HSBC's Global Business Environment: Denmark Expansion Analysis

This report provides a comprehensive analysis of HSBC's potential business expansion into Denmark, examining the company's background and financial performance. It delves into the business environment, utilizing the PESTEL model to assess political, economic, social, technological, environmental, and legal factors influencing HSBC's operations. The report highlights Denmark's favorable conditions for business, including political stability, a strong economy, and a focus on technological advancements and environmental sustainability. Furthermore, the report aims to analyze the business scenario using Porter's five forces model to provide insights for HSBC's strategic planning for the expansion in Denmark. The analysis covers HSBC's strategies to enhance its income levels, manage financial fluctuations, and navigate the complexities of the global banking market. The report concludes with a detailed examination of how HSBC can successfully establish its presence in Denmark's financial sector.

Business Organisational
Environments in a Global
Context

Table of Contents
INTRODUCTION...........................................................................................................................1
Background information of HSBC .................................................................................................1
Background information on the business Environment ..................................................................3
Analysis of Business scenario .........................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES .............................................................................................................................10

INTRODUCTION
A business organisation requires to process strategic planning for their firm which helps
to provide clear information about market, customers and competitors. Business strategy is all
about how an organization is going to compete in existing as well as global marketplace by
designing various splendid plans and procedures (Low, Chen and Wu, 2011). This report is
based on HSBC which is a British multinational organisation that provide banking and financial
services in around 67 countries. The organisation was founded in the year of 1865 by Sir Thomas
Sutherland as a single state firm but now the firm has around 3900 offices in approx. 80
countries. This research is basically focused on a specific objective that HSBC wants to expand
their business in Denmark. The project is determine background information of HSBC, business
environment analysis by PESTEL model and at last analytical approach by considering Porter's
five force model that assist to provide authentic information in order to expand business structure
in Denmark.
Background information of HSBC
HSBC is a banking and financial firm which was founded in the year of 1865 with a
finance trade between Europe and Asia. Main objective of this organisation is to resolve issues of
individual that they are facing due to lack of funds and money. In the year of 1865, HSBC was
established with a simple idea as to provide local banking services in UK as per international
needs. After the succession of this strategy HSBC create a another strategy in order to expand
their business in Hong-Kong. This creative idea assist them to build direct relation with
international customers. Through this, they maximise their working structure in several new
countries and now firm serve their financial services to around 38 million customers world wide.
HSBC is a large group of banking and financial services which operates their activities
in approx. 80 countries. The organisation is not only deal in commercial and merchant banking
but also provide its services in capital market, investment funds, securities and insurance
policies. HSBC group expand its business size and nature on international boundaries and
maximise its income as well as growth effectively. Major concentration of HSBC group is to
create a positive and long term relation with maximum customers. The Hong-Kong experience
setback a positive opportunity for firm in order to expand their business structure easily in
several countries (Briscoe, Tarique and Schuler, 2012).
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Financial Performance of HSBC
Income Statement
All numbers in
thousands
Revenue 12/31/2017 12/31/2016 12/31/2015 12/31/2014
Total Revenue 49628000 44562000 56018000 57277000
Cost of Revenue - - - -
Gross Profit 49628000 44562000 56018000 57277000
Operating Expenses
Research
Development - - - -
Selling General and
Administrative 34188000 35791000 38831000 40313000
Non Recurring - - - -
Others - - - -
Total Operating
Expenses 34188000 35791000 38831000 40313000
Operating Income or
Loss 15440000 8771000 17187000 16964000
Income from Continuing Operations
Total Other
Income/Expenses Net 1727000 -1659000 1680000 1716000
Earnings Before
Interest and Taxes - - - -
Interest Expense - - - -
Income Before Tax 17167000 7112000 18867000 18680000
Income Tax Expense 5288000 3666000 3771000 3975000
Minority Interest 7621000 7192000 9058000 9531000
Net Income From 11879000 3446000 15096000 14705000
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Continuing Ops
Non-recurring Events
Discontinued
Operations - - - -
Extraordinary Items - - - -
Effect Of Accounting
Changes - - - -
Other Items - - - -
Net Income
Net Income 10798000 2479000 13522000 13688000
Preferred Stock And
Other Adjustments - - - -
Net Income
Applicable To
Common Shares 9683000 1299000 12572000 13115000
(Sources: HSBC Holdings plc (HSBC) 2017)
HSBC group implement several strategies in their business in order to enhance their
income level. It is required need to improve financial condition that is not in favourable from
past few years. These strategies helps them discover several opportunities be exploring a foreign
direct investment. The above graphical representation determine that HSBC Group faces
maximum fluctuation in income related terms that determine numerous effects on their business
activities. In the year of 2014, HSBC calculate their new income as 13688000 while it reduce in
2015 and analysed on 13522000. In the year of 2016 the net income statement determine exact
calculation as 2479000 which is not too appreciable and in the year of 2017 as 10798000.
