HSBC Group HSBC Bank SWOT HSBC Bank SWOT HSBC is one of the largest organizations providing a variety of banking and financial services all over the world. HSBC s has got a global network of more than 10 ,000 branches /offices in about 83 countries and territories that are dispersed in Europe , the Asia- Pacific region , the Americas , the Middle East and Africa A SWOT analysis, as the name implies, is an overview of the strengths weaknesses, opportunities threats of any organization. In case of Hong Kong Shanghai Banking Corporation, a brief SWOT analysis is as follows Strengths The bank is well capitalized and this has enabled it to perform relatively well against other banks in recent economic events. The level of capitalization means that, going forward, the bank is unlikely to need to borrow from the UK government: this will enable it to retain more autonomy.
The bank has a strong presence in emerging markets, putting it in a good position to take advantage of future growth in those economies. The bank’s global presence in Europe, Asia and South America helps to spread risk and offers significant economies of scale. Despite rebranding relatively recently (1999), the HSBC brand has become well-established and is considered particularly valuable within the industry. HSBC is having a continuous positive trend towards increasing revenues and after-tax profit. This has only been possible due to its enhanced customer relationship all over the world. They promote a corporate culture of achieving success in their organization. Success allows them to invest in new financial products and services for the customers. It enables them to pay more dividends hence benefiting and actually winning shareholders investors for long-term relationship. Their culture has contributed as a major strength towards their growth success. International Finance Since HSBC is a multinational company itself, it is well-qualified to advise other companies on aspects of international business. With offices around the world, for the cosmopolitan client, HSBC often cannot be beaten in this area. HSBC knows how to succeed in M&A and organic and effective growth-- it was mostly an Asian bank until it took over a UK bank in 1992 and now has become the worlds second-largest bank by profit. China HSBC is the "Hong Kong Shanghai Banking Corporation" and it has 140 years of experience in China. Since China is the place to be nowadays for businesses and banks, HSBC benefits for being both an old Chinese company and trusted by the Chinese people. The best news for HSBC is that as other companies grow in China, it does, too, because it gains new clients and new global opportunities with each passing day. HSBC has the largest network of any foreign bank in China and deeply understands the Chinese market and customer. In a world that is increasingly going Chinas way, this is quite a boon to HSBC. Listed in London HSBC is primarily listed on the London and Hong Kong stock exchanges, which saves the company much grief in complying with new American Sarbanes-Oxley laws. Many companies have chosen to list on foreign exchanges other than America because of the expensive new regulations. Record profits Last year, HSBC experienced the most profits ever for a UK high street bank, with profits of £11.5bn ($20.97bn) for the whole year.
HSBC strengths are usually easy to identify, through your continuing discussions with customers and suppliers. Hsbc records (eg sales) will also help to suggest areas where you are particularly strong (eg rising sales for a particular product). Sound finances give Hsbc advantages over its competitors. Important factors include: Positive cashflow. Growing turnover and profitability. Skilled financial management, good credit control and few bad debts. A strong balance sheet. Access to extensive credit, a strong credit rating, and a good relationship with the bank and other sources of finance. Marketing is the key to HSBC success. For example, Hsbc business may enjoy: Market leadership in a profitable niche. A good reputation and a strong brand name. An established customer base. A strong product range. Effective research and development, use of design and innovation. Skilled sales personal. Thorough after-sales service. Protected intellectual property (e.g. registered designs, patented products). Management and personnel skills & systems may provide equally important underpinnings for success. This includes factors such as: Management strength in depth. The ability to make quick decisions. Skilled employees, successful recruitment, and effective training and development. Good motivation and morale. Efficient administration. Strengths in Hsbc banking may include the right premises and E banking, and good sources of corporate clients or loans. Hsbc may benefit from: Modern, low-cost product facilities (ATM, e banking etc). Spare processing capacity. A good location. Effective projects and good relationships with corporate clients. Be aware that strengths are not always what they seem. Strengths may also be weaknesses (for example, market banking leaders are often complacent and bureaucratic) and often imply threats (for example, your star sales personal may be a strength - until he resigns).
