HSBC as a Financial Service - Assignment Example

HSBC as a Financial Service Introduction HSBC is recognised as one of the largest banking as well as financial service based organisations. Headquarter of HSBC is situated in London. Branches of HSBC are located in different parts of the world amassing a large consumer segment in Asia-Pacific, the Middle East and Africa, the Americas and also in Europe. The wide spectrum of network is spread across 8,000 offices which are located in 87 countries. The bank is listed on various stock exchanges such as London, New York, Hong Kong, Paris as well as Bermuda stock exchange. They also have their shareholders located in 124 countries. They also are a provider of a large number of financial services to a large number of customers. These services include Commercial banking, Personal Financial Services, Private Banking and Global Banking and Markets (HSBC, 2010). Lloyd’s is one of the well known and trusted financial institutions. It has grown over the years to become one of the globally recognised and prominent figures in Dow Jones index and FTSE 100. It has been one of the greatest British institutions that have developed itself into the global business. The rating agencies have recognised the organisation by providing the securities high rates that shows that the firm has been performing well (Lloyd’s, 2010). Marketing of the financial services has been one of the recent phenomena even in the developed nations of the world. The financial service sector has not been subjected to the market pressure in an attempt to survive and prosper. This sector has operated in the benign market environment in most of the countries and has been managed and controlled by the state itself. Government has helped in the development of the new products as well as in the promotional activities. The strategic marketing planning helps to set direction for the medium to long term. In order to complement the strategic marketing plan it would be best for the companies to have an annual marketing plan in order to achieve the short term marketing objectives (Ennew & Waite, 2007). It is not the environment that moderates the type of planning the firm will pursue but the external performance of the firm and the internal planning performance are associated with the planning. The study will deal with the financial marketing strategies of the two companies that have been mentioned above. Description As Well As the Comparison of the Marketing Strategies Adopted By These Two Firms The main strategy of the HSBC Bank has been to build its position as the leader in the international as well as the emerging markets. It tries to pay the employees according to their performances that include market-based pay. The bank has a transparent structure that is based on the separate capitalised subsidiaries. It also takes a conservative approach to the liquidity management and has developed its business in such a way that helps to provide diversified and broad global services to its global customers. It has been recognised by the HSBC bank that since many years there has been faster growth in the developing markets than the mature economies and there has been expansion in the world trade at a greater rate. The bank focuses its strategy in delivering a superior growth and also in the earning by the development of group skills as well as heritage. The origin of the HSBC bank in Asia has a greater impact on the development of the Group which helped the bank to have long term and established presence in almost all the countries. The other strategies of the bank have been to invest in the developing as well as the developed markets and to pay more attention to those customers and the businesses that are having international presence. It has been found in the annual report of 2009 of the company that four non-financial key performance indicators has been chosen that seems to appear profitable for the success of the group in delivering the strategic advantages. The company tries to implement the recommendation of the customers with the intention that they can improve the services that are being provided to the customers (HSBC Holding plc, 2009). HSBC has shown its abilities in creating a global, recognised brand which is tailored to meet the needs of the customers. Decentralised management structure is followed by the bank in order to ensure that the local brand is responsive to their market (ISB, 2006). Lloyd’s corporate strategy has been focusing on being recognised as the leading financial services provider in the UK by the colleagues, customers as well as the shareholders. It was in the year 2009 that the bank has strengthened its strategic position by acquiring the HBOS. Therefore as to develop a high performance organisation, it tries to improve the cost efficiency and allocates its resources like capital in a more efficient manner. The company has been regularly encouraging, developing and managing its staffs in order to deliver according to their strategies (Lloyds Banking Group, 2009). Both the financial service providers have almost same types of marketing strategies as both have been based in UK market and have been facing the same challenges being in the same market. Therefore the strategies of marketing also seem to be the same. SWOT analysis of HSBC Strengths HSBC has been a multinational company and has been qualified to provide advice to other companies on areas of international business. It has a strong Global presence and has been successful in being the world’s second largest bank in terms of profit. The bank has about 140 years of experience in the Chinese market. The bank has been highly trusted by the people in China and is regarded as the old Chinese company. HSBC has also been