the country. The stability of political
activities plays a significant role in organisational growth and development. There are
various factors which involve in a political environment such as taxation policy, employment
policy, government stability, trade regulations and political stability. Switzerland is a rapidly
growing economy because it has political stability also it the government of Switzerland
gives core attention to employment laws for keeping their labour and employees highly
satisfied.
Economic factors: It involves those variables which can influence the buying behaviour of
customers and their spending behaviour (Chandrapala & Knápková, 2013). The HSBC bank
can lead to a high level of success and growth only if cooperate with economic factors. All
countries use terms like developed and developing which is influenced by their economic
condition in the entire world. Switzerland is a highly developed country because it has
developed the economy and also it has a positive exchange and interest rate which influence
positive impact on the income level of people. Some most important economic factors are a
recession, customer liquidation, inflation rate, interest rate, the balance of sharing, growth in
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spending power and so on. The HSBC bank to consider these factors also before making
foreign direct investment otherwise it can face business failure.
Social factors: This factor is highly related to the demographic characteristics of the business
environment. For having better growth and development it is highly essential for a business
enterprise to consider the values, beliefs, and behaviour of people. There are various social-
cultural factors such as religion, literacy, lifestyle, language, values, and belief of people
which should be considered by HSBC bank while investing huge investment in Switzerland.
A business enterprise can grow its business economy in Switzerland only if it operates its
business activities as per the need and demand of Switzerland customers (Dobbs, 2014).
Technological factors: This factor plays a most significant role in the present business
environment. By providing innovative products and services to the customer organisation can
highly satisfy them and also can make brand loyal for the long time period. There are
different technological factors like social media channels, electronic media, and electronic
commerce, and internet, the rate of technological change, research and development which
can help HSBC bank in becoming the leading private bank of Switzerland. The people of
Switzerland are highly advanced who like online banking services instead of traditional
banking methods. So, it is highly essential for HSBC to consider these areas while investing
money in a foreign direct investment.
Environmental factors: This is considered as the most important external business
environment. While marketing and selling the business products and services business
enterprise affect most of the natural resources which influence huge negative impact on the
natural environment. Switzerland is such a beautiful country and full of natural places which
also popular for its tourist sites (Eruemegbe, 2015). So, it is essential for HSBC bank to
minimise the usage of natural resources otherwise it will not survive in this country for the
long time period. There are various aspects which should be managed by HSBC bank at any
cost such as energy consumption, pollution monitoring, and waste disposal.
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Analysis of business scenario
A business enterprise can lead to a high level of success and growth only if it analyses each
and every component of the business environment. By taking help of different business tools
and analytical tools, HSBC bank can easily determine the impact of environmental factors in
most effective as well as in a systematic manner. Porter five forces and Pestle analysis are the
most important analytical tools which can be used by HSBC bank for analysing the business
environment of Switzerland.
Porter Five forces model
This model is considered as the most effective and holistic strategy framework which helps
the organisation in making strategic business decisions only by determine the current market
competition. The HSBC bank can easily make an effective decision regarding foreign direct
investment (Gupta, 2013). This analytical tool will help HSBC in developing a strategic
business position in Switzerland and also help in exploring profitable opportunities in the
financial sector of HSBC. Some most forces which should be considered by HSBC bank are
following as under:
Threats of new entrants: The banking sector is one of the most developing sectors so most
of the people like to start their career in banking filed which is continuously increasing
competition in the banking sector. New entities of Switzerland can put huge pressure on
HSBC bank by providing making services at the low price, reducing transaction cost and
delivering new propositions to clients. For dealing with new banking entities it is very much
important for HSBC bank to innovate new products and services, building economies of scale
and spending more money on research development. These strategies will help the
organisation in dealing with new business entities and also build a strong brand image within
the competitive marketplace of Switzerland.
Bargaining power of suppliers: For making a foreign direct investment in Switzerland,
HSBC bank should identify suppliers who will supply raw material and other services to the
bank. In Switzerland, there are many powerful suppliers who have strong bargaining power
and force banking companies to pay higher prices (Ibrahim & Primiana, 2015). The negative
impact of bargaining power of supplier is that it will minimise the profitability as well as
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productivity of HSBC private bank in Switzerland. For overcoming this problem, HSBC bank
should make better supply chain with multiple buyers. Apart from this, an organisation can
shift to other suppliers which charge low prices for raw materials.
Bargaining power of buyers: The customers of Switzerland are highly advanced so they
expect for quality banking services at low prices. Customers are the only key people who can
lead a business enterprise to success as well as failure. The expectations of customer put huge
pressure on HSBC bank because it forces the organisation to deliver quality services at low
prices which directly or indirectly affect the business profit and productivity. For dealing with
the bargaining power of customer HSBC bank should produce new products and services
because of customer demands for discount only on old products and services. Apart from this,
HSBC can build a large customer base which will help the organisation in increasing its
profit and minimising the bargaining power of customers.
