How HSBC Will Retain its Market Position - Coursework Example

? HOW HSBC WILL RETAIN ITS MARKET POSITION College: How HSBC Will Retain its Market Position Terms of Reference The is a Business Report written by an organizational analyst for HSBC Bank (UK) that is aimed at developing a strategy for the organization to retain its market position. This is to be submitted before 17th November, 2013. 2. Procedure The main purpose of this report is to identify strategies that HSBC bank can employ to regain excellent customer loyalty to survive in the competitive environment. For the purpose of this report, a SWOT analysis will be used to analyze the organizational strengths, weaknesses, opportunities and the threats. A secondary research will be conducted to obtain data from range of valid financial, statistical, government reports and sources related to the organizational performance in the market. 3. Findings 3.1. Introduction HSBC Bank (UK) is among the major multinational banks in Europe that was founded in 1986 that has enjoyed the reputation of being a self-funded organization. The bank has continued to utilize a dynamic market strategy to ensure its survival in a competitive market at a time of business recession. The organization has over 7,200 openings located in 85 countries and has won over 89 million customers across the global market and anticipates to win more in the near future. For the year ended 2012, the HSBC bank topped in the global market as the bank with the largest value of assets estimated at $2.693 trillion. The Bank continues to do well in the stock exchange market with high share value (Forbes, 2012). 3.2. SWOT analysis 3.2.1. Strengths of HSBC HSBC bank is a worldwide bank that has extended its business beyond the international boundaries. The organization has managed to expand its operations in 65 countries and financial reports indicate that the organization continues to enjoy over 85 million customers. Being a multinational corporation and an old market lender, the organization has built a good corporate name that has guaranteed the organization a continuous flow of customers. As such, the organization remains to be the strongest World Bank that has survived the severest market environment. In the year 2012, the organization attained the position of the largest world bank with an asset value of $2.693 trillion (HSBC, 2012). The fact that then the organization has a high asset value, it implies that the organization offers minimal risk of investment, an attractive feature for their customers. Consequently, the organization enjoys a high customer loyalty and more customers are expected to flow in the organization. Another Strength of HSBC emanates for its innovative investment in technology and automation of its business environment. With the advent of the new technology, the internet has become a strong business driver that organizations have successfully utilized in marketing, selling and applying customer oriented business strategies. HSBC has managed to roll out its online banking services across the world that allows customers to apply for their loans from their remote locations. This strategy has helped the organization to remain dynamic and has attracted more customers and hence higher statistics of profit generating transactions. Being the first international bank to launch the online marketing strategy, the organization has successfully enjoyed the benefits of online presence. In addition, the organization has successfully diversified its business operation to target the market more efficiently. The organization has a wide range of business operations including commercial banking, global banking and marketing, personal financial services and global private a banking. Consequently, the organization has managed to obtain a wide range of customers across the banking sector. This strategy has pushed the organization to compete more efficiently with other banking organization. The large population that the organization enjoys today corresponds to the diversity of the services that they offer in the organization. Table 1.0. UK Bank Performance 3.2.2. Weaknesses One major weakness of HSBC Bank is the development of a single brand for all its business services, a strategy that has reduced its ability to create a strong corporate image. Until recently has the organization rebranded its banking business to target its specific business environment. However, the is a strategy that has come late in the organization’s development when other banking organization had differentiated their business brand. As such, the organization has suffered loss of brand recognition which has given its competitors an upper hand in the market environment. The brand is the selling image that help organizations create a unique corporate image in their target market environment. The HSBC bank has exhibited a lot of weakness in its housing loan implementation strategy in the USA. In particular, the organization increased its bad debts in North America as more borrowers declined to repay their loans. The main reason why this has formed part of its weakness is because the organization has failed to predict and detect the deteriorating housing market environment which would have prompted the organization to reduce its bad debts. The organization's inability to detect changing market trends promises great danger for the organization. Finally, the organization has an organizational structural weakness that has cost the organization a fair portion of its revenue. The organization continues to incur high employment expenditures within the organization due to a redundant employee structure. According to the wall street journal (2012), the organization had to lay down over 27,000 staff and to close down business in 36 countries due to poor management and redundant work structure. In addition, the organization continues to spend more revenue in paying fines for rigging a key global interest rate. The organization has to set aside over $700 million each fiscal year to take care of the possible fines that have persisted during its operations. These weaknesses are costing the organization at large a large market which may be consequential during a period of economic recession. 