successful in understanding the customers as well as the market of China. Weaknesses Although the brand has been a global company, it took long time to decide an integrated marketing strategy. The bank had different branches in different countries but the name have been different in most of the countries like British Bank of the Middle East, Hong Kong Bank of Canada which might have created problem for HSBC in Brand recognition. Opportunities There seems to be tremendous opportunities in the hands of the HSBC bank. Along with the emerging economies like China there have been other countries like India and Brazils that are emerging as growing consumers’ spenders and growing consumers. It has been found that most of the people didn’t even have a bank account previously, thus it is an opportunity for the bank. Threats There has been downturn in the spending of the Americans which has impacted various organisations and also global economy including HSBC. Threats from computer related sources such as virus attack is another threat for the company. It was found in the year 2004 that the company received more than 100, 000 virus attacks (HSBC Holding plc, 2009). SWOT analysis of Lloyd’s Strengths It has been part of the UK financial service group that is aptly diversified. It has also been one of the leading retail financial service providers in UK. It occupies a leading position in most of the markets in which it participates and has the leading distribution capabilities. The capital efficiency as well as the chain of securities is among the other strengths of the companies. Opportunities The key opportunities for the Lloyds lie in the encouraging sign of economic recovery. Acquisition of HBOS will position the firm for future growth. Weaknesses The economic performance for the year 2009 has been very low. They need to recover quickly from this scenario in order to rectify their position in the local as well as global market. Threats There has been change in the economic climate in both UK as well as overseas in the past 12 months that have presented the banking industries with many difficulties. The European Commission state aid has prevented Lloyd’s from paying of dividends on its ordinary shares. This has created a destabilising scenario in not only Lloyd’s as an organisation but also its consumers (Lloyds Banking Group, 2009). Changes in the Firms Marketing Strategy The changes that occurred in the Lloyds marketing strategies have been the environmental as well as the climatic changes. As the world is becoming a riskier place and new threats are emerging day to day, therefore the companies have to make their strategies in a way to cope up with the circumstances. Moreover, there has been decline in the growth of the capital market products, thus the companies have adopted innovation strategies to gain the confidence of the consumers. On top of that with the globalisation there has been greater regionalisation of the trade and the political influence. The regional insurance sectors are disrupting the traditional flow of the insurance business. Therefore, in order to cope up with these the banks are formulating strategies (Lloyds, 2000). It was found from the annual report that there have been changes in the remuneration policy of the HSBC bank. It has been successful in addressing the challenges that it had to face. For this, the company has made several strategies (HSBC Holding plc, 2009). Why Have These Marketing Strategies Been Adopted By the Firm Various marketing strategies are adopted by the firm in order to meet the challenges. There is higher risk involved in the financial sector because of the economic condition of the countries. Moreover, the strategies are made to strengthen the financial position and stay competitively ahead. It is very important for any firm to win the trust of the shareholders and to provide fair rate of return to the investors. Thus, the firm formulates strategies to strengthen the relationship with the customers and shareholders. The companies adopt strategies in order to expand its operation domestically and abroad as well as achieve its objectives. As revenues are increasingly important for the firms, the strategies are made to increase them. The Potential Benefits or Disadvantages of Marketing Strategies Adopted By the Two Firms The strategies that are adopted by HSBC and Lloyd’s have affected the financial market in gaining maximum business from different regions of operations. The strategic applications that have been adopted by these financial service providers in different regions have varied in accordance to the standard strategies developed by the headquarters of the bank. Every country of operation has different strengths, weakness, opportunity and threats. Based upon this, the banks have developed the strategies to compete in the financial market. The alterations in the marketing strategies have been strongly developed as per the political, economical, socio-cultural, technological and environmental and legal constrains of that particular country. The defensive marketing strategy was applied by HSBC when the recession was prevailing in 2008-2009. This strategy was adopted to minimise the cost and was an attempt to retain the current business. In applying this marketing strategy, HSBC has been able to retain the business and as the market grew they have adopted the market challenger strategy to develop with the potential market (Hauser, n.d.). Lloyds Banking Group was also forced during the recession period to adopt the defensive marketing strategy to retain its current business. As the global economy grew, the strategy also has changed. Due to the market challenger strategy, both the banks have reported to provide high profits in the quarters of 2008. Lloyd