The Hong Kong Shanghai Banking Corporation
Table of contents
The Hong Kong Shanghai Banking Corporation (HSBC) was established in 1865 and is one of the largest banking and financial service institutions in the world with a network of nearly 10,000 offices globally across five core offerings; Personal Financial Services, Consumer Finance, Commercial Banking, Corporate Investment Banking and Markets, Private Banking. HSBC is very much a growth-orientated company with this being evidenced by initiatives such as “Managing for Value” (1988) and the more recent “Managing for Growth” (2003).
This paper explores some of the ways in which HSBC have attempted to enhance their brand equity through the implementation of a growth strategy. HSBC is an extremely large company with multi-dimensional internal structures and visions. This paper addresses the company at the macro level and pays particular attention to the global essence of the growth strategies. Whilst full market and competitor analysis for this subject would be both useful and interesting it has not been possible within the confines of this paper.
As a result, only the tools and information sources that provide direct insights into the company’s approach have been utilized. The paper is constructed through an external, then internal analysis of the company’s operations with recommendations for future strategy provided at the end of each section.
The Requirement for Growth in the Financial Services Industry
Before looking at the strategies HSBC has adopted in order to achieve growth in the banking and financial services industries it is perhaps worthwhile to start by taking a look at industry and market as a whole.
In recent years society has changed dramatically and the needs and motivations of customers have changed alongside this. As life has become increasingly fast passed consumers have started to demand more from their service providers, expecting convenience, forever improving customer experience and high value from their transactions, (Smith, Wheeler, 2007, p7). One major trend concerns the increase on the internet to conduct personal business and this has led to more and more banks switching from “bricks and mortar” establishments to online operations.
Through the availability of the Internet, customers have been able to access more services from more banks and this has forced the major players to redesign their value chains. A diagram demonstrating the common factors driving the value chains in the banking industry today is represented in Appendix One. In order to be successful in the current environment banks are being required to develop strategic positions which are defined in relation to the both the competitors and the marketplace and attract customers through product differentiation, pricing and marketing.
Let’s now turn to HSBC in question and address which areas of their value chain they have paid particular attention to.
Major strategies adopted by HSBC
HSBC’s corporate strategy over the past five years has cantered around the “Managing For Growth” initiative that was launched at the end of 2003. “Managing for Growth” is a strategic plan that acted as a blueprint for their targeted expansion and development.
Through the implementation of the deliverables named within the document HSBC ultimately aimed to attain a more competitive return on earnings (ROE) through “achieving sustainable advantage and value from a global business”. According to a renowned Strategic Management scholar, David Aaker, there are four main ways in which companies can focus their growth strategy; Grow in Existing Product Markets, Product Development, Market Development or Diversification Involving New Products and New Markets (Aaker, 2001, p213).
The Managing for Growth strategy is two pronged and incorporates both new markets and present markets. One major objective of Managing for Growth focuses on geographical expansion; developing emerging markets by duplicating areas of their current operation. Whilst doing this however, HSBC intend to make minor adaptive changes in order to maintain their brand image of “the World’s Local Bank”.
Alongside this HSBC have also identified a strategy which focuses on the existing product market, identifying three potential growth avenues which may provide a base upon which they can build and exploit momentum; “When looking at the developed markets business, focus is to build particularly on those parts of the customer base which have international connectivity for which our “right to win” is particularly meaningful”. These “right to win” areas are split into three areas:
Businesses with international customers where emerging markets connectivity is critical,
Businesses with local customers where efficiency can be achieved through global scale,
Products where global scale is critical to effectiveness in terms of efficiency, expertise and brand.
Whilst it is not possible to thoroughly assess each of these strategies within the scope of this document, it is clear that they all have one underlying trend; HSBC are conceiving and implementing a position for growth that heavily involves a global strategy.
For this reason I will focus HSBC’s globalisation strategy for the remainder of this paper and will consider some of the strategies they have adopted, both internally and externally, in order to deliver their aspirations to be the “World’s Local Bank”.
External Analysis: Customer
When one is introduced to the concept of a global company the general assumption is that the institution has implemented one “global brand” which is identical throughout the countries within which it has market presence.
However, this is not strictly true and on closer examination many global companies such as McDonalds, KFC, Disney and Nike have actually tailored offerings to suit the needs and motivations of the local customers. HSBC is no different. In order to deliver a global strategy, HSBC has segmented their customer by ethnicity. With the strapline “The World’s Local Bank” the company’s offerings are aimed at serving local groups of customers around the world. One example of this concerns the Asian American group of customers.
HSBC have a great deal of brand equity with many of these individuals and has attempted to optimize on this by introducing tailored offerings to meet these customer’s requirements abroad. Whilst the product is essentially the same they focus on additional, culturally important elements such as fen Shui, superstition, and signage. Through taking this approach HSBC have able to generate global business with a high degree of similarity, thus achieving the benefits of economies of scale, cross-market exposure, increased brand awareness, and the ability to dodge trade barriers.
In addition to this, however, they have been able to appeal to the motivations and unmet needs of the customer at a more local level. Their “World’s Local Bank” strategy is clearly aimed at both demonstrating to their customers their commitment to meeting their needs as well as representing the company’s internal capability to actually deliver on this. They are not the only bank who are pursing this strategy however, rivals such as RBS, Citibank, Barclays and Bank of America are pursuing similar strategies.