A Presentation By : Group 8

About HSBCThe HSBC Group is named after its founding

member, The Hongkong and Shanghai Banking Corporation Limited, which was established in 1865 to finance the growing trade between China and Europe

Headquarter in London HSBC is one of the largest banking and

financial services organisations in the world. Around 8,500 offices in 86 countries and

territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa.

Question No.1Analyze the external environment of HSBC

and identify the emerging opportunities and threats that will affect the future investment in the UK financial company.

UK Banking industry It employs 0.5million people Banks and financial services contribute £70bn to the UK’s

national output (6.8% of GDP) Banks and financial services provide 25% of total

corporation tax (£8bn) to the UK Gov The main retail banks provide over 125m accounts, clear

7bn transactions a year and facilitate 2.3bn cash withdrawals per year from its network of over 30,000 free ATMs

Banks provide banking services to 95% of the UKs population

The value of foreign exchange business passed through London every day is £560bn ($1 trillion)

SWOT Analysis

Strengths Global companyMulti-domestic strategyBrand NameAbility to successfully grow by mergers and

acquisitionHexagonLarge client baseLoyalty Record profits : most profits ever for a UK high

street bankInternational finance

WeaknessCommunicationBrandingGreater dependence on Less developed/

Emerging markets Size

OpportunitiesSustainability related businessProviding loans for environmental projectsMore diversified global financial services

companyGreater diversification into equity products

which is currently being pursued via HSBC Merrill Lynch

Increase presence in insurance and card products.

Private Banking

OpportunitiesOnline /e-bankingVenture fundingPension management applications

ThreatsEmployees strikingEmail virusesIdentity Theft

Question No.2Critically evaluate the current business

portfolio of HSBC and advise the company on ways to expand its financial service earnings to serve other market segments.

BCG – MATRIX (HSBC)

PFS

MarketGrowth Rate

High

Low

Relative Market ShareHigh Low

CIBM

Rest Of

Asia

Private

Latin America

North

America

Commerci

al

Europe

Hong

Kong

Question Mark

DogCash Cow

Personal Financial Services

PFSTargets individual customers including those

who are self employed.29 million customers worldwide.Services include current cheque, savings

accounts, home finance, credit card, financial planning and investment services.

PFSPFS has been categorized in the star category with

high growth potential and high market share.HSBC should invest more in this service to maintain

high market share as the market is still growing.This investment should be made as follows:- In Asia, because only 5% of their revenues currently

come from PFS signaling growth potential. Also, Asia is a market of moderate to high growth.

- Investment should also be made in Europe, outside UK because the current share is low at 21% but the market is relatively stable and mature.

PFS- Latin America and USA should not be pushed

for this service given the political economy uncertainty in Latin America and the low growth potential of the US market in this area.

- When the political scenario stabilizes, Latin America should also be looked at for this service.

Commercial Banking

Commercial BankingIt covers smaller commercial relationships.It extends the normal services by extending

documentary credit, insured export finance, leasing finance, factoring payments, cash services etc.

1.8 million customers worldwide.HSBC’s traditional strength.

Commercial BankingCategorized in the cash cow category in the

BCG matrix.Characterized by relatively lower growth rate

but high market share.The focus should be on maintaining overall

market share in this category.This will enable the generation of cash to

fund other services in the star or the question mark category.

Commercial BankingThe strategy for the bank for this sector should

be as follows:- They should concentrate on maintaining

market share in Europe and Hong Kong. The growth in these markets has stabilized and they need to operate to generate surplus cash from operations.

- They should invest the surplus cash to develop the Asian market to increase share of revenues from commercial banking.

- They can fund other services from the income in this sector.

Corporate Investment Banking & Markets

CIBMEncompasses a variety of businesses and

offerings.A small customer base of 12000 international

corporations.Includes general banking products as well as

trade banking products, such as securities, debt and equity issuer services, stock lending facilities. It also includes investment banking, treasury and capital market services.

HSBC has ambitious plans for this segment.

CIBMIt is categorized as a question mark in the

BCG matrix.This implies that the service has a high

growth rate but relatively low market share.HSBC needs to be bullish on this segment

and make investments to increase market share to move it to the star category.

It is an area of immense untapped opportunity.

CIBMThe strategy for HSBC bank should be as

follows:- A large chunk of revenues from the rest of

Asia comes from CIBM. But given the growing nature of the Chinese and other economies in the area, this region is a source of demand.

- Europe and Hong Kong, even though are relatively mature markets, the penetration of these services is low. The bank needs to market and increase the presence in these parts.

Private Banking

Private BankingServices to HNI’s.Four business: HSBC Republic, HSBC

Guyzeller, CCF Private Banking and HSBC Trinkhaus & Burkhardt.

Currently struggles in the area of private banking.

Private BankingThis service lies in the question mark category

and shows growth potential but has extremely low market share.

The company could consider developing this service in certain markets.

The strategy to push this service could be done for the Asian markets which show growth potential and where these services are non-existent.

The European and the Hong Kong market may also be explored.

But this service should be given lower precedence than CIBM.

Question No.3The current strategic direction of HSBC is to

become world’s leading financial services organisation while balancing earnings from stable , mature economies and those in more volatile emerging markets. Comment on the organization’s ‘Managing for Value’ strategy and its components as a strategic initiative for achieving the above goal.

Excerpts from 2003 annual report“One objective of “Managing for Value” was to establish HSBC and our hexagon symbol as a global consumer brand and to make it synonymous with integrity, trust and excellent customer service.Building our brand has been one of the most conspicuous successes of the plan. The careful management and further development of the brand is one of our most important responsibilities and we have consolidated our position by taking re-branding opportunities arising from recent acquisitions.”

The road ahead…..November 2003 launched “Managing for Growth”.

Transforming effect of technology, including the internet,

Need to free up resources by reducing or eliminating our involvement in businesses limited in scope or potential in order to allocate additional resources to areas which demonstrate strong growth prospects.

Our strategies always allow us to respond to opportunities to expand our geographical reach and product range through acquisitions, investments and joint ventures.

What is Managing for Value? To maximize shareholders’

value. It includes: Creating Value Managing for governance change

management, organizational structure, communicationand leadership

Measuring Value (valuation)

Analyzing the components 1. Development of Global Wealth Management

Middle market

and small Commercial

r/w

High net worth individuals

Active participation in Countries worldwide

Variety of businesses

Individual Customers

Global Wealth

Management

2. Growing Commercial Business1.8 million already existing customers it is

presently strengths of businessSustainence as a strength

Commercial businessServices provided by HSBC currently:Collections management Financing FX cross rates Global markets Insurance Internet Banking Investments Payments and Cash Management Retirement and pensions Risk Management Securities services Trade services Working Capital and Liquidity management

3. Integration of corporate and investment bankingLow customer base of only 12000

international corporationsProviding general banking and trade banking

productsEfficient wealth management of the group

4. Establishing the HSBC hexagon as a global brand with local identityLogo of HSBC-The World’s local bankBrand for customer experience and CSR

initiatives