Threats of substitute products or services: When one or two organisation provides the
same products for satisfying customer needs, profitability and productivity of HSBC bank
suffer. There are several private banks in Switzerland which have deep roots in the market of
Switzerland and also provide their products and services at lower prices (Oginni & Adesanya,
2013). The HSBC bank can deal with this market problem only be becoming service oriented
instead of product oriented. Apart from this, by identifying the exact needs of the customer
and increasing switching cost for customers, HSBC bank can easily make its product more
unique and suitable for customer needs as well as demands.
Rivalry among existing competitors: Switzerland is a developed economy and already
many banks are established in that country. The increased market competition in Switzerland
can influence a huge negative impact on the profitability and productivity of HSBC bank.
The organisation can accomplish competitiveness over market competitors only by making a
suitable differentiation in business activities and making collaboration with market
competitors.
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PESTLE Analysis
This is a most effective analytical tool which can be used by HSBC bank to analysing the
external business environment of Switzerland. This concept helps in getting knowledge about
different macro factors which are followed as under:
Political forces: While making an investment in Switzerland it is important for HSBC bank
to respond to the political system of the country and also consider all political factors. Also, it
has to comply with all legal law and regulations (Yunna and Yisheng, 2014). Apart from this,
the organisation should take into account security, quality and liberty of legal system
otherwise it can suffer from financial penalties.
Social forces: The HSBC bank is associated with many charitable organisations across the
world which helps it in developing a positive brand image all over the world. Apart from this,
there are various campaigns and programs are running by HSBC bank like HSBC’s rural
children program, Future First and many more only for the betterment of societies of
Switzerland. Also, the organisation provides only those products and services which are liked
and afforded by the customers of Switzerland so they will not any kind of problem (Rastogi
& Trivedi, 2016).
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Political factors
Social factors
Economic
factors
Technological
factors
Environmental
factors

Economic forces: HSBC is considered as world’s one of the biggest banks which also create
huge problems, threats, and uncertainties for the bank. The success and failure of HSBC bank
totally depend upon the foreign exchange rates and state of the volatile markets all over the
world. For having better growth, it is important for HSBC to continuously analyse the
economic condition of Switzerland’s market.
Technological forces: Highly advanced information technology helps HSBC private banks
in marinating their day to day activities. From last few years, technical management of HSBC
bank is suffering from various problems due to changing digital technologies. For solving this
kind of problem, it is important for HSBC bank to hire high skilled people who have great
knowledge about new technologies and their proper maintenance. For surviving in
Switzerland business environment, HSBC bank should use effective storage devices for
storing the customer’s data (Sridhar, et. al., 2016).
Environmental forces: There are various initiatives which are taken by HSBC bank for
securing and protecting the natural environment of Switzerland. Also, this organisation
participates in innovative environmental programs and also contributes large funds to the
charitable organisation of Switzerland. HSBC believes that for the prosperity of society and
the sound economic system it has to contribute to environmental programs and also utilise
natural resources in an optimum manner.
Hence, these are some most important external factors which should be considered by HSBC
bank while investing a large amount in foreign direct investment in Switzerland.
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Conclusion
By evaluating the above mentioned discussion, it has been concluded that business
environment plays most significant role in organisational success and future development.
Switzerland is one of the powerful economies of the world also, it provides huge growth
opportunities in its all retail, automobile, banking and other business industries. The business
environment of Switzerland involves different internal and external factors which should be
considered by HSBC bank which making the huge investment in foreign direct investment.
Some most important factors of the external business environment are political, social,
economic, technological and environmental. If a banking organisation will make FDI after
considering these factors then it can lead to a high level of success and growth. There are
various frameworks like Pestle analysis, Porter's five forces and so on which can help HSBC
bank in analysing the impact of external factors and possible strategies to overcome them.
There are different primary and support activities of HSBC bank which helps in identifying
its capabilities and resources which can add value in its future growth and development. By
taking help of different business tools organisation can easily analyse the current market
conditions and on the basis of that make effective decisions regarding foreign direct
investment in Switzerland.
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References
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business environment: Knowledge management and knowledge management
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Silviculturae Mendelianae Brunensis.
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industry analysis templates. Competitiveness Review, 24(1), pp.32-45.
 Eruemegbe, G. O. 2015. Impact of Business Environment on Organization
Performance in Nigeria Study of Union Bank of Nigeria. European Scientific Journal,
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 Ibrahim, R., & Primiana, I. 2015. Influence Business Environment on the
Organization Performance. International Journal of Scientific & Technology
Research, 4(4), 283-293.
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Engineering and Technology (IRJET), 3(1), 384-388.
 Sridhar, R., Sachithanandam, V., Mageswaran, T., Purvaja, R., Ramesh, R., Senthil
Vel, A., & Thirunavukkarasu, E. 2016. A Political, Economic, Social, Technological,
Legal and Environmental (PESTLE) approach for assessment of coastal zone
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management practice in India. International Review of Public Administration, 21(3),
216-232.
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Appendices
14
Political factors
Social factors
Economic
factors
Technological
factors
Environmental
factors