Being among the largest banking financial organizations in the world, Hongkong Shangai Banking Corporation (HSBC) has its headquarters in London .The international network for HSBC comprises close to 8,000 offices in 87 nations and territories in the Asia-Pacific region, Europe, America, Africa and the Middle East. After its establishment in 1865, the bank focused on standardization of the value of its brand. The global acknowledgment with the paradox reflected by its catchphrase “the world’s local bank” is the buoyancy and encouragement of HSBC (Haig, 2004).Through its global network connected by the advanced technology involving a rapidly growing capability for e-commerce, HSBC provides a wide range of financial services like commercial, personal, financial, investment, corporate and private banking (Source : www.hsbc.com).
Analysis of HSBC through PESTEL, Porter’s five forces and porter’s value chain model
Analysis of the external and internal environment of an organization provides a milestone in the determination of different competencies, expected growth, company assets as well as its liabilities. The analysis also outlines the core values of the business industry and the approaches through which the core values can be can be useful to the business model and the market at large. Analysis of the internal environment involves evaluation of an organization’s corporate structure, market share and culture, business models and their resources (Haig, 2004). To analyze the environment of HSBC and assess the impact on its strategy, various elements and factors of the organization and the banking industry will be assessed through the PESTEL model, the Porter’s five forces and the Porter’s Value Chain.
The PESTEL model
Since HSBC operates in various nations, it, therefore, has to respond to the political systems of the nations in which it has its operations. There are various political factors that could affect the organization attempt to grow globally. For example, if the organization establishes a new operation in a new country it needs to start by collaborating with other smaller firms. It starts a new operation in a new country under its own placard. Also, HSBC complies with the tax legislation of the government law and regularly pays taxes and on timely basis. The stability of a country in which it operates is among the major political factors that HSBC considers. The threat, security, liberty, quality and legal systems are also considered.
For HSBC, being the world’s largest banking and a financial group comes with uncertainties and inherent threats. The growth of the organization depends upon primary economic factors such as the exchange rate fluctuations and the unpredictability of stock market volatility. Further economic factors are the continued or extensive recessions, changes in government rates of exchange, fluctuation in employment rates and the volatile interest rates including in South Africa and in Asia (Annual report HSBC, 2009)
HSBC is and has been contributing so much socially. Through partnering with other primary charitable firms globally, HSBC contributes towards offering them monetary support. The chairman of HSBC holdings plc, Stephen Green, reports in one of the articles that one of the main attention of HSBC is on their investment in the community, the environment and education because they believe that such are the main things that drive the overall community development. HSBC runs a variety of campaigns and programs worldwide meant to uplift the children. Such programs and campaigns include HSBC’s rural children program, Future First and various other activities to better the society which makes them be the world’s local bank that they are today (info at hsbc.com)
HSBC has been a victim of several online malpractices despite being a Hi-Technology using organization. Organizations need to be updated on the data interpretation and data services because of the vital role that it plays within the financial organizations. Just like other banks and financial institutions, HSBC group has encountered many challenges over the past years. One of the major challenges that HSBC faced belonged to technical management. The organization lost many of their customs after the loss of sensitive information due to the negligence of HSBC technical team. The weakness of the operation and the error brought about leakages of sensitive customer information which was a violation of the laws protecting data. Although the loss of data did not have a disastrous impact on the organization’s operations and functions, it negatively affected the belief of the customers. The move by HSBC where it has outsourced its call centers and technology to various countries in Asia such as China, India, Philippines and Malaysia is also not a wise move. American and European customers are losing their trust in the bank because the move is seen as a way to restrict operations and human empowerment. This further reduces the faith and trust of the organization’s loyal customers in the way their money is handled.
When it comes to active contribution to the environment, HSBC is on the front line. The organization has partnered with Earth watch institute in which HSBC sends their staffs to different nations to learn to understand and spread environmental awareness. Prevention of electrical appliances abuse is another keen attempt by the organization to conserve electricity (Worthington, 2009). The 2015 HSBC annual report indicates that the organization has contributed to the globe hugely buy adhering to the best practices of switching off the lights and computers when they are out of use. To manage the global environmental risk for sustained solutions and maximizing growth opportunities for the business, HSBC group has taken other primary initiatives. The organization was the first financial service firm to become carbon neutral in the year 2015. After their announcement HSBC entered into a collaboration with the University of East Anglia ( UEA) and the University of Newcastle for partnership in Environmental Innovation’ program. HSBC’s budget for this program was 650,000 Euros for three years. The organization’s belief that environment is vital for the society prosperity and for the sound economy is what makes HSBC commit to environmental protection.
Various legal factors affect the external environment surrounding HSBC operations. The organization has to abide with some of the fixed rules and regulations that are set by the government. Failure to operate within the fixed regulations may legal charges against HSBC. The organization also has to adhere to laws such as tax regulations and environmental protection policies that affect operations in various nations in which it operates.
Porter’s Five Forces
Analyses of the five forces presented by the Porter’s model focus the elements and factors in the banking industry’s external environment. The factors and elements are capable of influencing a variety of banking industries in competition terms (Porter, 1980). The aspects have been explained as the factors which power rivalry and ensure that the interaction of the five forces will generate renowned business organizations. The buying power of customers, competitive rivalry, bargaining power of suppliers and the threat of new entrants are the five forces that are discussed in Michael Porte’s model. The factors are presented diagrammatically as follows
As a result of the high profits that the banking industry offers, many organizations such as Sainsbury’s, Tesco and other many markets are considering entering the banking industry which is a major threat for HSBC. A number of other large organizations have shown interest in the banking and financial industry because of the high profits associated with the industry. Without considering the breakdown impact on organizations such as HSBC, large UK supermarkets are also seeking to enter the banking industry. HSBC will still be able to create high standards for competition despite several threats from the market. Due to the strong brand image for HSBC, the company will still be able to retain its customers despite the new entrants. The effective strategies that the organization has in place will ensure that it maintains its high competitive edge in the banking and financial industry despite the new entrants.
