Strategic Evaluation of HSBC Holding Plc

This document provides a strategic evaluation of HSBC Holding Plc, including the value of purpose, mission, vision, and objectives in determining the strategic direction. It also discusses the competitive advantage of HSBC using the VRIO framework, analyzes the external environment using the PESTLE framework, and examines the industry competition using Porter's five forces model.

Strategic Management
Strategic Evaluation

Table of Contents
INTRODUCTION...........................................................................................................................1
Critically evaluation of the value of purpose, mission, vision and objective of HSBC Holding Plc
in determining the strategic direction..............................................................................................1
Competitive advantage of HSBC Holding Plc using VRIO framework..........................................2
PESTLE framework for analysing External environment for HSBC Holding Plc..........................4
Porter’s five force model for HSBC Holding Plc............................................................................6
Review of the HSBC Holding’s strategy.........................................................................................8
CONCLUSION................................................................................................................................8
References:.......................................................................................................................................9
Books and Journals.................................................................................................................9

INTRODUCTION
Changes in the business environment have made it imperative for the business firms to opt for
continuous evaluation of the strategies or plans made by the company that would assist them in
achieving their long term and short term goals. Strategic management is defined as the process of
identification and description of the strategies adopted by the managers, through ongoing
planning, monitoring, analysis and assessment of the needs and wants of the company to meet its
objectives, to have a competitive edge over others and enhance their overall performance
(Lusiani and Langley, 2019). Therefore, it is a process of setting objectives, analysing internal
and external environment of business in order to make the best use of strength, and exploit the
opportunities in the favour of a company. Through making intense strategies companies be
prepared for the predictable and unforeseen situations. HSBC holding Plc was founded in the
year, March, 1865 with the idea of serving to the international needs being a local bank. The
below mentioned report cover the evaluation of strategies made by HSBC with the help of
PESTLE, Porter’s five forces etc.
Critically evaluation of the value of purpose, mission, vision and objective of
HSBC Holding Plc in determining the strategic direction.
Strategic planning is an integral part of any business as it helps in setting priorities, effective
utilization of resources, and make sure that business activities are in sync with the already set
goals and objectives. These strategies act as a road map for the company to follow during the
entire course of business operation so that company reaches its potential to achieve its objectives
while enhancing its competitiveness and performance level. In order to have an intense and
effective strategic planning there are numerous elements which act as a basis for the formation
and implementation (Davis and Bendickson, 2021).
Vision: A vision statement of any company describes the future status of the company if
company achieve its short term goals, i.e. mission of the business. It is best defined as the long
term goals of a company emphasising over goals and ambition of business. Vision statement of
the HSBC bank is to create a better world for their investors, people, customers, communities as
a whole and planet that everyone share. Realistic, credible and enchanting vision statement of a
company keep the employees committed, energetic and motivated in an organisation culture,
creating a meaning in worker’s life.
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Mission: Unlike Vision, Mission statement laid emphasis over short term goals and objective of
a company with its present status in a business environment. Mission statement is significant to
each business as it describes the nature of business, products and services offered and customer,
therefore making it different from other competitors through defining their primary objectives.
HSBC, with their mission statement clearly defines what the company does (local bank serving
international needs), how it does (through finance trade between Europe and Asia) and who is
does for (for households, business institutions etc.), basically customers (Pirali and et. al., 2019).
Purpose: Purpose of any business highlight the key reason for which business has been created
and existed. The prime purpose of the HSBC Bank is to opening up a world of opportunities with
the appropriate use of expertise, capabilities and perspectives. Purpose oriented business like
HSBC work towards creating a positive impact over society or other stakeholders who are
involves in business such as employees, customers etc. apart from profit making. They aspire to
have a positive impact over society through their ethical, equitable and sustainable business
operations.
Objectives: Objectives of a business helps to find out the clearly set targets to be achieved during
the execution of business activities. Objectives helps the business firm to be relevant and
competitive in a market environment. Survival, profit maximisation, expanding customer base,
growth, expansion in other market are the reasons which make the company alive and is essential
for the survival of a business.
Mission, vision, objective and purpose of HSBC act as foundation stone for the company and a
guidance throughout the entire life of a business. These statements reminds and helps the
business to conduct their activities in a right and purposeful manner (Stone and et. al., 2020). As
per these statements manager guide the workforce so that business objective is achieved and
generate value for the stakeholders. It helps in allocating the resources in an effective way, guide
in decision making and comparison of actual performance with the set targets.
