HSBC: Analysis of the Business Environment Factors and Strategies

This report provides a comprehensive analysis of HSBC's business environment, employing PESTLE and Porter's Five Forces models to assess external factors influencing the bank. The PESTLE analysis examines political, economic, social, technological, environmental, and legal factors, highlighting their impact on HSBC's operations. The Porter's Five Forces model evaluates the competitive landscape, including potential entrants, bargaining power of customers and suppliers, threats of substitutes, and rivalry among competitors. The report further identifies and evaluates HSBC's key performance indicators (KPIs) across financial, internal process, customer, and staff engagement metrics, analyzing their performance over both short-term and long-term periods. The report concludes with recommendations for improvement, suggesting strategies to enhance internal processes, customer retention, and staff engagement to drive further growth and competitiveness in the banking sector. The analysis underscores the importance of adapting to the dynamic business environment and aligning strategies with performance metrics.

UNDERSTANDING THE
BUSINESS ENVIRONMENT

Table of contents
TASK 3...........................................................................................................................................3
PESTLE ANLYSIS.....................................................................................................................3
Portals five force model...............................................................................................................5
TASK 4............................................................................................................................................5
REFERENCES................................................................................................................................9
Books and Journals......................................................................................................................9

TASK 3
PESTLE ANLYSIS
Pestel analysis one of the effective frameworks which is utilized to determine the factor or the
element which affect the origination in positive as well as negative manner (Amoako, and
Boateng, 2022). Due to the determination of impact on the origination the business unit can form
plans of action in an appropriate manner. The analysis is consist of 6 major factors which are
mentioned as follow:
Political factor: it refers to the taxation policy, rules and regulation which is imposed by the
government on the various origination. Every country has different government and various rules
and regulation decided by the governing body. In context to that it is important for th e HSBC to
determine the political stability of different countries for the survival of the banks. The political
stability of the nation encourages the buyers and investor for showing the interest in the
association. Frequent changes in the policy of the nation affect the performance of the company.
In context to that the organization should form the decision as per the political environment of a
country. The government have good relationship with the other boundaries doer to that the
organization can obtain certain benefits from various marketplace and enjoying the facilities of
economic. Due to transparent governance structure the HSBC bank is facing various issues as
the corruptions is increasing in the domestic as well as international marketplace.
Economic factor: it is the most affecting factor to the organization due to that the company ca n
accomplish short term as well as long term growth in a specific sector. Due to the high
efficiency of domestic as well as international marketplace the company is developing better
professional relationship with the financial economic growth. With the assistance of this factor
the association is continuously defeating the competitors and offering competitive Advantages
in the marketplace ( Matović, 2020). The UK is having better economic condition so the tax rate
for operating the business is lower. Furthermore it is considered as the financial support as the
company is increasing the scale of revenue growth. Apart from the pros the negative aspect is the
inflation rate which is affecting the position or performance of the company. The increasing

inflation rate is decreasing the potential of the consumer expending in the services of the
association.
Social factor: in the current period taste and preferences, perception of buying, behavior of
consumer is changing as the household income of the people is decreased due to covid 19. After
the pandemic, consumers willing to spend money on those services only that are essential for
their lifestyle. In context to that HSBC has the opportunity to deliver various innovative services
to the consumer and encouraging the buyers to contribute in the success of business enterprises.
For the HSBC the behavior of the consumer is the challenging as the demand of every consumer
is different.
Technological factor: it is one of the trending factors which deliver large contribution in
boosting the effectiveness of the association in the positive manner. In the current time the large
numbers of the customer are depend on the technology. With the the assistance of the
technological factor the association remain connected with large numbers of customers. Due to
that the HSBC association can determine the marketing trends and deliver competitive
advantages in domestic as well as international marketplace. For the further progress the
association keep investing capital in research and development program due to that the
organization can increase the brand value (Islam, 2017).
Environmental factor: before delivery services to the consumer the organization need to clarify
that the product and services are eco friendly or not. As the global warming is increasing and the
planet is under the pressure the government aim to reduce the carbon footprint in effective as
well as efficient manner. Due to the environmental measure the company can bring the flexibility
in the supply chain operation and recycle the raw material or manage all the waste that deliver
great impression on minds of consumer.
Legal system: with the assistance of legal system the organization can build the trust of the
consumer and allow the buyer to obtain the services and operation of association. Before
entering in thew new marketplace the company determines the rules and regulation of the nation.
Due to that the company satisfying and empowering the employees of the organization.
Furthermore it also ensures the work environment safety which helping the company in maintain
positive culture and encouraging the people. For the satisfaction of the consumer the origination
delivers the values to the consumer with thew help of consumer law.