Bargaining power of customers
One of the most key forces that can affect the value’s occupation that has been created by the organization is the buyer. The concentration and proportion of buyers are important in determining this force. Effective customer satisfaction that HSBC has managed to create has gained the company customer satisfaction as well as customer loyalty. HSBC created a value which has impacted the occupation from one of the two main forces customers’ power. The role of this force involves customer size along with their concentration. HSBC manages their customers by gaining their loyalty and ensuring that they maintain customer confidence in them. The strategy used by the organization is what makes it the world’s largest leader in the banking industry even today.
Threat of substitutes
Without a doubt, the business environment is a very complicated and complex system. Business organizations are required to be more considerate of the various factors which will be operated on the basis of the changes in the market environment. In the banking industry, for example, companies need to adopt a unique and differentiated business model in order to have crucial competencies and a competitive edge in the industrial environment. It is obvious that new products and services are introduced into the market by competitors who offer similar products and services. Threats of substitutes can affect HSBC profits and make the firm work even harder so as to maintain its leading position. The strategy of HSBC focuses on four customer segments which have enabled the organization to satisfy the needs and demands of all the customers which limit the influence of other organizations offering similar products.
Bargaining power of suppliers:
The power of the customer is mirrored by the power of the supplier. Viewed from this perspective, the main attention is on both the proportion and concentration of suppliers which can also be connected to the customer. The degree of differentiation is also given attention about the materials supplied by the organization. HSBC organization uses the price discrimination strategy where it charges markets with different prices depending on the differences of the price of each customer.
Rivalry among current competitors
There exist many rivals in the financial and banking sectors. To ensure that it maintains its leadership position in the market among the many rivals, HSBC uses efficient strategies. When the rivals managed to up their competition game, HSBC was able to design a strategic plan that ensures that the organization is considered as the first priority by the customers in the banking and financial industry.
The porter’s value chain
There are several activities that an organization incorporates, which work in harmony to improve value ability to customers. Implementation of value chain keeps the organization at a higher edge in generating more profits. The porter’s value chain model involves the following nine activities which are categorized into primary and secondary factors
The primary activities
Marketing and sales
In order to succeed in any industry, strategic market planning is essential for organizations. When marketing strategies are controlled and implemented properly they contribute to the achievement of an organization’s goals and marketing objectives. However, as an organization operating in the banking and financial service industry, HSBC primarily relies on generic marketing strategies. For it to formulate a generic marketing strategy, HSBC identifies and analyzes its target market and designs a marketing mix that can satisfy the customers in the identified market. This marketing mix strategy has enabled the organization to make more profits and remain the global financial services leading institution.
The procurement department in HSBC plays a major role in the daily procurement of products and services for the organization. The organization has established relationships with suppliers. To become a supplier for HSBC, one must adhere to the firm’s supplier code of conduct which safeguards the relationship between the organization and its suppliers. Anyone who engages in commercial dealing with the organization must support the basic principles in the supplier code of conduct. Through this strategy, HSBC is able to manage and relate well with their suppliers hence promoting a global corporate image.
Global trading involves designing ways and strategies to improve service delivery and build customer satisfaction and customer confidence eventually. HSBC global operations are responsible for various activates which include managing the daily transactions for their Wealth Management and Retail Banking, carrying out the Commercial Banking services and supporting their Global Private banking. The organizations, Global Operations teams are located in the many nation that HSBC operates in including Asian countries such as India, Malaysia, China and Philippine. The strategy used by HSBC where they introduced an automation so as to reduce costs, workload and to improve customers experience has enabled the company to increase customers loyalty and maintain confidence.
The human resource management
In every organization the human resource department plays a very vital role. The functions of human resource department The Human resource management department in HSBC is also regulated by various strategies the organization has put in place ensure that it has competent staffs who are capable of carrying out the duties and responsibilities of HSBC globally. The organization has its staff located in all nations where it has its operations. The organization’s department carries out various activities including recruiting, hiring, training, compensation, developing and other HRM functions which ensure that the organization carries its functions and operations effectively (Hellin, and Meijer, 2006)
Technological and infrastructure Development
HBSC global Information Technology team manages and develops the organization’s systems and technology infrastructure. The team design, implement and support software and offer other IT services which allow the organization to remain at the front line in providing superior banking services. The HSBC IT team design and maintain the system for the organization’s global business and offer support to functions like HR, Risk and Finance. The team also manages the IT infrastructure and support services that are essential for the organization’s data centers, customers, ATMS, desktops, voice and data networks, and other services. The organization’s strong team which is made up of software engineers and developers, testers, architects, consultants, project managers, IT and business analysis and leadership teams ensure that the global operation of HSBC is continuously monitored to ensure efficiency and effectiveness of service delivery.
From the above discussion of HSBC strategic practices using a various strategic models like the PESTEL, Porter’s value chain and the Porter’s Five Forces, it is clear that an organization’s environment can be a burden or a contribution to the individual organization’s success. The HSBC’s strategic practices indicate that that it can provide value to its customers. HSBC engages in social, economic, and environment because of its much engagement in technology. Also, the organization has noted that the banking industry faces threats of new entrants who want to enjoy the huge profits associated with the industry. To counter the growing industrial competition and to remain the global leader in banking and financial services, HSBC has implemented various strategies that ensure that they do not lose their customers to competitors. Finally, the organization’s value chain analysis is a clear indication of the strength and opportunities available for the firm in the global market.
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