Competitive advantage of HSBC Holding Plc using VRIO framework
VRIO is an acronym for Valuable, rare, Imitable and organized, which help the business
firm in analysing and identifying what resources or expertise, products or partnership make the
company successful and stand out from the crowd. Through the help of VRIO framework HSBC
identifies what is their strength and what aspects or qualities can be or presently acting as key
factors to success of a business and determining their long term competitive advantage.
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Figure 1: VRIO Framework, 2021
Valuable: The first question asked by VRIO model is about the value of resources (Liao, Liu and
Ma, 2019). A resource is said to be valuable if it adds value to the company through exploiting
opportunities or mitigating the risks of threats. And this could be better analysed under the
framework of SWOT analysis where they are placed under strengths and relate to the
opportunities, if the answer is yes then resources of a company is regarded as valuable. HSBC’s
valuable resources helps in enhancing the perceived customer value through differentiation.
HSBC’s financial resources are extremely valuable which help them in investing into numerous
opportunities and make them more competitive. Additionally, highly trained and expertise of
HSBC is also regarded as a valuable which have allowed them to serve over 40 million customer
across globe.
Rarity: The next step is to judge the competitive edge of company on the basis of rarity of a
product or how unique the product is with that of a competitor. It explains the concept that if the
resources are easily acquired by the competitors, or a substitute of a resources can replace it
completely? If the answer is no that there is a situation of competitive parity and if yes than the
company proceeds to a further step. The distribution network of HSBC is regarded as rare
resources which have enabled them to operate in over 130 countries and territories across globe
and having such supply chain will lead competitors to incur lot of investment (Chen, Lee and
Ahlstrom, 2021).
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Imitability: Imitability of a resources at VRIO model explains how easily a competitor can
substitute or make a duplicate of a resources. A valuable, rare and costly resources, or high cost
of imitability can-not be copied or replaced with substitute resources thus enhancing the
competitive edge of a company. The patents of the HSBC are regarded as expensive to imitate as
having a patented resource prevent itself from being stolen or copied by other offering a legal
right to the originator, therefore enhancing the competitiveness of a company (Melnik, Ermolaev
and Kuzmin, 2019). For instance, a rivalry company can copy a feature of a product or its pricing
policy or marketing strategy but can-not imitate a brand or resources which were developed due
to historical events and are based on company’s culture.
Organized: Without proper management a company can-not gain a competitive advantage solely
on the basis of its rare, valuable and costly to imitate resources. An effective organisation can
extract the maximised potentiality of the resources through organizing management systems
policies, process and organisational structure so as to achieve sustained competitive advantage.
HSBC organise its financial resources with the help of their unique capabilities, expertise and
perspective that open a world of opportunities through investing at a right time, at right place.
From the above analysis it is been understood that HSBC have a highly valuable and rare
financial resources that have helped them in having sustained competitive advantage over several
decades.
PESTLE framework for analysing External environment for HSBC Holding
Plc
PESTLE analysis of external environment help the business in understating the dynamic
and complex fast changing environment with the aim of revising their strategies and policies
which would help them in attaining business goals and objectives (Tsaousoglou and et. al.,
2019). Detailed analysis of PESTLE framework help the company preparing in advance for
future events and uncertainties through predicting in advance and mitigating the threats that
could become a hurdle in the prosperity and growth of a company.
PESTLE analysis of HSBC
 Political factors: These factors gives information about the extent of government
intervene in a particular economy or a business. HSBC being a financial institution has to
consider these factors as it can affect their overall profitability and survival of a business.
HSBC holdings have an operations in nearly more than 130 countries across global which
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increase the risk to a higher extent. Government policies, political instability, foreign
trade policy, labour laws, tax policies etc. are the factors have an affects over the
performance of company (Schneider, Oppel and Winter, 2021). Interest rates of different
nation can affect the profitability of a company for instance, high interest rates of loan
can lead to the less creditors or rise in repo rate can result in expensive for banks to take
loan from Central banks. Additionally, economy with a recession or political instability
majorly in Asian countries can disturb the performance level of HSBC.
