SWOT Analysis and Strategies for Hsbc Essay

Excerpt from Essay :

HSBC Bank and Its Strategy

Industry Analysis:

HSBC is the world's largest banking and financial services provider. Headquartered in London, the firm has global networks that include over 10,000 offices in over 80 states, as well as territories in the Asia-Pacific area, Middle East, United States, Africa and Europe. Listed as HSBC Holdings Plc, the business have roughly 200,000 shareholders in roughly 100 countries as indicated in listings in nations such as Bermuda, New York, Hong Kong and Paris.

Industry life cycle

The industry is in the maturity stage. Industry players have attained the complete aptitude to be consumed by the users. Thus, the growth of firms in this industry tracks economic growth in general. At this level, increased standardization pushes companies to compete heavily. Consequently, the profits margins reduce adding pressure on profits. At this stage, firms in this industry are known as cash cows because their cash flows are consistent though there is a minimal chance for profit growth (Great Britain, 2010).

Competition and key issues

The industry has become an oligopoly instead of a competitive. The sector is dominated a few large banks such as the Royal Bank of Scotland (RBS), Barclays, HBOS, and HSBC. Regarding the value of assets, the industry is clearly oligopolistic. There are three main key issues. Direct competitors are summarized in the diagram below:

The sector has significant entry barriers. Most clients only seek to open a bank account with companies that have a favorable credit history and a wide range of branches, as well as a recognizable brand. Hence, new entrants are struggling or even deterred from entering the industry. Possible entry barriers have been that capital, liquidity requirements, and FSA authorization process. It is evident that these entry barriers are causing the banking system to become overly concentrated (West et al. 2015).

Economic experts conclude that some giant banks are operating a complex monopoly in their service supply. This results in a decreased competition to the detriment of the consumers. For instance, customers tend to be reluctant to switch banks as they all offer similar benefits.

Due to the recent financial downturn, the sector increased its concentration level. The industry's HH Index rose from 1400 in 2008 to 1740 in 2011. An index rating of 2000 is regarded as highly concentrated.

Strategic Analysis

Strategies

To attain a competitive advantage and content successfully, HSBC uses different strategies. "Managing for growth" is one of its key strategies. This strategy allows the company to develop and grow more. The strategy has been the basis of the firm's strengths and sticks to the areas that need further improvement. The company's main objective is to be the leader in financial service sectors; as such, it employs a strategy that strives to secure and sustain a leading position in the target market.

Besides, HSBC uses a strategic human resource management that offers comprehensive and intensive values among the employees. For the business, a company that has a workforce that is highly motivated and productive will support them attain their organizational goal. Moreover, the business also implements the CRM strategy. The aim is to maintain a positive relationship among the target market across the world. The goal of adopting the CRM technique is to ensure that the business is often complying with the demands and needs of the customers (West et al. 2015). By using information technology, precisely the Internet, HSBC reaches different customers worldwide and offers them satisfactory and quality products and services. Such a strategy appreciates the fact that growing a customer base is a recipe for success coupled with the provision of services that satisfy their needs and desires. The products offered as the company grows must always be receptive to the changing needs of the customers where efficiency matters a lot.

SWOT analysis

Strengths:

HSBC is the worldwide leader in international finance. Its global network comprises of roughly 10,000 offices in over 80 states, as well as territories in the Asia-Pacific area, Middle East, United States, Africa and Europe. This network renders it the largest and most profitable financial firm across the world. It operates as uniquely established businesses acquiring brand recognition based on the global trend benefits. Its nature of doing business is diverse because it functions in numerous fields like investment banking, financial services, personal financial services, as well as commercial and corporate banking. HSBC enjoys a global footprint, and they have the potential to fulfill the demands and needs of numerous customers around the world.

Weaknesses

HSBC has made various acquisitions. They have acquired many banks across the globe to establish a global leap. Some of these banks include British Bank of the Middle East, Hong Kong Bank of Canada and HSBC Banco Roberts. However, before 1998, none of these acquisitions carried the HSBC logo. Therefore, when the logos and names of all these acquisitions were changed to HSBC, the consumers thought that the company had newly acquired the banks. Nevertheless, the reality is that they had been running under the HSBC Holdings Plc for some time. Many businesspeople criticized this move, terming it wrong (Kew & Stredwick, 2005).

