Managing Across Borders Privatization Discussion: HSBC's International Expansion

Reason for going international

Discuss about the Managing Across Borders Privatization.

The Hong Kong and Shanghai Banking Corporation that is HSBC is one of the largest banking and financial institutions and it has a customer base of more than 37 million worldwide. From the 19^th century, it has started its global expansion and it has always been a long-term focused vision. In faster growing market and across international trade flows, the organization is well positioned, which would benefit from the engines of global growth (Hsbc.co.in 2017). Mission of this banking organization is connecting with customers to meet with their opportunities. It enable economies to prosper and business to thrive by helping people in realizing their ambitions and fulfilling their dreams and hopes. Vision of organization is to set the highest standards of behavior by aiming that all the customers and employees are proud of their business. HSBC aims to become leading private bank for business owners of high net worth and thereby building their commercial banking heritage. Organization operates in four primary segments such as wealth management, global banking, retail banking and global private banking (Amaral and Schocair 2015).

HSBC has been committed to build local network with the help of branches and local agents. It went into high-risk industries and acted as local bank financing international trade. In the recent time, after a number of strategic expansions organization has dominated its presence in European and Asia–pacific regions. HSBC has been shifting its focus to take proactive approach rather than being reactive. An organization enjoys international economic scale when it is seeking to expand internationally. This has occurred as HSBC has opened branches across continental Europe for selling its financial product in UK. It has been done by increasing number of outlets selling products. Diversity strategy of HSBC is based on the premise that quality of an individual service are the most important competitive differentiators (Berger et al. 2016).

HSBC is a leading international bank and it has strongly positioned its business to help business overcome the obstacle they face in foreign investment and trade. Organization operates in highly competitive environment and because of global market conditions; it needs to intensify its competitive position. Concentrating activities in banking organization such as HSBC has been increasing because of consolidation of competitive services industry. HSBC has been exposed to competition in financial services and capital market at local and global level alike (Bowles and Wang 2013). This is experienced in light of globalization.

Steps in developing international global strategies

Some of the proactive reason for banking organization such as HSBC going international is the availability of competitive environment. HSBC intends to strategically seek out its competitive advantages by enhancing sales overseas. This is so because it may have access to resource, which may save on processing and shipping costs. Technological and regulatory changes are the main catalysts for the international expansion of the banking industry. Business system and adequate technology is an important ingredient of international expansion (Buggea et al. 2014). Integrated solution such as development process for Enterprise decision management, analytic models and software technologies internationally will help ability of HSBC to optimize profitability across the consumer-lending portfolio. This will help in supporting long-term objectives in Asian-Pacific region. HSBC needs highly scalable solutions for rolling out optimum decision strategies across the products. It will help in strengthening the leadership in booming consumer-lending market of Asia pacific and building rapid growth of credit card portfolio (Cagano et al. 2015).

Internationalization strategy of HSBC relies on nurturing and identification of committed local partners with whom organization can entrust care for brand and innovative products. Sharing technical knowledge gained at the global level can be shared with local partners. This would enable them to create sophisticated solutions for the sophisticated consumers in the home country. If the business needs to succeed internationally, it must practice differentiation by offering unique products to niche markets. International activities are geographically well diversified. Performance of HSBC in emerging market is reinforced by the historical presence (Doz and Prahalad 2013). Emerging market gives real growth potential. Mutual funds of HSBC invested in emerging markets allow the customers to access most promising market in terms of growth. HSBC needs to focus on emerging markets for adjusting their strategies in order to capitalize and assess unanticipated opportunities. International expansion helps in improving portfolio diversification of burgeoning investment opportunities. It would enable them to take the advantage of evolving economic growth prospects. The main competitors of HSBC are Royal bank of Scotland and Citi Group and Barclays Plc.

Strategic planning forms the basis of global interdependence of any organization. Strategic planning concerning the requirement of key stakeholders and the success of its efforts helps in identification and formulation for ensuring sustainable growth of an organization. If the organization has strategic plan in place, then organization comes with the ability of anticipating opportunities and effectively responding to threats. It is critical for organization to grapple with new challenges.  Risk to business is no longer isolated by geography and industry in today’s globally interdependent environment (Vries 2015).

Global business of HSBC is set on a global consistent business strategies and operating models.  HSBC Bank Plc had established strategic alliance with Total Oil Trading SA. Such alliance has helped the bank in opening new segments to market and offer energy specific over the counter derivatives products to its clients. Alliance of HSBC with SA has come seeking to deliver

HSBC has also made alliance with Global payment Inc for providing payment-processing service to merchants in United Kingdom. This strategic joint venture between HSBC and Global payment came with a number of growth opportunities. It had immediate priority of implementing number of direct key sales initiatives. This comprised of targeting specific segments if merchants, introduction of automation tool of sales force, enhancement of sale force training and using a more focused approach of sales. Capitalization on significant investment that has been made by bank in global solution development is assisted by such alliance.  