Portals five force model
Potential entrant: the company has potential to enter new market as the company has good
reputation in the different ,marketplace. But the association continuously receiving threats from
the marketplace as the numbers of competitors are continuously increasing. the biggest
competitors are Tesco and Sainsbury which is creating high standard in the market and entering
in bank sector in order to expend the business ( Hole Snehal, and Bhaskar, 2019).. Due to that
the customers of the association are shifting toward another brand so the company need to
improve the quality and performance in the domestic as well as international marketplace. `
Bargaining power of the customers: the organization deliver effective values to the customer
that deliver assistance in attracting them toward the production of company. With the assistance
of the loyalty program the company mange the customers in effective as well as efficient
manner.
Threads of substitute: the competitors of the origination are continuously providing innovative
product and services in the marketplace which is allowing or encouraging thew customer to shift
toward different brands. In context to that the company need to focus on targeted customers
( Bruijl, 2018).
Bargaining powers of suppliers: the company can form the strategy and increasing the brand
value, for improving the bargain power of supplier the company can deliver or offer the product
and sentries at lower prices to the consumer and supplier as compare to competitor.
Rivalry among competitor: the compaction among the differ brands are high. In context to that
the origination can develop new strategies that attract thobe customer and improve the finical
crises in an appropriate manner. For that the company should enhance the capability of of the
association.
TASK 4
KPI of HSBC are identified as follows
 Financial
 Internal process
 Customer
 Staff engagement

KPI 6 Months 1 Year
Financial 3% increase in average
tangible equity
8.3% increase in average
tangible equity
Internal Process 32% increase in cost
efficiency ratio
64% increase in cost
efficiency ratio
Customer Satisfaction 6 out 10 score in wholesale
banking
4 out of 12 in commercial
banking
Improving customer
satisfaction to obtain the rank
in top three banks
Staff engagement Target of maintaining 60%
score for employee
engagement
Target of maintaining 72%
score for employee
engagement
On the basis of above balanced scorecard indicating both financial and non-financial
measure of performance with respect to HSBC, it can be seen that the company has identified
four metrics for the improvement of their internal operations in order to improvise their external
outcomes (Quesada, Aibar Guzmán and Lima Rodrigues, 2018). This involves financial indicator
by taking average tangible equity. The company has targeted to achieve a 3% increase in their
average tangible equity in the short run while in the long run that is in the duration of one year,
the company has achieved an increase of 8.3% in their average tangible equity. The internal
process is another metric of financial measure indicating financial performance of HSBC bank
with respect to both short term and long term. In the short term, that is within the duration of six
months, the company wants to achieve the 32% reduction in cost to achieve a cost efficiency
ratio of 32% while in the long term of one year, the company wants to achieve a cost efficiency
ratio of 64%.
On the other hand, the non – financial measures that company has adopted with respect to
improving their performance has been indicating in terms of customer satisfaction and staff
engagement (Sardjono, Selviyanti and Perdana, 2020). The bank is currently having 6 and 4
score in different areas of their operation while in the long term of one year, it is planning to
obtain a 3rd position in the banking sector of UK which is possible through greater satisfaction to