 Economic factors: It is imperative for each and every to take into account economic
factors, especially for the Financial institutions like HSBC whose business utterly
depends on economic performance of a nation. Inflation rates, interest rates, disposable
income of consumer, unemployment rates etc. are the few factors which determines how
attractive and favourable an economy of a nation is. HSBC emerged with the idea of
“local bank serving to the international needs” which makes it different from other
financial institutions. Growth of HSBC is based on the stability of foreign exchange rates
and stock market across globe. Income of a consumer in a particular nation will
determine how much a person keeps the amount in Bank which is a source of income and
investment for HSBC.
 Social factors: Customer base and workforce of a company is largely dependent on these
factors which constitute age distribution, income distribution, career attitudes, health
consciousness, lifestyle and cultural barriers (Keum, 2021). HSBC being a financial
institution has to keep pace with the change as per the market trends and it evident
through its several programmes in collaboration with charitable institute across globe
which focus on investment in education, community and environment which are the basis
for overall development of a society as whole. People’ desire to live a luxurious life on
credit, government schemes to promote SME’s are the other factors which is beneficial
for HSBC.
 Technological factors: Innovation in technology have completely changed the way
company interacts with the customer. Technological advancements have created a
favourable conditions for financial institution like HSBC Holdings which have enabled
them to step into the foreign markets, where geographical boundaries are left behind.
HSBC deals with the customer across globe through internet based technology which
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have added more value to the customer and enhance their experience level (Kouamé and
Liu, 2020). Use of internet banking, international ATM cards, foreign exchange cards,
use of personalised and wealth banking are few of the new methods adopted by HSBC to
make the customer feel at their host country and stay connected always with bank.
 Environment factors: Several factors like scarcity of raw materials, pollution targets,
carbon footprints, and sudden change in climate have forced companies to opt for a
sustainable way of doing business with no impact over people, planet and its natural
resources. HSBC have crafted a plan which is based on the transition to a zero global
economy by 2050 or earlier. HSBC is already a leading player in low-carbon economy
and aim to become a net zero bank through more sustainable ways of doing business
(Chun and Ovchinnikov, 2019).
 Legal factors: These are the factors which cover all the laws and practices which govern
overall operations of a business. HSBC being a multination financial institution takes into
account numerous laws such as discrimination law, employment law, consumer
protection law, health and safety law; patent and copyright which enable the company to
execute its business activities in an ethical, legal and society acceptable manner.
Adhering to the each law of each nation is quite challenging for HSBC banks, however
company revise and rectify their policies as per the recent new or amendments in the
laws, norms and regulation which help the company to have a incessantly business
operation and enhance its brand image across globe.
Porter’s five force model for HSBC Holding Plc
 Competition from rivalry (High): Competition among the financial institution in
the finance industry is intense due to the low switching cost of bank from one to
another. Additionally, rivalries are attracting customers through attracting offers
and schemes to the households and investors (Du, Li and Wu, 2019). HSBC face
an intense competition from other competitors such as Standard Chartered Bank,
JP Morgan Chase and Lloyds banking group which compete to provide best
services and pull away customers through higher interest rates, lucrative
investment options, and more convenience.
 Bargaining power of consumer(moderate): The bargaining power of buyer are
at moderate level because an household individual have a relatives less bargaining
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power as compared to that of big business institution who trade with the HSBC in
millions of dollars. Losing an individual saving account won’t affect the
profitability of a company but losing a big investors can be a loss of asset (Lusiani
and Langley, 2019). HSBC extend, design and develop their customer loyalty
programmes on a regular basis so as to avoid loss of any customer.
 Bargaining power of supplier (high): Suppliers for the financial institutions are
the major sources of financial resources on which company rely and execute its
business operations. The major sources of the HSBC holding Plc are customer
deposit, Mortgage and loans, loans and other financial institutions; and Mortgage
bank securities. Threat from Individual can be a relatively low but capital from
large group of depositors and business firms can be big threat for HSBC.
Therefore the bargaining power is suppliers is high (Davis and Bendickson,
2021).
 Threat of substitute: In the financial sector does not exist the threat from the
rivalry companies but from the other companies outside the sector which offers
customised financial services in a more innovative and creative way which were
traditionally offered by Banks. Non-financial institutions, banking services,
mutual funds, insurance schemes and fixed income securities such as Gold Bond
are the substitute of the banking products. Additionally Paypal, Paytm, Google
Pay, Apple Pay, prepaid debit cards, online peer to peer lenders offers diversified
and personalised services to the customer shifting customer from traditional way
of banking to modern way.
 Threat of entrants: Threat from the new entrants is relatively low as new
business can-not compete with a prodigious financial institution like HSBC.
