Company Report: HSBC Value Management Review and Reflection

This report provides a comprehensive analysis of HSBC Holding plc's value management, encompassing a detailed introduction to the company and its significance in the global financial landscape. It includes a situational analysis, employing both qualitative and quantitative methods, such as 5C analysis, risk management assessment, and corporate governance assessment, to evaluate the current status of value management within HSBC. The report proposes improvements to value management and outlines milestones for management, while also addressing potential risks associated with non-implementation of these proposals. Furthermore, it includes a critical review of the literature used in the analysis and explores potential research perspectives for a DBA. The report concludes with a reflection on employability enhancement, identifying critical thinking and core capabilities needed for consultancy tasks, evaluating knowledge and skills in the context of the company analysis, and reviewing related leadership skills for future personal development and career advancement.

Company report, review and
reflection

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
PART 1 THE COMPANY REPORT..............................................................................................1
A1 Introduction to company.......................................................................................................1
A2 Situational analysis to evaluate the current status of value management..............................2
A3 Proposal for improved VM and milestones for management...............................................7
A4 Risk to organisation on not implementing proposals..........................................................13
PART 2 EVIDENCE REVIEW.....................................................................................................13
B1 Critique of literature used in Part A....................................................................................13
B2 Potential DBA research perspective....................................................................................15
PART 3 REFLECTION FOR EMPLOYABILITY ENHANCEMENT ......................................16
C1 Identification of critical thinking and core capabilities needed to achieve this consultancy
task............................................................................................................................................16
C2 Evaluate knowledge and skills competencies in context of Part 1......................................17
C3 Review related leadership skills required for future personal development and career
accession...................................................................................................................................19
REFERENCES ...............................................................................................................................1

INTRODUCTION
The whole report is based on HSBC holding plc and this will be covering value of firm,
situational analysis in evaluating current status of value management. Improvement and
sustainability development of company among stakeholders and resource which are needed to
satisfy their need is called Value management (Aven, 2016). Assignment will further continue
with addressing the inefficiencies which are identified and formulating proposal for
improvement also risk to organisation on not implementing proposals. For any company it is
important to identify their key performance indicator both financial and non financial one so that
they can make sure about management of their value in market. Then it will be covering
literature review of all critique which is used in above mentioned part and at the end assignment
will conclude with employability skills which are needed for reflection.
PART 1 THE COMPANY REPORT
A1 Introduction to company.
Value management is very important for company in market which they are performing
or delivering services. As all the stakeholders of company who are linked with them some or
other way needed to judge it with different perspective and they define their own priorities to
stakeholder (Bell, Filatotchev and Aguilera, 2014). There are many stakeholders of a bank as this
is very important part of all the economies of world. Without bank within country they will not
be able to work and develop on global level. HSBC holding plc is most reputed British
multinational bank which is also providing financial service all over the world. This is a public
limited company which is operating in banking and financial service industry and was initially
originated in Hong Kong. With about total assets of $2.374 trillion in December 2016 HSBC is
seventh largest bank of world and 235175 number of employees in same year.
Hong Kong and Shanghai Banking Corporation also known as HSBC is having its home
market as UK and Hong Kong. HSBC is having its branches in 67 countries of world with about
1

3900 offices and is having 38 million customers. HSBC is operating in many segments which is
related to commercial, global banking, investment, retail banking, wealth management and
private banking globally (Cucchiella, D’Adamo and Gastaldi, 2015). Market capitalisation of
HSBC holding was about £102.7 billion in 2016 and was second largest company which was to
be listed in London Stock Exchange. It is very important for HSBC to manage the value of its
company and to attract more and more stakeholder and also to satisfy them.
A2 Situational analysis to evaluate the current status of value management.
Situational analysis is collecting of all method which will be used by managers of
company to analyse internal and external environment in understanding capabilities, business
environment and stakeholders of firm. This can be done by following two methods which are
qualitative and quantitative.
Qualitative:
This include various types of analysis which is made by company to understand all
capabilities and competencies which they are having and which can lead them a better profit in
market. Qualitative part of situational analysis include 5C analysis, risk management assessment
and corporate governance assessment (Dewachter, et.al 2015). Value management is achieved
with the help of formulating proposal for improvement of business process and financial
management of company this will also lead to designing a strategic management system that will
be implementing with financial and non financial KPI for ongoing performance improvement.
KPI are the key performance indicator of firm which will be defining that company is
having the capabilities of achieving important business objective. This will help the company in
tracking the record of all business area of firm and analysing that will company achieve the
target which it has set or not. This KPI will be helping company in management of its value in
market so that they can gain greater market share from others in market (Haimes, 2015).
Strategic management system will analyse that how can company formulate the plan for whole
year and achieve the financial goal of company.
5C analysis- this will be giving more and more information on internal, macro environment and
micro environment factors. This 5C analysis will be providing all sort of extensive and relevant
information about company that is why this is considered most useful and common way to
2

