Analysis of Business Environment: HSBC Banking Sector Factors

This report delves into the business environment of the banking sector, focusing on both macro and micro factors affecting its operations. It begins with an introduction to the concept of the business environment, highlighting the influence of internal and external factors like technology, government regulations, and economic conditions. The report uses PESTEL analysis to examine the macro issues affecting HSBC, a multinational bank, considering political, economic, social, technological, environmental, and legal factors. It then explores the impact of technological and economic factors at the micro-level within the banking sub-sector, including the effects on customers, employees, investors, and the overall efficiency of banking processes. The study also addresses challenges faced by the banking sector, such as obtaining specific company information and understanding complex economic impacts, and outlines methods for overcoming these obstacles through research and analysis of various data points. The conclusion summarizes the key findings, emphasizing the multifaceted nature of the business environment and its impact on the banking sector.

Business Environment

Table of Contents
Introduction.....................................................................................................................................3
Task..................................................................................................................................................4
1. The macro issues which affect the business environment of the banking sector-...................4
2. Impact of technological and economical factor at micro level in Banking sub-sector...........9
3. Different challenges and the ways to overcome them..........................................................11
Conclusion.....................................................................................................................................12
Reference.......................................................................................................................................13

Introduction
Business environment refer to all the internal and external factors which affect the working of
the business such as clients, suppliers, customers, owners, improvement in technology, laws, and
various government activities, social and economic factors.
The study attempt to give a conceptual framework for the internal and external factors that
affects the business environment. The work environment of a banking sector can be affected due
to various macro issues the study explains the various macro factors with the use of PESTEL and
the study also shows the ways by which the various macro issues such as political, Legal and
other external issues can be handled (Hamilton 2018.).

Task
1. The macro issues which affect the business environment of the banking sector-
HSBC plc. Is a multinational bank holding 7th position in the world largest bank list having total
assets of about US$ 2.558 trillion. It works in four groups i.e., commercial banking, global
banking, retail banking and wealth management, and global private banking.
PESTEL analysis of the HSBC bank:
The PESTEL analysis will cover all the macro issues such as political, economic, social,
technological, economic, and legal factors. PESTEL analysis is a strategic management tool
which is used by the marketers to analyse the current situation of the market. It can be used by
the managers of HSBC to identify the various macro issues which affects the HSBC.
The change in technology, government law, regulatory framework, and consumer spending
framework can affect the working of the banking sector as this factors can directly or indirectly
affect the banks.
i) Political factors :
Political factors such as
 Change in government policies
 Discrimination law
 Environment law
 Tariffs
 Bureaucracy
 Anti trust law
 Tax
 Regulation and deregulation.

Impact of political factors on HSBC bank
The HSBC has its branches in different countries so it has to make the policies according to the
countries banking requirements. As the different countries follow different rules and regulation
so the company has to keep on eye on the changing policies of the country.
ii) Economic factors :
Economic factors such as
 Exchange rate
 Consumer spending behaviour
 Inflation rate
 Interest rate
 Taxation rate
 Labour market condition etc.
Impact of economic factors on HSBC bank
The banking sector and the economy are closely related to each other. The growing inequality in
the society can impact the consumer sentiment which can affect the consumer spending
behaviour
Recession in 2018 due to the liquidity in the market increases which can lead to increase in
inflation in the HSBC wholesale market
iii) Social factors:
Social factors which can affect the business environment is:
 Gender role
 Societal role
 Attitude toward certain products

 Culture, health and safety attitude etc.
Each and every country has its own culture of doing business. The HSBC has to understand the
culture of different market and also needs to know the customer preferences in the market they
operate. Culture also influence the purchasing behaviour of an individual(Ivančić and et.al.,
2017).
Technology helps the banks as well as costumers to buy the products easily, online transaction,
any many other services related to banks which helps in building trust and also in maintaining a
good relation between the bank and the customer.
Impact of social factors on HSBC bank
The education level is high in UK so HSBC can use it to increase its presence in united states.
There is income inequality in the United states from the last 6-7 decades therefore HSBC should
work on this and ensure to maintain an equality in the business environment.
iv) Technological factors-
As the technology is changing rapidly it has become an essential part of every sector nowadays.
The banks use technologies for providing services like : online banking, customer service, fraud
detection etc. The technological factors affect the business environment in numerous
way(Saleem, 2015).
Technological factors are:
 access to greater information
 innovation in customer service
 Supply chain disruption etc.
Impact of technological factors on HSBC bank
Technology has enabled the supplier to develop new products which has created a pressure on
the HSBC marketing department.

The company has to move with the new technological changes, to provide friendly user
experience. This will help HSBC to increase the customer experience with the industry and to
maintain a healthy relation with the customers(Cho 2015).
v) Environmental factors:
Environmental factors which affect the business environment are:
 safe water treatment
 limiting carbon footprints
 insurance policies
 increasing focus on sustainability
 climate change
 safe waste disposal
Impact of environmental factors on HSBC bank
Environmental norms also affects the innovation of the product, many time's product has to be
redesigned according to the environmental standards.
vi) Legal factors:
Legal factors help the business in development of the economy. Legal factors ensures that the
selling of an appropriate object. The various legal factors which has to be considered before
entering into the business are:
 data protection law
 discrimination law
 Copyrights law
 Health and safety law

 employment law
 Fraud law
 Import and export law
 Intellectual property right
Impact of legal factors on HSBC bank
A business which run globally, it is necessary for them to have a proper knowledge about the
countries in which the business is operated(Glambosky and et.al., 2015). The company should be
aware about the various rules and regulation of the country as each country has their own set of
rules and regulations.
The HSBC has to meet the law of the United States, such as law regarding health and safety,
employment law, business law etc.
2. Impact of technological and economical factor at micro level in Banking sub-sector
Technological factor