HSBC Plc group continues to unify in the way they present their brands across the global market. At the same time, it maintains the message of special cultural understanding and local specialization. It is likely to continue as strategy of bank for reinforcing its business in emerging markets. HSBC’s communication is driven by strong customer insight that a global bank is intimidating for majority of consumers. Strategy of HSBC is executed through marketing and advertising. This is also done by living up to customer expectation by offering customer experience. It can be explained by an example, a recently launched product for brand in action that is HSBC premier, which allowed the customers to open bank accounts in 37 countries and getting assistance irrespective of their locations. Globalized execution can impart a lesson that global brands can find value that is appealing to local consumers. In this regard, organization has stared with positioning the strong brand through tweaks in communication cascades into local markets (Chey 2013).

HSBC is world’s sixth largest public company according to a composite measured by Forbes magazines. It has around 4000 branches in seventy countries and territories of Asia, Africa, Oceania, South America and North America. Total strength of the organization stands at 235175 (Hsbc.co.in 2017).

Setting objectives of organization- Setting long-term objective is an essential step of an organization, which involves fixation and medium used for achieving those objectives. It concerns with deployment of resources for objective attainment (Sutyrin and Kovalenko 2016).

Evaluating organizational environment- In the second step, general industrial and economic environment is evaluated. It comes with reviewing competitive position of organization. Such review helps in identifying competitive factors that are important for achieving success.

Setting quantitative targets- Fixing the quantitative targets are the third step of international development strategy. Under this context, contribution done by organization in operating departments and products zone are identified.

Aiming divisional plan- In this step, contribution made by each department to each product category are identified. For each sub unit, strategic planning is done by the organization. It makes careful analysis of trends of micro economic analysis (Yongding 2014).

Networking- In this step, alternative business development strategies are included such as sponsoring, attending, conferences and networking. Organization can expand the networking by relying on web based networking group.

Modification of plans aligning with international culture- Offerings of the organization needs to be modified for selling in different areas. Goal of this step is to ensure that documentation of international development demonstrate industrial objectives. Remuneration policy of organization has the achievement of strategic objectives. This is done through balancing rewarding for both short and long-term sustainable performance (Wenbing and Hongzhong 2014).

Since year 2011, the group has been restructured for making it simpler and leaner. In today’s time, organization has established rigorous control for protecting against misconduct and is growing financially. Through increased international connectivity, global economy has shifted long-term trends of company. HSBC has introduced regulatory changes for making financial services resilient. Organization has resulted in increased efficiency (Vavrus and Pekol 2015). It has optimized branch network and has introduced a new operating information technology model that has resulted in achievement of 4% cost reduction rate. Manual payment has been reduced by 25% through automation process (Sparrow et al. 2016). HSBC has witnessed a productivity increment in UK branches through online appointment booking and customer support. Time taken to approve the personal loan has improved from an average of twenty days to two days.  Areas that are capital intensive has been the focus of organization for its usage reduction. This provide capacity for growth in areas of higher returning business and regions.

On an adjusted basis. Organization has achieved the target of growing revenue faster than operating expenses. Customers are supported by providing tailored products and it has a justifiable claim for offering truly global relationship management. This mainly relates to global institutional clients and major corporate clients.

Analysis of performance- In this step, performance analysis include the analysis of gap and discovering the gap between planed and desired performance. Degree of gap persisting between the long-term aspirations and actual reality of an organization is critically evaluated.

Selection of strategy- This is the last step in international strategy development. In this step, after considering organizational strength, goals, limitation and potentialities, the best course of action is chosen (Steers et al. 2013). This also involves external opportunities.

In order to serve the customers in a better way, organization is innovating in digital and technological innovations and thereby enhancing the security of customer data and financial transactions. Technological advancement made by the organization in financial services are improving customer experience, broadening access and lowering service delivery costs. At the same time, data that are held digitally are also exploding. This reinforces the need to bolster cyber security (Moran et al. 2014). HSBC has an urgent public policy that helps in clarifying the responsibility given the growing number of routes.

HSBC operations, technology and technical support helps the organization in functioning effectively and improving satisfaction of customers. It offers to customer a wide range of career opportunities ranging from customer service position and roles of software engineering. Organization relies on technology for enhancing the productivity and this is done through appointment booking and online customer support (Shildebayev 2014). 

HSBC is currently investing in technology and digital feature of “core payment and cash management” and on Global Trade and receivable financial corporation. It has also enabled the mobile payment service in UK and US and in six markets of Hong Kong, US and UK; it has launched live chat online customer service. The customer login experience has been made simpler by making available digital secure keys (Macnaghte et al. 2014). New online banking platform has been launched. It was deployed in additional countries in the year 2016.