HSBC bank deals with maximum foreign subsidiaries among the most leading banks in
Mexico, France, Canada and others (Crystal, 2013). Now organisation is focusing on exploring a
foreign direct investment opportunity in the Denmark. Main objective of this process is to
emerged in global banking market that assist to enhance their level in financial sector.
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Background information on the business Environment
For a business organisation, it is required to analyse environmental stability while they
willing to expand their operations in new country. Main objective of this process is to identify
impact of external factor on business activities and approaches. On the basis of this, management
of firm can easily make a impactful strategy that assist them to make appropriate decision for
business expansion (Dul and et. al., 2012). HSBC group deals in banking and financial services
in approx. 80 countries and now they are planning to enhance operations through application of
the mode of FDI in Denmark . For this they requires to analyse rules and regulation of the
country that can affect their business decisions. In each country, external environmental factors
has major influence that are requires to analyse and manage properly in order to reduce its
negative impact. For the external analysis, HSBC can take identify influence of several factors
by using the tool of PESTEL analysis as -
Political factor – Denmark is a most liable country in the terms of establishment of new
business firms. But now the country faces various crises due to political instability that has direct
negative impact on business growth.
As per the above graphical representation, it has been identified that the rate of political
stability is getting downward from the past few decades. These condition can affect new entreats
in the country. To encourage new businesses growth opportunities, government of Denmark
formulates linnet policies toward organisational establishment (Caligiuri and Tarique, 2012).
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Illustration 1: Denmark political stability. 2018

These factors can be beneficial for HSBC bank in order to maximise foreign investment
approach in Denmark. Participation of government encounter the reduction of political risk for
the expansion strategy of HSBC bank. In the terms of Banking services, government of Denmark
also taking a initiative in order to enhance number of depositor in commercial banks Per 1000
adults. All these business ideas are helpful for HSBC group as well as the government of
Denmark in order to provide financial services to small business firms too.
Economic factor – While expanding business activities in new country, it is required to
analyse economical condition because these factors has direct impact on several businesses.
HSBC group is a large banking and financial firm that provide investment services to small as
well as large scale firms. The economy of Denmark is very liable as Human development index
of the country is on .923 which represent them more developing among 169 countries. In the
terms of business stability, Denmark is stand on the number of 3rd position which is very
appropriate for HSBC in terms of expansion. One major element of the economy of Denmark is
that the country has implement equal level of income distribution approach that assist to make
them high income economy in the world (Baker, 2012). All these factors are requires to
understand properly by HSBC before expanding their business in Denmark.
Social factor – The economy of Denmark is very liable and provides equal opportunities
to each segment of the society. For a business firm who running their business in this country,
require to consider such activities in their operations as to providing equal opportunities to each
and every person in the terms of employment, pay, working hours. HSBC group provide
financial services to their customers, so if they expand their business in Denmark they needs to
provide appropriate funds equally to each segment as Small and large business, poor and rich
people as well as corporate and Private firms. One major social factor of Denmark is the
language, the formal communication method of Denmark is Danish and English which is broadly
uses in businesses, local agencies or in population (Bansal and Hoffman, 2012). So for this,
HSBC group requires to mange such social factors in their business in order to enhance their
business operations positively in the country.
