Operating environment of HSBC
The Competitive, or Operating environment of HSBC involves many different parties including competitors, creditors and suppliers. In some areas of the business, such as investment banking, their competitors can also be their customers. A market profitability assessment has been completed (See Appendix Two) using the Porters Five Forces of Market Profitability tool (Porter, 1986, p. 16). The output of this is useful in understanding how competitors may behave in the industry or market as it gives an indication of likely competitive intensity and profitability levels.
The outputs of the tool reveal that HSBC face a number of challenges in continuing their global growth. These are detailed below, together with some insights into how HSBC are developing strategies which tackle these challenges: • In some countries barrier to entries are high with heavy government regulation preventing new entries. One of HSBC’s advantages in this area concerns their history and the fact they have deep routes in many geographical areas.
In addition to this, their scale has provided them with the financial mechanisms through which they can merge with, and acquire, some local players and subsequently gain a foothold in a new market. • Rapidly changing technology and customer demands require investment in information
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HSBC’s infrastructure is unrivalled and allows them to implement both geographical and customer linkage. • The power of the buyers in this environment is extremely high, as are their expectations. Innovation is extremely important in attempting to generate and sell differentiated products and service offerings. HSBC are heavily focussing on creating additional value through leveraging their existing businesses and functions.
Their existing scale, experience and developed value chain allows them to create value that their competitors find hard to match. • The growth rate in economies such as Asia and South America is extremely high leading to intense competition and rivalry in these areas. The customer base is heavily price focussed and HSBC are able to react to this through passing the savings they make through their efficiencies and economies of scale directly to the customer.
• The major of players in the industry are attempting to outperform their competitors through the development of sustainable competitive advantages that are often formed through the unique structure and consolidated value chain of their organisations. HSBC has a truly unique organisation and have leveraged this to offer value add services. • The companies who are the most successful in attaining a global presence are doing so through mergers, takeovers and acquisitions; HSBC is no exception to this.
• Putting the customer at the heart of the strategy requires a deep understanding of what drives and motivates them. Companies such as HSBC have invested heavily in Customer Relationship Management software and systems that are capable of measuring customer spending patterns, preferences and development. However, many of the banks are continuing to experience difficulties in utilising these complex sets of data to generate real differentiated customer propositions (Mckinsey Quarterly, March 2008).