Banking Group and HSBC Bank have shown growth in the UK market. This strategy did not work for all the markets but turned out to be of potential benefit for the UK market (Finch & Choudhury, 2010). HSBC Bank applies the tag line of ‘The world’s local bank’. This shows the development of the various markets by localising it in that particular area. The company is trying to make it simple and less complicated by offering the services that consumers will gain from all branches of HSBC in any part of the world (HSBC Bank, 2010). According to Lloyd Banking Group, “The strategy is focused on being a more conservative, ‘through the cycle’ relationship based business”. In experimenting the marketing strategies both the banks have been benefited in different markets and also have suffered losses according to the change in business environments (Lloyd Banking Group, 2009). The market expansion strategy has been used in both the banks. Since, in the financial sectors it is difficult enough to retain consumers, thus banks go for expanding the market and developing more clients. The expansion strategy is the best suited strategy when the market is in a growing stage. The banks have been using this strategy but the financial recession had forced them to modify the strategy in marketing. Recently the global market is growing and the banks are applying the growth strategy in marketing. The marketing growth strategy provides the opportunity to meet the unmet requirements of new as well as old consumers. (Wind, 2004). Figure 1. This is the general pattern of growth mostly being followed that is illustrated in figure 1. This is done with the help of market perspective that is explained in the figure 2 below. Figure 2. (Wind, 2004). It is not only the marketing strategy that provides potential benefit to the banks in terms of more consumers and retaining the old consumers but also its effect is observed in the financial stock market. The financial stock market depicts the value and performance of the banks in the financial market. The marketing strategy of HSBC have been able to increase the equity shareholders’ funds with the constant support of the investors and trusted with the banks’ strategy. With the different kind of marketing strategy, HSBC Bank and Lloyds Banking Group have been able to develop the brand recognition in various regions. As per the research done in several markets, the strategy implementation has helped in developing positive brand recognition. The defensive strategy, the market challenger strategy and the growth strategy have provided the banks to develop and compete in the challenging marketing environment in the long run as well as in the short run. The adaptations in the strategy as per the situation analysis have led to the success of the banks. Both the banks are UK based and have been successful in the international markets by adopting different strategies as per the market needs and in recent times have gained advantages for the strategy that they have applied previously. The effects are not only seen in the short run but it is also evident in the long run. The strategies applied by the banks have provided a positive benefit to them and its effects can be observed in the financial performance. There has been growth in the financial aspects of the companies with increasing number of consumers. There is huge competition between these banks and they have been benefited as well as lost in certain markets through the application of the marketing strategies. Conclusion There is stiff competition in the international market and in order to cope up with the competition it is important for the firms to formulate their strategies with the intention that they can stay competitively ahead. From the above sections, it is evident that circumstance makes it important for the companies to adopt different strategies. The companies have to choose the strategies as per the market in which they are operating else it will yield a negative impact on the organisation. The best way to think of making the strategies is to conduct the SWOT analysis as well as the PESTEL analysis which will help the companies to identify the key areas that they need to improve and will also help them overcome the challenges. The two business organisations HSBC and Lloyd’s have faced various difficult circumstances over the years like the recession. The two financial service providers have been able to withstand these hard times by keeping faith on their marketing strategies to reach out to a large spectrum of consumers. Therefore marketing strategies are an extremely significant component of any organisation in their endeavour to maintain a position or to stay competitive in the global market. References Brews, P. J. and Hunt, M. R. (1999). “Learning To Plan And Planning To Learn: Resolving The Planning School/Learning School Debate”, Strategic Management Journal, vol.20, pp.889-913. Ennew, C. & Waite, N., 2007. Financial Services Marketing: An International Guide to Principles and Practice. Butterworth-Heinemann. Finch, G. & Choudhury, A., 2010. Lloyds, HSBC Report Quarterly Profits: How Much, They Won’t Say. Bloomberg Business week. [Online] Available at: http://www.businessweek.com/news/2010-05-11/lloyds-hsbc-report-quarterly-profits-how-much-they-won-t-say.html [Accessed November 18, 2010]. HSBC, 2010. About HSBC. 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[Online] Available at: http://marketing.wharton.upenn.edu/documents/research/0501_Marketing_as_an_Engine_of.pdf [Accessed November 18, 2010]. Bibliography Danca, A. C., 1998. SWOT Analysis. What is SWOT Analysis? [Online] Available at: http://www.stfrancis.edu/content/ba/ghkickul/stuwebs/btopics/works/swot.htm [Accessed November 18, 2010]. Read More