Weaknesses HSBC associates itself strongly with investment in the small business sector, but the current economic situation has led to increased risks, potentially compromising the activity levels in this area of the operation. The bank was involved with sub-prime markets in the US and has had to write off large figures lent to high-risk borrowers. Despite falls in the UK interest rate, HSBC has increased its mortgage rates. This may be perceived negatively by borrowers and potential borrowers, adds pressure to an already depressed housing market and could ultimately lead to more defaulting as borrowers struggle with higher repayments. A redundancy program announced recently may affect morale among staff, leading to decreased production and loyalty. HSBC’s branding emphasizes its global presence, and this may be seen negatively by some customers in its implication of homogenization and lack of personalization. Along with the strengths, HSBC has got some weaknesses too. The major weakness that is evident to even a lay man s eye is that they have a very little foot print and hence despite having operations in several countries , it has less exposure to the much larger and potentially profitable market which is there and already being exploited by other Banking Financial organizations , especially in Asian region Branding While it is certainly a global company, HSBC came late to the game on deciding to perform an integrated marketing strategy and capitalize on its global brand. Because it had set up so many different banks in different countries at different times over a hundred year period, it set them up under different names-- Hong Kong Bank of Canada, British Bank of the Middle East, HSBC Banco Roberts. Not even all of these banks, prior to 1998, carried the HSBC logo. In 1998, they were all branded together, but the previous lack of branding and the name changes may have hurt HSBC in brand recognition. Customers may have thought that HSBC was taking over their local bank and not realized that HSBC had already been serving them for decades. In any case, the re-branding was an overdue move that should have occurred before 1998. Record profits ending As is usually the case, record profits can only last so long. HSBC announced in December 2006 that it was doing just as well as last year, but not as well in revenues. It announced that each year, it’s bad debt rises. Other banks shares fell as well on the news.
HSBC weaknesses are often known but ignored. A SWOT analysis should be the starting point for tackling underperformance in Hsbc business. Poor financial management may result in situations where: Not enough funds are available for investment in new plant or product development. All available security, including personal assets and guarantees, is already pledged for existing borrowings. Poor credit control leads to unpredictable cash flow. Lack of marketing focus may lead to: Unresponsive attitudes to customer requirements. A limited or outdated product range. Complacency and a failure to innovate. Over-reliance on a few customers. Management and personnel weaknesses are often hard to recognize, except with hindsight. Typical examples are: Failure to delegate and train successors. Expertise and control locked up in a few key personnel. Inability to take outside advice. High staff turnover. Inefficient products, premises can undermine any business, however hard people work. Typical problems include: Poor location and shabby premises. Outdated equipment, high cost products and low productivity. Long leases tying the business to unsuitable premises or equipment. Inefficient processes. Opportunities HSBC’s high level of capitalization places it in a strong position to acquire assets Banks finding trading conditions particularly difficult at present may be available at low cost HSBC also has adequate capital to purchase stronger banks such as Bank Economy in Indonesia, in which it has purchased a stake to continue its Asian expansion despite challenging economic times. HSBC’s generally strong position presents the opportunity to outperform competitors during the economic downturn and to build a reputation for being one of the safer banks for depositors, helping to increase resources for lending.
Negative press coverage of competitors such as HBOS may encourage customers to choose HSBC instead. The HSBC has got a lot of opportunities in the South East Asian region especially in Pakistan, India and Bangladesh. Since India has been pacing up its economic growth and development at a positive rate and far much better rate, therefore HSBC has already started making preparations for increasing its foothold there. Recently HSBC announced the acquisition of 73 .21 holding in an Indian brokerage house IL FS Investment Limited The Middle East Other banks are running scared of this region. However, HSBC has run its regional business locally and been rewarded for its efforts with numerous awards and honors for the Middle East market. HSBC is a trusted name there, and the company has taken advantage of Iraqs new democracy by creating a presence in the country. HSBC is the largest international bank in the Middle East. Emerging economies In addition to the growing Chinese middle class, Brazilians and Indians are beginning to emerge as growing consumers, and therefore growing consumer spenders. Some denizens of these countries previously did not even own a bank account, but companies like HSBC are poised to move in and take advantage of the growing middle class in these areas. In places like Argentina and Turkey, HSBC experienced pre-tax profits of 50% last year. This is where it is growing the most. By investing in these countries, HSBC can offset problems it may have as spending in the US and UK declines. External changes provide opportunities that well-managed HSBC Banks can turn to their advantage. Changes involving organizations and individuals which directly affect Hsbc banks may open up completely new possibilities. For example: Deterioration in a competitors performance, or the insolvency of a competitor. Improved access to potential new customers and markets (e.g. overseas). Increased sales to existing customers, or new leads gained through them. The development of new distribution channels (e.g. the internet). Improved supply arrangements, such as just-in-time supply or outsourcing non-core activities. The opportunity to take on a key employee from a competitor. The introduction of financial backers who are keen to fund expansion. The broader business environment may shift in Hsbc favor. This may be caused by: Political, legislative or regulatory change. For example, a change in legislation that requires customers to pay more processing fee. Economic trends.