Information technology change the scenario of banking sub sector. The advance technology
affect the micro business environment factor like customer, competitors, media, employees
shareholder and suppliers in banking sector. It helps to make the banking work more effective
and efficient. HSBC is one of the largest private banking sector in UK. It offers various
commercial retail and private banking services in UK. IT sector make a huge impact on HSBC
bank. The impact on HSBC are as follows:
Customer: Bank help their customer to fulfil their need by offering different services. IT forced
banks to integrate new technologies to satisfy customer. HSBC bank offer self inquiry service to
their customer. Customer can see the transaction and inquire the bank about account information
by online method. They also provide Telebanking, online banking and mobile banking to their
customer. It helps to make the work simple and easy like fast transfer of money, balance check,
record of transaction etc. It helps to make the payment easier (Albulescu 2015).
Employees: Introduction of information technology in banking sector help their employees to
reduce the work load. It helps to save time and make the interest calculation and balancing the
amount too fast. HSBC bank use different software like Finacle, Ebanq etc. to reduce the
duplication of work. It makes the employees work easier by providing this software and also
reduce the paper work. Advance technology make the work more accurate, authenticate and
more reliable.
Investors : IT sector helps investors to check there current status of their fund via online. HSBC
bank provide all the detail regarding the funds of investor and the new schemes to the investor.
IT sector helps banking sector to introduce their facilities, schemes in the market and pool the
customer to invest more in the bank. It helps to increase their productivity and profit.
Technology helps HSBC bank to protect their data from cyber crime and also protect the investor
money.
Economic factor : The banking industry and economy are connected to each other. The change
in government laws, rules and regulation highly affect the productivity of banking sector. The
recession period, flow of income, GDP, per capita income affect the overall banking sector at
both micro and macro level (Mare 2015).
At micro level, the economic factor affect the HSBC bank. Spending behaviour of customer
increase or decrease the productivity of banking sector. Spending behaviour of customer is

change day by day. Now people more believe to invest rather than to save which ultimately
increase the bank productivity.
Increase in inflation rate reduces the profit of bank. In inflation time the value of currency
increase and the foreign customer think twice before investing in bank.
Exchange rate also affect the profitability of banking sector. Stable currency pool the customer
to invest in the bank. HSBC helps their customer to save more money and provide them different
secure schemes to increase their investment (Menicucci 2016).
Liquidity risk also make an impact on banking sector. The relation in asset and liability ratio
affect the productivity of HSBC bank. If the liability of HSBC is more than its asset than it make
an adverse impact on the productivity and if the asset is more than its liability it makes
favourable impact. To overcome the liquidity risk HSBC has to regularly monitor, manage and
evaluate the assets, liability and loan level of the bank. HSBC has to check the repayment and
recovery period of the loan.
The increasing interest rate helps the investor to invest more in the bank product. Increasing the
rate of interest helps HSBC to pull the investor by offering high interest on their saving and
investment. If the interest rate decrease than it make adverse impact on the investment behaviour
of customer.
The changes in tax rate also affect the business of banking sector. The lower tax rate may reduce
the ROI of HSBC bank. If the tax rate of the economy decrease than people more spend on other
products rather than to invest or save them which ultimately decrease the profit of HSBC bank
(Okech 2016).

3. Different challenges and the ways to overcome them
I face many challenges to find the impact of macro and micro factor on the business environment
of banking sector. Firstly it is difficult to get the information about the particular company i.e.
HSBC bank. Its difficult to evaluate the internal performance of the HSBC bank (Routledge.
Laeven abd et.al 2016). To overcome this issues, I go through with different websites and search
a lot about the internal and external factor which affect the business environment of HSBC bank,
its customer, employees and the investor. I also evaluated the spending behaviour of UK
population and how they increase their capital and invest in different product of the bank. I
search the interest rate of UK and the effect of changing interest rate on the spending behaviour
of customer.
I also face the problem in understanding this micro and macro environment factor and their
impact. It is difficult for me to understand the impact of tax rate and exchange rate on the
banking sector. To overcome this challenge I study the tax rate of UK and the impact of
increasing and decreasing tax rate on the economy than I relate this issue at micro level in
banking sector. This help me to understand the pattern of changing tax rate. To understand the
exchange rate, I study the current exchange rate of dollar with other currency than the impact of
changing exchange rate on the spending behaviour of customer and the government policy. I also
find that government change its rules and regulation and make new policy with change in
exchange and inflation rate. I also find that increasing in inflation rate make an adverse impact
on the productivity of bank (Singh 2016).
This all study and research help me to get the information about the issues and to overcome this
challenges.

Conclusion
From this study it can be seen that there are various factors which can affect the working of the
bank the two factors which have been explained i.e., technological and social factors shows that
how these issues can be overcome. Technology has proved to be beneficial for both the banking
sector and the customers including the employees working in the banking sector they have also
benefited from the technology as it makes the work of the employees easier and helps in
increasing efficiency of the employees. The two challenges which was faced during the study
and the ways overcome the challenges.