Opportunities:

The greatest opportunity for HSBC is further expansion. The organization may develop internationally and may strive to continue to be the "world's local bank." Recently, HSBC has been making numerous acquisitions and mergers to increase their international presence and business worth. The positive move to make a leap in the developing economies of Asia-Pacific and the Middle East regions has demonstrated to be flawless and boosted the income margins of the nation bounds and leaps. HSBC Holdings Plc had put their feet in the emerging economies in early 2008, acquiring at least 90% of Indonesia's biggest commercial institution called Bank Ekonomi. Besides, they acquired other financial organizations in other nations like Philippines and Vietnam. The organization is considering business in and is engaged in different alliances in different geographical areas.

Threats:

HSBC is confronting the major threat associated with their online banking service. The firm's online banking service is of a high standard and is advertised as one of the most secure packages to bank online. Nevertheless, just like any other system, HSBC's online banking system has some drawbacks following security issues like theft of company information. In 2008, HSBC's computer servers were reportedly hacked resulting in loss of transaction information of almost 160,000 accounts. Such incidences lowered customer confidence as they began to lose faith in the company. Another issue is the increased number of identity frauds and theft in the country that are contributing to the loss of confidence among customers (Kew & Stredwick, 2005).

Financial analysis

Return on Assets (ROA)

A bank's ROA Ratio serves an idea of how successfully the institution is using its assets to produce profits. Aspects of a bank's ROA include net non-interest margin, net interest margin, and special transaction. The sum of all these aspects leads to ROA. This breakdown of a firm's income is useful in explaining the recent changes that banks are facing in a specific financial condition. For HSBC, their ROA has been recording ups and downs for the last five years with the highest in 2011 (0.18%) and the lowest in 2008 (0.1%). The rise of ROA in 2011 is attributable to the increase of net profit margin that rose to a considerable percentage of 0.2% (Ndavi, 2014).

Return on equity (ROE)

ROE is a ratio, which measures a firm's profitability through revealing how much profit a firm generates based on the shareholders investments. ROE is indicated as a percentage. Just like ROA, it also has some aspects that include equity multipliers, asset utilization, and net profit margin. Each aspect of this equation indicates a different element of the bank's operation. HSBC's ROE peaked in 2012 as it increased to a 0.1%. The firm attained the lowest ROE in 20099 when it stuck at 0.1% (Great Britain, 2010). The equity multiplier was lowest in 2012 and highest in 2008; this is a positive indicator for the business. The equity multiplier explains how the firm uses debt to fund its assets. The bank recorded a positive performance in 2011, as its net profit margin was 0.2% while the equity multiplier was at 15%. In 2012, the equity multipliers went down to 14% though the net profit margin also declined to 0.2% (Kew & Stredwick, 2005).

Conclusion

The industry environment is evidently an extremely complicated system. Industry players are expected to be more considerate of various components that must be integrated based on the market trends. The leading players have adopted a distinctive and unique strategy to gain a competitive advantage and create a global presence. HSBC is the market leader in the finance and banking sector. As such, the company employs numerous techniques to fulfill market demands and needs. This paper demonstrates that HSBC has outgrown its rivals courtesy of the strategies they comply, which comply with the current market trends.

References

Ndavi, M. (2014). HSBC Banking and Finance. Munich: GRIN Verlag GmbH.

Great Britain. (2010). Maintaining…

Sources Used in Document:

References

Ndavi, M. (2014). HSBC Banking and Finance. Munich: GRIN Verlag GmbH.

Great Britain. (2010). Maintaining the Financial Stability Of UK Banks: Update on the Support Schemes: HM Treasury. London: Stationery Office.

Kew, J., & Stredwick, J. (2005). Business Environment: Managing in a Strategic Context. London: Chartered Inst. of Personnel and Development.

West, D. C., Ford, J. B., & Ibrahim, E. (2015). Strategic Marketing: Creating Competitive Advantage. New York: Oxford University Press

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