analysis market environment (Kallala and et.al 2015). This include company, competitors,
customers, collaborators and climate.
Illustration 1: 5C Situational Analysis
Company- this include the evaluation of objective, strategy and capabilities of company and will
be indicating strength of business model. Will also be telling all areas which need improvement
and how well company is fitting in external environment. Analysing goals objective of firm are
the aligned to mission and vision of company and analysing marketing strategy of company also
of marketing mix. This will also be including performance of company and then analysing
effectiveness in achieving mission and goal of firm which they have already stated.
Competitors- this will be taking all potential competitors of firm within market which can be
threat to profit and market share of company. The main aim of competitor analysis is to identify
all potential competitor in market, their position and growing capabilities so that they can
prepare themselves against competitors (Lam, 2014). Company first need to identify competitors
in same industry, assessment of competitors to see their goal and objective and then lastly
3

predicting future initiatives of competitors. Identification of competition in industry means
analysing whether they are providing the same service or product to customer as the company.
Customers- this is most essential one as can involve many parts in it and can be vast and
complicated one. This will involve demographic area in which company is operating like market
size, motivation, distribution channel, quality of purchase and income level of customer.
Customer are divided according to the income level and market size company need to motivate
them to buy the product.
Collaborators- these are helpful as they allow and increase creation of idea and gaining in
likelihood of more business opportunity (Larcker and Tayan, 2015). Collaborators can be person
like agency, supplier of firm, their distributors and partners who are working with them to earn
profits and share losses. They must be having that many capabilities to identify the supplier and
agent of firm which will be providing the product to end use customer so that they are happy
with the service of company.
Climate- this will be helping in business climate and environment and all factors which are
affecting business. This will be including PESTLE analysis of company which are political,
economic, social or cultural, technological, legal and environmental analysis.
Risk management assessment:
This is the effect of uncertainty and the assessment of risk which will be followed by
identification and prioritisation of risk (McCahery, Sautner and Starks, 2016). Risk management
also include coordination and economical application of resources which will be minimising and
monitoring probability or impact of unforeseen events. Identification and assessment of risk is
very much important which will be coming from various sources like financial area, project
failure, natural causes or uncertain events. All the different type of risk are having different
effects and causes measures related to them are also of various kinds.
Implementation of risk management for some type of company need time and resources
which will be difficult for the company to complete the given project. There is a difference
between risk and uncertainty as risk is calculating to impact and probability of happing of the
uncertain event. If the company is not able to assess the risk and prioritise it then this will lead to
waste of time and energy as well (McNeil, Frey and Embrechts, 2015). If they are taking too
4

much time in assessment of risk which is involved in doing certain project then this will delay
the time to start the project.
Corporate governance assessment:
This system ensures the relationship between board of directors and stakeholder of firm
this also help management to direct and control systems in organisation. Corporate governance is
the system which will be important as see how will decision marker of company be acting, how
them can be monitored and how they could be held responsible for the decision which is been
taken by them only. This will be helpful in situational analysis of company and will be telling
whether decision makers are capable in doing their work and can they be useful or not for future
decision making of company. Auditing of the company and its record are also the essential part
of corporate governance assessment (Tricker and Tricker, 2015). As if the company is healding
its yearly audit of the company then this will be attracting more number of stakeholder towards
the company. UK is using a laid down code of the best practice which is commonly called as
comply or explain which is associated with corporate governance assessment. Auditing in HSBC
holding is of very importance as for a bank this is required that they all do the auditing of their
books and journals each year. This is also required for corporate governance of company so that
more and more investors are directed towards them.
Quantitative:
This will be including the comparison with prevailing competitors in market who are
sharing market share and profitability with HSBC holding. As the bank is providing all kind of
service to customers all over the world like that of financial service, commercial banking,
corporate investment and market private banking. In UK some of major competitors of HSBC
bank are Barclays and Royal Bank or Scotland (Vogel, 2014). They both are also performing
very good in market and earning higher share of profits giving tough competition to HSBC in
UK itself. The growth prospect of HSBC is very good at market and is showing steady and
frequent growth in share price in both stock exchange over last 5 years. As compared to its
competitors in market HSBC is having more capabilities in identification of need of customer
and that of investors. Bank is deriving its 22% of profits from Hong Kong only as this is the
operational centre of company and is growing to emerging market like that of Asia and Pacific
region.
5