Technological factor – In the terms of Technology, Denmark enhance their innovation
approaches that assist to provide technical support to different business organisations. Danish
software engineers take a leading role in this process that assist them to maximise programming
activities in the country. Main objective of the government of Denmark is to implement advance
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computing operation that assist to manage online transaction for safe and secure services. These
kind of factors can beneficial for HSBC bank because they operate their operational activities
through Cloud technology. These factors are basically uses for manage data of customers safely
and securely in order to use them on requirement timing. For this, firm uses digital formation that
requires to work properly in the terms of data management, online transaction and information
confidentiality (Bachmann and Inkpen, 2011).
Environmental factor – In Denmark, Government is highly focused on environmental
safety approaches. This is the only country that introduce tax on CO2 in order to protect
environment from the negative impacts of gases. The country is majorly focusing on the such
type of activities that assist to emerge them effectively in global context. In this term, HSBC
bank can provide several services and investment in those organisation who are working for
environmental safety approaches (Voegtlin, Patzer and Scherer, 2012). Through this, they can
easily create a positive image of their business firm in global context that assist to maximise their
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Illustration 2: Technological opportunities 2018

profitability with effective goodwill. Major example of environmental safety is application of
mobile apps that helps in the reduction of use of papers.
Legal factor – Government of Denmark initiate various rules and regulation in their
country in order to manage legality in their country. For this, New organisations required to
implement such factors in their business in order to working legally in different countries. Some
of the major legislation of the governmental bodies for business organisations are equality, health
and care of employees, data protection and so on. All these law are required to implement
properly in HSBC in order to manage expansion approaches effectively. These activities are
basically uses to working positively under governmental bodies in order to getting their proper
support for future success. Fulfilment of laws related to equality and data protection in new
country help to attain he trust and loyalty of customers which enables them to effectively attain
growth within short span of time.
Analysis of Business scenario
HSBC is the banking and financial service provider organisation which is expanding their
business in Denmark. While introducing their operations in other country they will face several
issues because every nation have their different rules and regulation which gives wide impact on
the working. Thus, to overcome with such issues HSBC have to implement Porter five force
model in their working. This model is developed by Michael Porter for analysing and identifying
major five competitive forces that gives wide impact on every kind of industry (Louhiala-
Salminen and Kankaanranta, 2011). Apart from this, it also assist in determining strength and
weakness of the industry. HSBC is expanding their business in Denmark so for them it is
necessary to analyse all the five forces so that they can generate more profit as well can help in
attracting large number of customers. In simple term it can be said that, porters five force model
will analyse the level of competition in environment regardingservices offered by HSBC in
future. This is part of an strategic management series which assist in determining threats of new
entrants and substitutes, bargaining power of buyers and suppliers and industry rivalry.
Industry Rivalries- When business industries are rapidly growing then they are less
likely to compete due to the entire industry size also attains growth.. The only way to grow in the
industry is to steal the market-share from their rivals or competitors. In the banking industry,
competition is higher and bank require to establish their recognition more unique. Henceforth,
based on the competitors, HSBC bank will require to employ best and most effective techniques
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as Liquidation in funds, low interest rates on loans and approach in regard of accomplish market
share as well as manage their growth. Major rivalry of of this firms are Sydbank, DLR kredit and
Nordea kredit and so on.
Bargaining power of consumer- If a nation contain large number of consumer, they
tend to have leverage bargaining. This restricted assist Denmark to gain long-term competitive
edge as well as sometime negative influence on the organisation. In context of banking industry,
consumer are expecting more benefits for their investment as well as are expecting more service
quality from the banking segment. Hence, the service user have a short term negative influence
of the organisation (Brammer, Jackson and Matten, 2012). Therefore, the value of buyer are
subtracted due to the bargaining leverage which will direct to increase in the banking services
price and decrease in benefits. Henceforth, HSBC bank can easily expand their business
organisation in Denmark without having any disputes and resistance in market. Government of
Denmark represent initiative to maximise number of depositor in commercial banks Per 1000
adults. These activities helps to maximise values and effectiveness of banking system and will be
beneficial for HSBC bank.