customer by improvement the quality of their services. At last, the another non – financial
measure identified with respect to the improvement of HSBC’s performance is to achieve greater
score for staff engagement. Staff engagement indicates dedication of employees towards
accomplishment of their assigned tasks and meeting goals with greater efficiency and
effectiveness.
With regards to the balance between financial and non – financial measures of
performance while reporting their current growth practices, it has been seen that the practice is
highly balanced because the scorecard consists equal proportion of both financial and non –
financial measures of performance. The balancing can also be explained in terms of how
financial and non – financial measures are interlinked with each other. This can be explained as
if internal processes are effective and efficient, then it leads to speedy processing of transactions
and accordingly, customer would be satisfied (Tuan, 2020). Also, improvement in cost efficiency
ratio would led to reduction in costs and increase in profitability which will facilitate the
achievement of higher ratio for average tangible equity. Furthermore, a well - defined target for
staff engagement would allow for better internal process which in turn would lead to greater
score for customer satisfaction along with increase in tangible equity. This interconnection
between financial and non – financial measures of performance allows for achieving the set
targets through implementing framed strategy becomes easier. This is a result of inclusion of
both financial and non – financial performance metrics in balanced scorecard which ensures that
the current growth reporting practices are balanced (Quesado, Aibar Guzmán and Lima
Rodrigues, 2018).
Recommendations for further improvements are as follows:
 In order to improve internal process and achieve greater cost efficiency ratio, it would be
suggested to HSBC bank that it should go for installing automated systems in their
internal operations which would definitely benefit it in terms of greater cost efficiency
and customer satisfaction.
 Also, in order to obtain the third position in banking sector, it is recommended that the
bank should go for competitive pricing strategy for many of the banking products to
ensure customer retention. This would lead to greater profitability of the bank and

eventually increase in average tangible equity of the bank (Hegazy, Hegazy and Eldeeb,
2020).
 Through offering incentives of both financial and non – financial nature to their
employees, HSBC can ensure greater staff engagement which would assists in serving
their customers well and meeting set goals on time.

REFERENCES
Books and Journals
Amoako, S. and Boateng, E., 2022. Considering factors that leads to sustainability of Small and
Medium Enterprises in Ghana using PESTEL and theories of entrepreneurship as a
measuring tool. Technium Social Sciences Journal, 31, pp.594-653.
Bruijl, G.H.T., 2018. The relevance of Porter's five forces in today's innovative and changing
business environment. Available at SSRN 3192207.
Hegazy, M., Hegazy, K. and Eldeeb, M., 2020. The balanced scorecard: Measures that drive
performance evaluation in auditing firms. Journal of Accounting, Auditing & Finance,
p.0148558X20962915.
Hole, Y., Snehal, P. and Bhaskar, M., 2019. Porter's five forces model: gives you a competitive
advantage. Journal of Advanced Research in Dynamical and Control System, 11(4),
pp.1436-1448.
Islam, M.A., 2017. SWOT Mix and PESTEL Analysis: Effective Tools of Risk Management of
Leasing Companies. The Millennium University Journal, 2(1), pp.1-18.
Matović, I.M., 2020, September. PESTEL Analysis of External Environment as a Success Factor
of Startup Business. In ConScienS Conference Proceedings (pp. 96-102). Scientia
Moralitas Research Institute.
Quesado, P. R., Aibar Guzmán, B. and Lima Rodrigues, L., 2018. Advantages and contributions
in the balanced scorecard implementation. Intangible capital, 14(1), pp.186-201.
Sardjono, W., Selviyanti, E. and Perdana, W. G., 2020, May. The application of the factor
analysis method to determine the performance of IT implementation in companies based
on the IT balanced scorecard measurement method. In Journal of Physics: Conference
Series (Vol. 1538, No. 1, p. 012026). IOP Publishing.
Tuan, T. T., 2020. The impact of balanced scorecard on performance: The case of Vietnamese
commercial banks. The Journal of Asian Finance, Economics and Business, 7(1), pp.71-
79.