Additionally there are several factors which restrict the companies such as huge
amount of investment, lengthy and complex process, rigid government regulations
and; trust and reliability of a customer over new banking institutions (Pirali and
et. al., 2019).
Review of the HSBC Holding’s strategy
Due to the advancement of technology and emergence of Covid-19 have compelled the
big financial institution to change the paradigm of doing business. People are shifting towards
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the technology based banking services which comes with its convenience and several benefits.
Less interaction with personnel and banking services at finger tips have increased the expectation
of the customer in terms of value (Stone and et. al., 2020). Core strategy of HSBC Holding Bank
is in align with its ambitions, which is to become a preferred international financial partner for
their customer across the globe. The strategy of HSBC is supported by four pillars:
 HSBC want to lay emphasis over its unique attributes and strengths to achieve their goals
and ambitions. HSBC want to become global leader in cross border banking, become the
market leader in Wealth Management and invest at the opportunities which has a huge
potential for profit.
 Another pillar of HSBC strategy is to create and deliver fast, convenient and deliver
customer experience while ensuring that banking services is resilient and secure.
 HSBC want to become a zero net bank by the end of 2030 and support to a customer
transition to a low carbon emission.
 And lastly, HSBC wants to be a simpler, flexible, responsive and effective organisation
through training and development programmes to teach new skills to the employees
(Liao, Liu and Ma, 2019).
CONCLUSION
. Therefore, it is been concluded that it is imperative for each business organisation to
conduct an external and internal analysis of environment on a regular basis with the objective of
revising and restructuring the policies and strategy that would help the company towards
attaining business goals. Strategic management describe and highlight the policies and plans to
be adopted by a manager which act as guide throughout the entire business activities of a
company. Developing and devising right strategy as per the values, vision, mission, objective
and purpose of a business help the managers in crafting a path that has to be followed by
everyone in an organisation which leads directly to the fulfilment of organisational objectives.
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References:
Books and Journals
Chen, S.Y., Lee, A.Y.P. and Ahlstrom, D., 2021. Strategic talent management systems and
employee behaviors: the mediating effect of calling. Asia Pacific Journal of Human
Resources. 59(1). pp.84-108.
Chun, S.Y. and Ovchinnikov, A., 2019. Strategic consumers, revenue management, and the
design of loyalty programs. Management Science. 65(9). pp.3969-3987.
Davis, P.E. and Bendickson, J.S., 2021. Strategic antecedents of innovation: Variance between
small and large firms. Journal of Small Business Management. 59(1). pp.47-72.
Du, X., Li, M. and Wu, B., 2019. Incumbent repositioning with decision biases. Strategic
Management Journal. 40(12). pp.1984-2010.
Keum, D.D., 2021. Innovation, short‐termism, and the cost of strong corporate
governance. Strategic Management Journal. 42(1). pp.3-29.
Kouamé, S. and Liu, F., 2020. Capturing emotions in qualitative strategic organization
research. Strategic Organization, p.1476127020935449.
Liao, S., Liu, Z. and Ma, C., 2019. Direct and configurational paths of open innovation and
organisational agility to business model innovation in SMEs. Technology Analysis &
Strategic Management. 31(10). pp.1213-1228.
Lusiani, M. and Langley, A., 2019. The social construction of strategic coherence: Practices of
enabling leadership. Long Range Planning. 52(5). p.101840.
Melnik, A.N., Ermolaev, K.A. and Kuzmin, M.S., 2019. Mechanism for adjustment of the
companies innovative activity control indicators to their strategic development
goals. Global Journal of Flexible Systems Management. 20(3). pp.189-218.
Pirali, A., and et. al., 2019. Explaining the pattern of effective factors influencing on strategy
implementation in organizations. Journal of Strategic Management Studies. 10(37).
pp.177-200.
Schneider, A.M., Oppel, E.M. and Winter, V., 2021. Explaining variations in hospitals’ use of
strategic human resource management: How environmental and organizational factors
matter. Health care management review. 46(1). pp.2-11.
Stone, M., and et. al., 2020. Artificial intelligence (AI) in strategic marketing decision-making: a
research agenda. The Bottom Line.
Tsaousoglou, G., and et. al., 2019. Near-optimal demand side management for retail electricity
markets with strategic users and coupling constraints. Sustainable Energy, Grids and
Networks. 19. p.100236.
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