Strategic Management Report: Analyzing HSBC's Business Strategies

This report provides a comprehensive strategic analysis of HSBC, a leading global financial institution. It begins with an overview of HSBC, followed by an examination of its external environment, including industry analysis, PEST analysis, and Porter's Five Forces. The report then delves into HSBC's internal environment, focusing on value chain analysis. A SWOT analysis synthesizes these findings, leading to strategic recommendations based on the Ansoff Matrix and other strategic considerations. The report aims to identify opportunities for HSBC to gain a competitive advantage in the financial services industry, considering both macro and micro environmental factors. It concludes with a summary of key findings and recommendations, supported by a detailed reference list.

Running Head: STRATEGIC RECOMMENDATION
Strategic Recommendation: HSBC
Name of the Student:
Name of the University:
Author note

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Executive Summary
The purpose of this assignment is to understand the concepts and the theories associated with
strategic management and to align it with an organisation. The company that has been
selected to conduct the study is HSBC, which is one of the leading financial institutions in the
world and the company has over the years employed efficient strategic management decisions
in order to accomplish the objectives. The assignment analysis both the macro and micro
environment of the organisation in order to understand the position of the company and what
are the capabilities and lastly has provided strategies to gain competitive advantage using an
academic model.

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Contents
1. Introduction.........................................................................................................................3
1.1 Overview HSBC..........................................................................................................3
2. External Environment of HSBC.........................................................................................4
2.1 Industry overview and analysis...................................................................................4
2.2 Pest Analysis....................................................................................................................5
2.3 Porter’s five force Analysis..............................................................................................7
3. Internal environment of HSBC...........................................................................................9
3.1 Value Chain analysis...................................................................................................9
4. Strategic analysis of HSBC...............................................................................................12
SWOT analysis.....................................................................................................................12
5. Strategic Recommendation...........................................................................................16
5.1 Ansoff Matrix (competitive advantage)....................................................................16
5.2 Other recommendations.............................................................................................17
6. Conclusion........................................................................................................................18
7. Reference list....................................................................................................................19

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1. Introduction
Strategic management in business organisations are essential to formulate policies and
decisions. Over the years there have been several theories and models that have been coined
by many scholars to help and guide managements of organisations. The success or failure of
an organisation depends upon the ability of the company to achieve the objectives that has
been set (Senge 2014). In order to set the objective and to deliver those companies undertake
strategic management decisions. In order to understand the concept of strategic management
better, the organisation that has been chosen to complete the assignment is HSBC. It is one of
the largest financial organisations in the international market. The assignment will focus on
providing the organisation with strategic recommendations based on the analysis with the
help of various tools. It will focus on overcoming the barriers and achieving competitive
advantage.
1.1 Overview HSBC
Hong Kong Shanghai Banking Corporation or HSBC is the world’s seventh largest
financial institution in the world. The company was established in 1886, and is a
multinational organisation that operates in the sector of banking and financial services.
Originating from Hong Kong the company is based and headquartered in Britain, UK and is
listed with the London Stock exchange (Hsbc.com 2018). Over the years of operation the
company has been through several ups and downs. HSBC has its operation in more than 80
countries with the help of offices in 7500 locations. The functions of the business can be
divided in four broad categories: Global Private Banking, Retail banking, Commercial
banking as well as Global Banking (Hsbc.com 2018). In the years of operation the
organisation has become a forerunner in the industry by setting several benchmarks in terms
of economic, employment facilities, setting trends in the consumer behaviour, updated

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technology with a greater communication system as well as recognise the duties the company
have towards the society and the environment (Hsbc.com 2018; Alvesson 2012). The
company focuses on Europe, Hong Kong, Asia-pacific region, Australia and America as the
area of operation. Asia-Pacific region is recognised as an emerging market for the company.
2. External Environment of HSBC
2.1 Industry overview and analysis
The finance industry has evolved over the years, the companies that operate in the
industry has incorporated technology in the process of service. The industry helps the
customer take care of their financial aspect as well as helps them get financial back up as well
(Senge 2014).
One of the major barriers of this industry is credibility, after all these years there are
customers that lack their trust in the industry and do not recognise the advantages associated
by doing business with a financial institution like HSBC. For long-term economic growth and
development it is important for people to save, investment and make use of the other financial
services that the companies in this industry has to offer (Weforum.org 2016).
The finance industry is important to the economic development of a country as it is
directly associated with the savings rate, investment rate which in turn provides the country
with financial stability, improvement in the rate of poverty and provide job opportunities in
the long-run. The industry is crucial as it helps the country in raising capital; improving the
foreign trade, the transfer of liquidity, it also provides higher level of integration for global
transactions.
Some of the direct competitors of HSBC are Standard Chartered Bank, Citibank,
Deutsche Bank. The industry has intense competition and is strictly bound by rules and