There are some of the security concern over corporate banking of HSBC. Due to the huge technological advancement, it is required by bank to transform faster than its competitors are. There are few challenges faced by HSBC when it comes to technology. Personal banking website does not allow the customers to log on and the business accounts are not running fast. The technological issues was not attributable from external source and was not due to distributed denial of service (Eriksson et al. 2014).

Organization also suffered major online banking services as the customers have not been able to access their online banking accounts as result of internal technical issue. In the recent time, HSBC also faced internet fraud and crime. It was however removed by mitigating measures taken by organization intending to reduce credit and losses resulting from fraud through digital channels. Internet banking of HSBC has come under denial of service attack. This had an impact on personal websites of the customers. There was also payment failure, which was mainly because of the backlog caused by some mega payment. E business challenge concerns technical glitches mainly with online banking (Jensen and Petersen 2014).

In order to strengthen the global reach and portfolio products, HSBC has expanded its business in other foreign market; it has been focusing on Foreign Direct Investment. This strategy is adopted to enter any new country intending to geographical reaching in the world. This entry strategy is regarded as Foreign direct investment as it represents a direct involvement in the economy having long-term relationships.

HSBC has gained the competitive advantage and success in the international market, various strategies has been used. Managing for growth is another strategy used by organization, which has helped the company in strengthening and development. This strategy has guided the company in maintain the top position among its competitors as it is aligned with organizational objectives (Yongding 2014).

Organization has made use of strategic management for ensuring that business is helpful in gaining profits at local and international level. It is well acquainted in the name of company that the possession of goods in industry helps in becoming pleasing by the customers. Responsibility has been implemented at the corporate level and this will assist in recognizing accountability to customers (Huang et al. 2014). While entering new market, HSBC experiments with a technique called ‘smart value positioning’. It enables selling high product at the premium price. Expansion is also done by directly seeking the vendors.

HSBC has also adopted the branding strategy while entering the new markets. A strong corporate brand act as a face of strategy portraying needs and objectives of corporates in the market place. It implements a stringent corporate branding strategy. Same common expression with a simple advertising strategy are adopted by HSBC throughout the globe. Such strategy helps in bridging the cultural gaps by portraying many faces of same strategy (François 2013).

• In the light of skeptic economic situation, it is recommended to HSBC to adopt the ‘wait and see approach’. They need to address the limitations concerning technology for ensuring that transactions and records of customer are supported by adequate expansion and capacity.
• For the international expansion in the emerging markets, it is required by HSBC to focus on implementing their plan. In developing country, one of the requirement for market entry is establishing an alliance with local firms. Developed countries allow foreign banks to establish through subsidiaries, offices and branches (Gikundi 2015).
• Emerging market based banks are arising due to global economic crisis. An important step to be taken by emerging market-based banks is to develop relationships with local regulators and possessing detailed knowledge of local regulations as well. In this regard, HSBC needs to understand the regulations they are facing because of international expansion.
• Alternative investment funds of bank should be able to harmonize information into platform of single data and thereby generating customized solutions for clients and greater transparency. Investment should be made in comprehensive data strategy wrapping data in advanced data modelling. Allocation of resources should be done by identifying and weighing risks and a vigilant approach should be adopted to cyber preparedness. For dealing with cyber breaches, there should be an established an incident response team (Ravasi 2015).
• Financial projections and strategy should be carefully reappraised. This is so because plans, budget, transactions and strategies need revision. There is a need to have transparent understanding of decision-making process, for which HSBC should adopt comprehensive contingency strategy. HSBC should also modify its strategies in order to comply with the tightened regulations and economic downturn.

Conclusion:

The assignment requires gaining a wide understanding of the internationalization of HSBC. Various factors such as entry strategies, E business and strategic planning have been discussed. This gives a deep insight into the strategies adopted by organization, which is an essential factor for success. Internationalization of HSBC has been associated with wide range of factors as it bring together various benefits to customers. With the development and improvement of products, company will be able to deliver the growth by enhancement of its culture in international markets. From the above discussion, it can be concluded that HSBC has been successful in maintaining competitive position in the markets it serve. Internationalization of banks has been a mixed blessing of shareholders for over a long period. Relationship between the consumers and producers in the market has been affected by brand image of organization. Investment made in client and sales management has resulted an increment in average deposits by customers.

Global footprint of organization has formed the basis of strong position in transaction banking products and this support global capital and trade flow. Networking scale of HSBC helps in offering the products to a larger customer base and thereby creating business synergies.  HSBC was equally strong in maintaining brand image that brought success to the organization. Variety of products have been managed to be accommodated at the international level. This helped in establishment of reputation of company. Various strategies have been adopted by banking organization for dealing with the customers. However, there are few technological challenges faced by organization, which have been improved by adopting some standards.

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