For example, falling interest rates reducing the cost of capital. Social developments. For example, demographic changes or changing consumer needs leading to an increase in demand for Hsbc products like E banking. New technology. For example, new ATMs, processes and information technology. Threats Trust in banks has decreased due to financial losses suffered by investors, who may be more inclined to invest elsewhere. Financial losses affecting banks and investors on a global scale have resulted in less credit being available to customers. In the UK this is coupled with increases in living costs resulting in less money being saved. The falling property market has created a rise in numbers of homeowners with negative equity. If a property is worth less than was borrowed to finance its purchase, there is little likelihood that the bank will recoup all its losses if owners default. Claims have been made that HSBC has understated losses resulting from US sub-prime markets, and this could undermine confidence in the bank. One threat that is continuously being faced by HSBC is the regular series of virus attacks on its system i.e. 10 on a daily average Another threat to HSBC is Royal Bank of Scotland (RBS) which operates a multi-brand strategy as opposed to HSBC operating a single-brand strategy . This allows the company to appeal to many different segments of the market consequently taking away the share from HSBC in regions where it is confronted by RBS. Downturn in American spending As interest rates rise and the housing boom ends, Americans are predicted to rely less on consumer credit and more on their saving skills to get by. The drop in American spending will be bad for the global economy as a whole, and HSBC will certainly be affected. In 2005, HSBC pretax profits rose 5% to $10.64bn (£6bn) for the first six months of the year, largely on the rise in consumer finance for growing consumer spending. Employees striking Last year, British employees held a strike involving 1,500 workers at HSBC branches in London. At its annual meeting, striking workers stood outside, handing out bags of nuts and saying that they are paid "peanuts" while HSBC experiences record profits. Strikes such as this,
especially in union-conscious Europe, are bad for image reasons and HSBC needs to take action to ensure that its workers are happy just as its customers are. Email viruses Last year, HSBC Groups CEO announced that HSBC received tens of thousands of email viruses a day and must spend great amounts of money to prevent these from causing system wide damage. As most banking is done on computers, even one virus could cripple HSBC. On their worst day in 2004, the bank received 100,000 attacks. Identity theft With a trillion dollars in managed assets, taking over HSBC is a crackers dream. HSBC has to remain on the front lines of security and protect its customers, at the same time reassuring them that online banking is safe. In August 2006, HSBC was accused, despite its claimed airtight security; of having left its online customers open to a security glitch for two years without fixing. Researchers at Cambridge University claimed that any HSBC account could be broken into within nine attempts. Threats can be minor or could possibly destroy the banking business. Changes involving organizations and individuals that directly affect your business can have far-reaching effects. For example: Improved competitive products or the emergence of new competitors. Loss of a significant customer. Creeping over-reliance on one distributor or group of distributors. Failure of suppliers to meet quality requirements. Price rises from inflation. Key personnel leaving, perhaps with trade secrets. Lenders reducing credit lines or increasing charges. A rent review threatening to increase costs, or the expiry of a lease. Legal action (e.g. being sued by a customer). The broader business environment may change to your disadvantage. This may be the result of: Political, legislative or regulatory change. For example, new regulation increasing Hsbc costs or requiring product redesign. Economic trends. For example, lower exchange rates reducing your income from overseas. Social developments. For example, consumer demands for environmentally-friendly products. New technology. For example, technology that outdates Hsbc products services or gives competitors an advantage.
The results of HSBC Bank SWOT analysis - and the action needed - will be different for every banking business. Capitalize on opportunities that play to Hsbc’s strengths. Opportunities that match Hsbc strengths may prompt banks to follow a strategy of aggressive expansion. The SWOT analysis may also suggest other strategic options. For example: Moving away from areas of significant threat to more promising opportunities. Focusing on turning around weaknesses in areas of significant opportunity. Taking defensive measures in areas of threat where Hsbc banks are weak. Address Hsbc weaknesses. Decide which weaknesses need to be addressed first. Other weaknesses must be acknowledged and respected until time and resources allow a solution. Some weaknesses can be turned into strengths or opportunities. For example, it might be possible to turn a shortage of production capacity into rareness value for your product. Some weaknesses have a clear solution.
For example, financial weakness might be solved by raising further funds and management shortcomings by recruiting new personnel. Some weaknesses will take time and money to address. For example, Hsbc may need to start a program of improvements through training, or quality management. Protect Hsbc against threats. For example: Build relationships with suppliers and customers. Promote good employee relations. Make sure you have clear and reasonable contracts with suppliers, customers and employees. Take out insurance cover against obvious potential disasters. Draw up realistic contingency plans to cope with possible crises. Introduce the right types of service contract for key personnel. Invest in legal protection for your intellectual property. Take advantage of low fixed-interest rates to move your overdraft to long-term loans. Successful banks focus on capturing market niches and creating barriers to entry to reduce possible competition.