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regulations. There are several international authoritative organisations in the finance sector
that behave as a check on the companies that operate in the industry like the World bank and
IMF (Jaber and Al-khawaldeh 2014).
2.2 Pest Analysis
The external environment of an organisation factors impact the strategies and decisions of
the organisation. Organisations have to keep monitoring the external environment as the
dynamics of the factors are not under the control of the management of the organisation
therefore decisions must be taken to understand and determine the opportunities and in order
to overcome the threats and weaknesses. PEST analysis will help in determining the external
business environment of HSBC; this will further help in proving strategic recommendations.
Political: A business organisation has to agree with the government of the countries in which
the company runs it s functions. As HSBC is a financial organisation the company has to
keep up with the framework of the government of the country regarding the financial rules
and restrictions (Worldbank.org 2016). Political stability index must be considered while
expanding the business. In order to successfully achieve the objectives of the organisation
aligns the interest with the interest of the customers and the country of operation the company
(Senge 2014). The encouragement of trade and business by the government of the country
provides support to the mode of entry and operation for HSBC. As a multinational
organisation that operates in the international market HSBC follows the international political
codes and regulations as well (Jaber and Al-khawaldeh 2014).
Economy: The economic development and the current condition as well as the predicted
overview of the country helps an organisation take decisions to use the situation in its benefit.
The company has faced several setbacks and has been able to combat the situation based on
strategic management decisions taken during the depression of 2008, HSBC had faced severe

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economic meltdown (Worldbank.org 2016). Some of the economic factors that impact the
functions of HSBC are fluctuation and the dynamic nature of the global stock market,
difference in the foreign exchange rates and, inflation rates, fiscal policies of the country of
operation etc (Weforum.org 2016). The higher management of HSBC say that the
improvement in the performance and revenue development is because of the growth in the
international and commercial banking sectors. There are more potential in Asia as several
countries in the region are developing rapidly or are improving the rate of development
radically. Therefore, this aspect of Asia makes it an opportunity for a financial institution like
HSBC to expand the operations and grow (Worldbank.org 2016).
Societal: The lifestyle and the standard of living among the people of the country of
operation are important to understand the needs and requirement of the customers. The target
market of a financial institution like HSBC understand the value of money and is concerned
about improving their monetary value in the long run therefore they need an institution like
HSBC (Senge 2014).
The place in which HSBC operates the people has become conscious towards their
spending and hence the services of the company are required. The people have a tendency to
save and the bank is the best institution to do so. Not only that the company has also taken
measures to adapt to the culture and traditions of the country of operation in order to provide
the people with better customised service (Weforum.org 2016). The diversity in the work
place also helps the company to serve with a wide range of customers all over the world. The
modern lifestyle and the luxurious ways of living on credit have provided the company with
opportunity (Worldbank.org 2016).
The Company has also adapted to the triple bottom line concept as a part of their
objective and considers the conditions of the planet and people associated with the company

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as important as the expansion and growth of the business (Worldbank.org 2016). HSBC
understands the responsibility the company has towards the society (Weforum.org 2016).
HSBC releases its CSR report every year like the annual financial reports; the company hosts
various programs and events for the betterment of community, education and the
environment as the organisation perceives these factors as the basis for the overall
development of the community (HSBC.com 2018).
Technological: Technological advances has made the organisation reach its previous
objectives, HSBC has adapted to the changing dynamics to serve the customers better.
Technology has a big role to play in the finance industry (Senge 2014). Therefore the impact
of advancement in technology is also significant. People from anyone can have access to their
bank accounts owing to the technology (Jaber and Al-khawaldeh 2014). The company has
adapted its business functions over the years and is always looking forwards to incorporate
innovation in the process of operation on a daily basis (Hsbc.co.in, 2017). The company
outsources its technology from several countries; apart from running the basic business
operations the company uses technology for CRM as well. HSBC has faced controversy in
the past regarding the leakage of service information due to technical security issues.
Therefore, HSBC uses its resources and capabilities in order to improve the goodwill and also
deal with situations like this (Jaber and Al-khawaldeh 2014).
2.3 Porter’s five force Analysis
With the help of the analysis coined by Michel porters the competition in the industry
can be determined. The five force analysis will be made keeping the UK industry as that is
the home country of the company (E. Dobbs 2014).
Threat of new entrants: A number of major players in the market have diversified in the
finance business, for example: Tesco or Sainsbury have entered in to the market. The UK

