As one of the world’s largest banking and financial service organizations, HSBC’s mission according to their 2012 Annual Review states, “We aim to be where the economic growth is, connecting customers to opportunities, enabling businesses to thrive and economies to prosper, and ultimately helping people to fulfill their hopes and realize their ambitions.”
HSBC Holdings was established in 1991 by The Hongkong and Shanghai Banking Corporation to perform as a new group holding company. In 2012, Forbes named HSBC holdings the world’s third largest publicly held bank and sixth largest public company. Based in London, the global banking and financial services organization had over 102 billion sales in 2012 providing services to 58 million customers covering 87 countries and territories. The bank operates in Hong Kong, Europe, Rest of Asia-Pacific, the Middle East, North America and Latin America. Their services are identified into four global businesses, Retail Banking and Wealth Management, Commercial Banking, Global Banking and Markets and Global Private Banking. As of December 31 2012, HSBC market capitalization is $194 billion up from $136 in 2011.
According to HSBC Holding plc’s Annual Review 2012, shares in HSBC holdings are held by about 220,000 shareholders in 129 countries and territories. HSBC is listed on the London, Hong Kong, New York, Paris and Bermuda Stock exchanges. In their 2012 Annual Review, HSBC defines their strategy as an “international network connecting faster-growing and developing markets.” While also developing Wealth Management Services and investing in Retail Banking only in markets where they will reap a profitable scale. HSBC operates with a global brand strategy with efforts with its popular marketing tagline “the world’s local bank.” They have recently shifted gears to know become the “world’s leading international bank.” HSBC is concentrating on growth markets as well as emerging markets where wealth is being created.
The U.K. telegraph interviews CEO Stuart Gulliver’s proposition of a HSBC transformation. Gulliver argues during January 2011, the firm was run as a series of countries, each head in charge of their own bank causing a disconnect, difficulty to control and mismanaged during this time. Since then, his plans have shifted to not just focus on emerging markets but to have a strong stance in developing and most importantly developed countries. Gulliver states “What I don’t want to do is position it purely to be an emerging markets business. There will always be a substantial trade and capital flow between the developed world and the emerging markets, and to capture that you have to be in the developed world.”
Essentially, HSBC states in their Annual Review of 2012 that their strategy is to continue to become the world’s leading international bank. To execute their vision, the global bank relies on three areas to evolve, 1) Growing HSBC, 2) Simplifying HSBC and 3) Restructuring HSBC. Growing HSBC will be achieved by placing HSBC in a proper growth position. This means delegating capital across their home and priority growth markets, accessing emerging markets while covering all major trade corridors. To attain this, they plan to establish closer communication and coordination among their four businesses to maximize revenue. Secondly, simplifying HSBC, will allow the bank to be easier to control and manage. To do this, they have plans to eliminate 47 ineffective transactions as well as improving their organizational efficiency. Lastly, restructuring HSBC includes adapting to the changing environment specifically reshaping their U.S. operations to focus primarily on core activities such as, servicing international businesses, global private banking and improving operational standards.
The banking industry is a complex one that HSBC has done a good job of entering and dominating. The political, economic, and legal atmospheres are key influences on any bank’s success.
Starting with politics, according to SmartMoney, capitalist economies do not mix politics and banking. However, with the recent recession, the government has been increasingly involved in the regulation of financial industries “whereas once investors analyzed earnings, management and profit margins [and] now all eyes are focused on the back scratching and insider dealings in Washington, D.C., where politicians who don t know much about banking are turning taxpayers into involuntary investors.” The economic atmosphere is extremely important to the banking industry’s welfare in terms of the circulation of money by spending and investing. There will always be a need for banking however, on both a personal and institutional scale. HSBC successfully perpetuated and managed the market being the second largest bank in the world according to Global Finance Magazine. Lastly, the legal pressures coming from federal authorities have also increased with the recession. We can see such changes taking place in new laws like the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act which “restricts the banks’ own trading as well as to increase transparency of operations.” The 2012 scandal within HSBC’s management and lending to risky parties blew up in Washington as the Senate Banking Committee pressed for heavy fines and even jail time for the HSBC officials that were involved in the scandal.
Politically speaking, in most recent years the lines between financial institutions and the government have become extremely blurred. Just referencing the U.S. bail out of the banks in the 2008 financial crisis ignited by housing market crash due to inappropriate default loans. Although the banks needed hand holding during this time of crisis to prevent a detrimental financial meltdown, to some extent banks should have harsher penalties and policies with regard to their illicit practices.
Requiring a bank to pay a fee is like a slap on the wrist. According to the New York Times article, “Realities Behind Prosecuting Big Banks,” the harsh realization that most banks in this industry are “too big to fail” and “too big to jail.” Ultimately, the notion is that these financial institutions have become so monumental that pressing criminal charges can deem economically destabilizing worldwide.
The Nation’s attorney general, Mr. Holder told the Senate Judiciary Committee, “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute — if we do bring a criminal charge — it will have a negative impact on the national economy, perhaps even the world economy.” This article gives perspective into how the government determines bank penalties, being on the basis of severity and nature of offense. Would prosecuting jail time and harsher charges do more harm then good?
In terms of competition and survival, the banking market is very saturated with various niche banks, community banks, and global banks that cater to every financial need. Because of the heavy density, banks are very service based. The consumer satisfaction is key to the bank’s success. MBA Lectures argues that the main drivers of success in this industry include technology like ATMs, quality of service, brand recognition, and size of the bank since larger banks tend to have more physical presence improving convenience and product awareness. Because the industry is already very much set up with few new entrants and products, banking can be seen as in the maturity stage of the business life cycle. In terms of supplier power, the Federal Reserve Bank is the only supplier for the banking industry as they control rates and money supply. The buyers are the everyday person with a banking need which applies to almost everyone, making consumer power very high as competition is extremely fierce. Because starting a bank requires enormous capital, the supplier would be the only identifiable entity that has enough power to constitute a threat of backward integration.