Threats of Substitute – For HSBC group, it is required to analyse several organisations
that provide their effective services in the country on minimum rates of interest. These firms and
organisation can known as major threats for HSBC. In banking industry, there will be no existing
substitute but there can be some impactful competitors who can influence directly in business
decision making approaches. There ate some of the organisation who provide similar services to
their clients on appropriate costs are Sydbank, DLR kredit and Nordea kredit and so on.
Threats of new entrance – HSBC is a large scale banking and financial organisation that
cater their services in approx. 80 countries. The firm wants to expand their business in Denmark,
so for them it is required to analyse industry effectiveness that provide brief information about
economy condition in which new organisations can enter for expansion. Danske banks operate
their new office in the country as its subsidiaries can be a major threat for HSBC while they
expand in Denmark. For this, they needs to make strong strategy in order to survive easily in
competitive market (Brammer, Jackson and Matten, 2012).
Bargaining power of Suppliers – In a banking organisation, Supplier can be knowns as
their agents who helps to introducing organisational services in front of customers in order to
easily convince them. The power of suppliers determine that how they enhance profitability of
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firm by adding appropriate margin in their sales services. For HSBC bank, these factors helping
to maximise industry services in new market in order resolving issues of firm easily.
The strategy of Porter's five forces model assist to manage analytical approaches in order
to resolving organisational in terms of ethical and functional. These factors providing proper
guidelines to firm in for betterment of their operational approaches in new country.
CONCLUSION
From the above report, it has been summarised that for a business organisation, it is
required to implement strategic approaches in order to getting desired growth and success
properly. This report is majorly focusing on the analysis approaches of external environmental
factors that assist to analyse its major influence in organisational activities. On the basis of this,
management of firm can easily make a impactful strategy that assist them to make appropriate
decision for business expansion. Expansion strategy of an organisation can provide them several
opportunities but they can impact negatively if firm not analyse country's major factors. While
introducing their operations in other country they will face several issues because every nation
have their different rules and regulation which gives wide impact on the working.
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REFERENCES
Books and Journals
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Briscoe, D., Tarique, I. and Schuler, R., 2012. International human resource management:
Policies and practices for multinational enterprises. Routledge.
Crystal, D., 2013. A global language. In English in the World (pp. 163-208). Routledge.
Dul, J. and et.al., 2012. A strategy for human factors/ergonomics: developing the discipline and
profession. Ergonomics, 55(4), pp.377-395.
Caligiuri, P. and Tarique, I., 2012. Dynamic cross-cultural competencies and global leadership
effectiveness. Journal of World Business, 47(4), pp.612-622.
Baker, J., 2012. The technology–organization–environment framework. In Information systems
theory (pp. 231-245). Springer, New York, NY.
Bansal, P. and Hoffman, A.J. eds., 2012. The Oxford handbook of business and the natural
environment. Oxford University Press.
Bachmann, R. and Inkpen, A, C., 2011. Understanding institutional-based trust building
processes in inter-organizational relationships. Organization Studies, 32(2), pp.281-301.
Voegtlin, C., Patzer, M. and Scherer, A, G., 2012. Responsible leadership in global business: A
new approach to leadership and its multi-level outcomes. Journal of Business
Ethics, 105(1), pp.1-16.
Louhiala-Salminen, L. and Kankaanranta, A., 2011. Professional communication in a global
business context: The notion of global communicative competence. IEEE Transactions
on professional communication, 54(3), pp.244-262.
Brammer, S., Jackson, G. and Matten, D., 2012. Corporate social responsibility and institutional
theory: New perspectives on private governance. Socio-economic review, 10(1), pp.3-28.
Online
Company History.2018.[Online].Available through<https://www.hsbc.com/about-hsbc/company-
history>
Denmark political stability. 2018. [Online]. Available
through<https://www.theglobaleconomy.com/Denmark/wb_political_stability/>
PESTEL analysis of Denmark.2018. [Online]. Available
through<https://www.slideshare.net/hatimthathiya/pestle-analysis-of-denmark>
Technological opportunities 2018. [Online]. Available
through<https://www.statista.com/statistics/664832/companies-usage-of-digital-and-
technological-opportunities-in-denmark/>
HSBC Holdings plc (HSBC).2017.[Online]. Available
through<https://finance.yahoo.com/quote/HSBC/financials/>
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