Market metric-
This is the key performance indicator of firm which is determining greater precision and
tracking the performance of firm over a particular time say for a year. Market metric can be
derived form market value, market to book ratio and price earning ratio of HSBC holding which
will be as comparison to competition like that of Royal Bank of Scotland.
Market value-
The market capitalisation of HSBC holding was about £ 152,856.06 million and the price
of its share was 751.50. Revenue of the year 2016 was $47.96 billion and profit was $2.479
billion.
Financial analysis-
Profitability ratio 2015 2016
Assets turnover 0.03 0.03
Return on assets 0.5 0.05
Return to equity 6.64 0.71
Price earning ratio 10.7 38.3
Price to book ratio 0.8 0.9
Investor ratio
Earning per share 3.2 0.35
Dividend 2.5 2.55
Payout ratio 67.5 242.9
Liquidity ratio
Working capital 2.67 13.32
Sale growth will be 59836-71092/71092= −0.15 which is the current years Gross profit
subtracted by last years gross profit and divided by current year gross profit (Cucchiella,
6

D’Adamo and Gastaldi, 2015). As it is clear that last year gross profit was more than that of
current years so the growth of sale in HSBC bank is decreased. This means that the company is
in loss in regard to the sale from last year.
The price to book ratio of company is the value of its current market share prices of
company. The book value would be the part or portion which is with the shareholder of company
not actually the market price. In the year 2016 the price to earning ratio of HSBC was 38.3 which
was more than that of last year which was about 10.7.
Liquidity ratio will be denoting how much company is having capabilities to repay all its
creditor of firm from its total cash and is dividing total cash by the short term borrowing (Laudon
and Traver, 2013). So the working capital ratio which is the part of liquidity ratio of HSBC
holding for the year 2016 and 2015 was 13.32 and 2.67 respectively.
The profitability ratio of firm is the clear measure of performance of company as
compared to that of its competition in market and this is the left over income after deducting all
the cost and taxes or expense of firm. This can also be used to compare last year and current year
profit of the firm and this can be done by taking out all the profit and loss of the firm after
deducting the taxes, cost and expensed which are made during the year.
Identification of inefficiencies in above qualitative and quantitative analysis:
If the company want to take out all the ratios than they need to do analysis of all the cost,
revenue, taxes, profit and its loss for the year. They need to identify its all customer and
competition which are there in market and this will be taking so much time and work will be
increased.
They also need to analysis that hat is the future contract of business on the basis of which
they need to do the planning.
The collaborators of firm should be satisfied by the growth and profit of the firm as they
are one who are investing in company (Haimes, 2015). To satisfy customer of company is the
most basic and important task of management.
Value management in market will be possible if the customer or supplier of firm are not
happy.
7

A3 Proposal for improved VM and milestones for management.
A) Financial management
As per Rappaport in year 1986 mentioned that there are 7 drivers in business which will
be managing to create value of firm they are as under:
Growth in sale, increase in operating profit margin, in competitive advantage period and
reduction in cash tax rate, working capital investment, in fixed asset investment and weighted
average cost of capital (Gordon, Jorgensen and Linthicum, 2017). All these things if
implemented then that will lead to increase in shareholder value and value management of firm.
Illustration 2: Value of shareholder and value management
[Source: Gordon, Jorgensen and Linthicum, 2017 ]
In order to achieve shareholder value in capital value gains and dividend form there are
some important valuation components which need to be considered impacting financial
profitability. Some are as under:
I) Cash flow
The amount of cash which is given by the company to meet out payments to creditors and
used to analysis liquidity position of company is known as cash flow. This cash flow is derived
from net sales revenue, revenue growth realised margin and its protection, working capital
8