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government encourages trade and business and helps in the development of the finance
industry as it is crucial for the development of the country’s economy (Worldbank.org 2016).
There is growing demand from the perspective of the target market therefore the industry is
lucrative for investors. But gaining the trust among the people is important. The rate of threat
from new entrants is therefore medium (Porter, 2008).
Intensity of competition: The completion in the industry has been strong as there are a
number of companies that operate in the global financial sector, the companies deal with both
B2B and B2C clients (E. Dobbs 2014). With the new entrants in the market the competition is
on the growing trend. Some of the direct competitors in the industry are Citibank, Standard
Chartered Bank etc. HSBC incorporates a number of strategic management decisions in order
to maintain an edge over the competitors.
Bargaining power of the customers: In case for an organisation that operates in an industry
where credibility and goodwill is the major aspects of choice among the customers, HSBC
has been able to serve a number of loyal customers over the years (E. Dobbs 2014). Despite
facing issues and controversies the company has emerged with plans and strategies to
perform the way that they claim. The bargaining power of the customers are high considering
the intensity of competition yet the fact that trust play an important role this power reduces
therefore making the switching cost for the customers high (Porter, 2008).
Bargaining power of the suppliers: The suppliers of the service that are provided by the
industry are in terms of the technology and resources (Worldbank.org 2016). As HSBC is an
important client to severe the third party suppliers switching cost becomes high and therefore
lowering their bargaining power (E. Dobbs 2014).

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Threat of substitutes: As there is major apprehension in the mind of the people regarding
the services of a financial institution keeping the money with them and not investing or
spending it on other items are substitute. On the other hand, illegal money lenders etc are
some of the substitute for banking institutions (Worldbank.org 2016).
3. Internal environment of HSBC
The internal or the micro environmental factors are the ones which can be controlled and
monitored by the company and these are to be used in order to use the opportunities that has
been recognised in the external environment and also to combat the threats of the industry.
The resources and capabilities of the company are the major aspects of the micro
environment.
3.1 Value Chain analysis
Porter’s value chain analysis will help in understanding the potential of the resources and
capabilities of the organisation. There are two segments of the theory: primary and
secondary activities. Following is the analysis of HSBC value chain
Primary activities
These are the factors that lead to the service creation, sales and transfer of the service to the
client to gain by using the benefits (Kynaston and Roberts 2015).
Operations of the business: The business function of HSBC is in the finance sector they
serve both B2b as well as B2c clients in their business. The company strives to achieve
excellence and come up with innovative; path breaking service oriented methods of operation
that will help the customers and help the organisation retain and build the position in the
long-run. On a daily basis the functions are associated with wealth management, retail

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banking, proving loans and credits, commercial banking services. The organisation has its
global team in several countries like Malaysia, China and Philippines (Hossain and Khan
2016).
Marketing and sales: the organisation uses marketing strategies to communicate with the
customers as well as develop services based on the needs and requirements of the clients.
HSBC maintains a valuable relation with the customers and the clients. The company uses a
mix of traditional and contemporary ways of promotion and communication. The marketing
team of the company develops campaigns and helps the organisation fix price of their
services like any other company. The marketing mix is used to make an assortment of the
services and then with strategic management plans the company incorporates the policies
which are appropriate for the company to maintain their competitive advantage.
Logistics: The company merges the transportation, aviation and logistics in the same
department and this department has gone through a number of changes in the past few years
(Gbm.hsbc.com 2018). The mergers and acquisitions is a major part of the logistics
department and it is. the factors of the external business environment like economic and
political aspects is likely to show new scope for the company and the logistics will help in
keeping up with the changes and use this scope as an opportunity. The company uses third
party services to ensure that the logistics are efficiently used (Hsbc.com 2018).
Secondary activities or support activities
The factors under these are the ones which help the company to use the primary
activities efficiently.
The human resource and organisation infrastructure: These aspects are the back bone of
any organisation a company uses the infrastructure along with the human resource to achieve

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the objectives of the company. The company focuses on talent acquisition and encourages the
employees to be innovative in their work approach (Business.hsbc.uk 2018). The number of
people working for HSBC is approximately 229,000 making the company one of the major
employers (Statista.com 2018) HSBC has a hierarchal organisation structure which helps in
proper communication within the organisation as well as with the stakeholders of the
organisation. The company is committed to maintain a high standard in the corporate
governance; the board of directors are responsible for enforcing the governance and aligning
it with the culture of the company (Hsbc.com 2018).
Technology: HSBC uses technology in the process of business functions in almost all the
operations of the business. The company not only uses technology in order to ensure better
services, they also use technology to reach out and communicate with people. The company
also have faced controversies in the past due to technological failure but in order to combat
that situation, the company has incorporated the strategy of releasing the technology report,
and also have improved the security of the system (Hsbc.com 2018). Some of the examples
of technological features used by the company are as follows: Block chain, voice recognition,
chat option with customers and customer service, Robo-advisors using AI algorithms,
Finance programmes over social media digital wallet etc (Kynaston and Roberts 2015).
Procurement: The procurement of the company is focused in the information technology
and banking operations. In order to manage the supplier’s the management of the company
has formulated five principles that focus on the way the company must treat the suppliers in
terms of their communication, transparency (Masterman and Masterman 2013). The services
that are provided by the suppliers are used by HSBC in order to improve the process of
business operation. As a multinational company there are service providers of the company
all over the world. The focus of the process is to provide the customers with better services
and security plays a significant role in the process (Gbm.hsbc.com 2018).