The durability of HSBC’s continued success on a global scale will depend on their ability to deliver products and services that their customers truly value. Barriers to imitation are low in this industry and, as such, HSBC need to continually focus on their value chain and how it can be optimised to generate competitive advantages; • HSBC need to ensure they continually invest in understanding their customer segments and drivers and need to refine their strategy to ensure they are well equipped to deal with proliferation whilst minimising complexity and maintaining the agility of the organisation.
Investment in CRM systems should continue and a heavy focus should be placed on generating data that can be understood and utilised to best effect. 2. 5 Internal Analysis: Diversification In addition to being in a position to manage external threats and opportunities, HSBC’s strategy development must be based on their internal strengths, capabilities and values and their ability to structure themselves in order to effectively manage their operations internally across these numerous geographical locations.
As previously highlighted, whilst globalisation offers HSBC the opportunity to streamline operations and cross sell, a number of key internal issues need to be taken into consideration when defining the strategy
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The internal challenges engendered by growth are well known and large corporations have been attempting to find a balance between a traditional centralised management structure and a localised reactive type structure for many years. Such companies include Phillips, Matsushita, Acer, Toshiba, IBM and Starbucks. In order to be successful as the “World’s Local Bank” HSBC need to be able to harness the advantages of having a global organisation with the ability to make decisions and react at a local level, something which can be described as “global integration with local responsiveness” (Sohn & Paik, 2004).
Both centralised and decentralised management structures can involve conflict between increasing profitability and corporate responsibility. Whilst central management and direction can ensure decisions are aligned with universally acceptable codes of conduct, autonomous structures are more likely to reflect the local cultural values and needs. The risk to HSBC is that decisions made at a local level may damage the company’s reputation and impact the shareholder value.
In order to ensure that issues relating to women, children, bribery, the environment, product quality and working culture are avoided HSBC may choose to engender a centralised approach to management. There are, however, drawbacks to this too. Many employees thrive on empowerment and taking away the ability to make decisions from recently acquired local banks and subsidiaries may lead to employee dissatisfaction, rebellion and confusion.
According to Bayendam (2005) this too will negatively impact shareholder value as employees focus is removed from the customer to understanding and accepting how to work in the new environment. 2. 6 Internal Analysis: Major Findings & Recommendations HSBC have widely communicated their “ethical behaviour which observes the letter and sprit of regulation of rules and regulations” (Strategic Overview, 2007) as a fundamental part of their operating strategy and it is clear that a great deal of investment has been made in this area.
They recognise that it is their people who are one of their biggest competitive advantages and that diversity is a crucial element of success. Managing this going forward, however, will continue to present major challenges. Some of the ways in which they can deal with this include: • A clearly defined company code of conduct that has, at its heart, the need to drive business decisions that are ethical and in the shareholder’s best interests. This code of conduct should acknowledge and deal with regional differences and should be a living document which changes in accordance with the external environment;
• Along with investments in IT infrastructure and CRM capabilities HSBC need to continue to expanding their knowledge base and look to bring in what Good-to-Great author James C. Collins would refer to as “the right people on the bus”, people who are experts in their local areas and can help to create a point of difference. However, HSBC should combine a mixture of local management with management from abroad. This can help to ensure that the required local knowledge is present within the operation but the strategic direction and intention of the corporate culture is similarly reflected.