3.2.3. Opportunities Despite the competition that exist in the contemporary banking sector, there market is promising new market trends with new investment avenues developing in numerous global markets. For instance, the Middle East business market in unexploited and the organization is bound to increase its revenues if it has successfully marketed its banking business product in this market environment. With the population of the Middle East continuing to grow, the banking sector is expected to attract more customers in the near future. If HSBC bank capitalizes in this market, it is bound to enjoy the wide range of customers from the business sector and private investors. As the profitability declines in the UK and the US, new markets are opening up in the Brazil and Canada. The evolving middle class in these countries is promising better investment markets. Coupled with the shortage on long loan lenders in these countries, the organization has an opportunity to offset the competition that has set in the UK and US especially in the business sector. If the HSBC bank successfully takes advantage of the development opportunities, the organization is expected to increase its profitability in the long term. 3.2.4. Threats The banking industry has become one of the most competitive banking industry in the recent past. The US and UK market have remained competitive and the profit margins continuously dwindle promising to reach a flat rate in the near future. Market saturation has seen the organization achieve little profits from this market environment. When the number of customers remains constant and the number of business rivals continues to increase, the investor bargaining power continues to fall as the customer bargaining power grows. The implication of this is that the return on investment continues to dwindle as banks resort to pricing strategies to compete in the market. The organization has fallen a victim of cyber crime, a trend that is escalating in the business industry. Quinn (2013) warned the banking sector regarding an intensified internet crime that is targeting the online banking customers. This problem set as soon as the HSBC bank developed their online banking services. HSBC reported to have received over 100 thousand bank attack most of which were accomplished through fishing emails. With the current penetration technology, the internet crime rate is expected to increase and become a potential business threat. Already, HSBC has spent a lot of money in developing system security to avoid potential crimes in the organization. Identity theft is another market force that seems to be growing at an enormous rate. Identity refers to situations when attackers illegally acquire personal information from the potential customers and use it maliciously to access their accounts with the motive of stealing from the person or the bank. Being a trillion dollar organization, indentity thieves have HSBC at the top list. Consequently, this is a warning signal that is already threatening the organization and strict security measures may be required to assure customers of their safety as they invest in this bank. Identity theft is a crime that threatens to suppress the customer loyalty that this bank has continuously enjoyed in the market. The internal market environment of HSBC is sending warning signals to the stability of the giant investor. Over the past few years, the organization has experienced as a series of organizational strikes that have threatened to halt the business operations for a good part of the fiscal year. As the banking industry investor implements a scheme to reduce its expenditures, the organization plans to cut over 3,000 employees as part of the wealth management sector. Dunkley (Para. 2), a reporter for The Independent, reports a possible strike after the Trade Union declared the strategy of UHSB an unacceptable “disgrace” and has garnered all the employees to partake in industrial action if the plan goes through. In the Middle East and part North Africa, HSBC employees took to the streets demanding an immediate pay rise and the bank had to respond by effecting a salary increment of 8% which was implemented in 2011. In London, over 1,500 employees demanded a pay rise claiming that they were helping the organization to become the strongest investor while receiving peanuts in return. The high rate of worker strikes promises danger in the organizational performance and worker loyalty declines during a critical economic time. 4. Conclusion HSBC has successfully deployed its business operations in a ready market by differentiating through innovation, image construction and effective international strategy. However, the organization shows weakness in its service development and organization structure. This is the main reason why the organization is likely to offer an upper hand to its business rivals. On the other hand, the organization anticipates new market opportunities as new markets open up in unexploited markets. As the organization continues to align its business strategies, it is crucial to be aware of the looming threats of cybercrime and employee disloyalty that seem to promise instability in the organization. The survival of HSBC depends on its ability to capitalize on its strengths, take advantage of the new markets and overcome its structural weakness as it continues to mitigate cybercrime and possible worker disorientation that promises destabilize the organization. 5. Recommendations The organization should win employee loyalty by; Increasing their salaries to avoid losses during the mass industrial action. Engage employees in their business strategy planning to ensure that they contribute to a strategy that is employee-sensitive. Formulate employee salary review committee to mitigate industrial strikes. To adopt an employee rewards scheme that clearly identifies the procedure for employee promotion in the organization. To reduce their expenditure on fines, effective business structures and cybercrime losses, the organization should; Expand their business scope to avoid the necessity of cutting down the number of employees. To increase their investment in online network security as they expand their online business market. To develop a quality and standards team to ensure that the organization complies with market regulations to reduce fines that come along with failing to comply with the market rules. Bibliography Chaudhri, Mustakeem (2011). HSBC Bank (UK) SWOT Analysis. Available through: < http://www.slideshare.net/hxmhxm/swot-hsb4c> Forbes, (2012), The Worlds Biggest Public Company. Available through: < http://www.forbes.com/global2000/list/> HSBC, (2012). HSBC Annual Report and Accounts. Available through: < http://www.mfsa.com.mt/pages/readfile.aspx?f=/Files/Listing%20 Authority/Annual%20Accounts/HSBC%20-%20Annual%20Report%2031.12.2012.pdf> KPMG, (2013). UK Banks: Performance Benchmarking Report. Available through: < http://www.kpmg.com/UK/en/IssuesAndInsights/ArticlesPublications /Documents/PDF/Market%20Sector/Financial%20Services/banking-performance-benchmarking-report-2012.pdf> Nixon, S., (2012). HSBC Moves Past its Weaknesses. The Wall Street Journal. The Independent, (2013). Strike Threats as 3,000 UK staff at HSBC face Cuts. Available through: < http://www.independent.co.uk/news/business/news/strike-threat-as-3000-uk-staff-at-hsbc-face-cuts-8585346.html> Quinn, N., (2013), The Future of Business: The Changing Face of Business in the 21st Century Britain. Available through: < http://www.100thoughts.hsbc.co.uk/downloads/ HSBC-future-of-business-report.pdf> Appendix 1: Group Statement of Financial Position Read More