HSBC’s competitors would include other enormous global banks which Yahoo Finance identifies as Barclays, Citigroup, and the Royal Bank of Scotland. These banks do not match up to HSBC’s assets but they do hold more market share depending on geographic location. HSBC, like much of its competitors, offers products to small and large sized consumers for financing, investing, online services, transaction banking, securities services, and trading. According to financial analyst, Keith Bowman, HSBC has fared far better than the Royal Bank of Scotland (RBS) in terms of surviving the credit crisis. RBS greatly depends on the government for assistance; as much as 80% of the bank is owned by the government as well as having 95% of its business in the United Kingdom while HSBC’s United Kingdom business only accounts for 55% of its total business. American banks Citigroup offers more products than HSBC but cannot boast the widespread coverage of HSBC. The fact that Citigroup’s business is primarily in the United States made it extremely vulnerable and threatened by the housing market crash. However, Citigroup has an impressive online banking sector that has proved itself successful and popular amongst consumers. Barclays, also smaller than HSBC, focuses on corporate and investment banking, wealth and investment management, retail and business banking. Barclays has also been in a number of scandals dating back to the 1980s.
HSBC has proven to dominate the global setting of financial services. The strong brand name, reputation for great service, enormous physical presence and wealth are all reasons that HSBC thrives and are seen as strengths of the bank. Like every other company, there is always room for improvement. Underlining the bank’s recent scandal, HSBC can better its monitoring and tracking system to prevent faulty loans and also look at Citigroup’s online superior presence to mimic it and better their own services on the web. Projecting into the future, the threats of the banking industry include mounting government pressure after failure to responsibly manage the capital as seen in HSBC’s recent scandal as well as the new trend in virtual banks. Increasing government regulation can severely impact bank image and success as well as virtual banks that offer lower cost service because they do not pay overhead cost. Opportunities include capitalizing on society’s growing need for technologically advanced banking services by adjusting marketing platforms and online banking features.
HSBC is one of the largest international emerging markets bank and financial services organizations, which has decided to launch concrete strategies to attain “The World’s Local Bank” in the financial industry. Accurately, the financial flows and economic development are the two long-term trends of HSBC’s strategy is aligned with trends that will shape the global economy. The network of businesses connecting the world and the wealth management and retail with local scale are the two parts of the strategy that based on theses long-term trends and their competitive position. Implementing HSBC’s strategy has across relies on three area. The first area is capital deployment that includes five filters which are evaluation criteria, namely international connectivity, economic development, profitability, cost efficiency and liquidity. The second is cost efficiency that launches four programs which are implement consistent business models, re-engineer operational recesses, streamline IT, and re-engineer global functions. The last area is growth, “Our global positioning is to be the world’s leading international bank”, said by HSBC’s group head of advertising and marketing Andrea Newman. Overall, the HSBC’s strategy focus on markets where wealth is being created and emphasis on retail banking and focus developed markets businesses on international connectivity.
Sources:
Bowman, Keith. “HSBC and RBS”. Hargreaves Lansdown. May 11, 2012. Online. April 3, 2013
“Direct Competitor Comparison”. Yahoo Finance. April 1 2013. Online. April 1 2013.
http://finance.yahoo.com/q/co?s=HBC+Competitors
Hoenig, Jeffrey. “Why Politics and Banking are a Bad Mix.” SmartMoney.com. January 26 2009.
Online. April 1 2013.
http://www.smartmoney.com/invest/markets/why-politics-and-banking-are-a-bad-
mix/
“Key Success Factors in the Banking Industry”. MBA Lectures. Online. September 28
2010.
http://mba-lectures.com/management/strategic-management/819/key-success
factors-of-banking-industry.html
“The Banking Industry In 2012”. Investopedia. January 27 2012. Online. April 1 2013.
http://www.investopedia.com/financial-edge/0112/the-banking-industry-in
2012.aspx
“World’s 50 Biggest Banks”. Global Finance Magazine. August 27, 2012. Online. April 1 2013.
http://www.gfmag.com/tools/best-banks/11986-worlds-50-biggest-banks
-2012.html#axzz2PDsFjIdD
“DealBook.” DealBook Realities Behind Prosecuting Big Banks Comments. N.p., n.d. Web. 03 Apr. 2013.
DeCarlo, Scott. “The World’s Biggest Public Companies.” Forbes. Forbes Magazine, 18 Apr. 2012. Web. 29 Mar. 2013.
“Financial Results.” HSBC Holdings Plc –. HSBC, Mar. 2012. Web. 29 Mar. 2013.
“Gulliver’s Travels and the Transformation of HSBC.” The Telegraph. Telegraph Media Group, 3 Mar. 2012. Web. 29 Mar. 2013.
HSBC. HSBC Holdings Plc Annual Report and Accounts 2012. Rep. London: HSBC, 2012. Print.
HSBC. HSBC Holdings Plc Annual Review 2012. Rep. London: HSBC, 2012. Print.
“Our Strategy” HSBC Holdings plc, HSBC. April, 2013. Web. 3 April, 2013.
http://www.hsbc.com/about-hsbc/our-strategy
“HSBC: The World’s Local Bank No More” Rayana Pandey, Global. Marketing-interactive.com,Web. February 07, 2012. Web. 3 Apr 2013.
http://www.marketing-interactive.com/news/30818