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A Presentation By : Group 8

About HSBC
The 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.1
Analyze 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 UKs 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
Brand Name

Global company Multi-domestic strategy Ability to successfully grow by mergers and acquisition

Hexagon
Large client base Loyalty

Record profits : most profits ever for a UK high street

bank International finance

Weakness
Communication
Branding Greater dependence on Less developed/ Emerging

markets Size

Opportunities
Sustainability related business
Providing loans for environmental projects More diversified global financial services company

Greater diversification into equity products which is currently being pursued via HSBC Merrill Lynch
Increase presence in insurance and card products.

Private Banking

Opportunities
Online /e-banking
Venture funding Pension management applications

Threats
Employees striking
Email viruses Identity Theft

Question No.2
Critically 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)


High

Question Mark
PFS CIBM Rest Of Asia

Market Growth Rate

Priv ate Latin Ameri ca

Comm ercial

Europe Hong Kong

Low

Cash Cow

North Ameri ca
Relative Market Share

Dog

High

Low

Personal Financial Services


Percentage Of Total Revenue From PFS
60% 52% 50% 43% 40% 29% 21% 20%

30%

19%

10%

5%

0%
Hong Kong UK & Europe USA Canada Rest of Asia Latin America

PFS
Targets 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.

PFS
PFS 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
Percentage of Total Revenue From Commercial
50% 45% 45% 39%

40%
35% 30%

25%

25%
20% 15% 10% 5% 0% Hong Kong UK & Europe USA Canada Rest of Asia Latin America 9%

18%

20%

Commercial Banking
It 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. HSBCs traditional strength.

Commercial Banking
Categorized 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 Banking
The 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


Percentage of Total Revenue From CIBM
80% 70% 70% 60% 50% 40% 30% 20% 10% 25% 18% 5% 37% 71%

0%
Hong Kong UK & Europe USA Canada Rest of Asia Latin America

CIBM
Encompasses 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.

CIBM
It 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.

CIBM
The 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
Percentage of Total Revenue From Private Banking
30% 26% 25% 20% 15% 10% 5%

7% 3% 0%

5%
0% Hong Kong UK & Europe

1%
Latin America

USA

Canada

Rest of Asia

Private Banking
Services to HNIs.
Four business: HSBC Republic, HSBC Guyzeller, CCF

Private Banking and HSBC Trinkhaus & Burkhardt. Currently struggles in the area of private banking.

Private Banking
This 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.3
The current strategic direction of HSBC is to become

worlds leading financial services organisation while balancing earnings from stable , mature economies and those in more volatile emerging markets. Comment on the organizations 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


Individual Customers Middle market and small Commercial r/w

Global Wealth Management

Variety of businesses

High net worth individuals

Active participation in Countries worldwide

2. Growing Commercial Business


1.8 million already existing customers it is presently

strengths of business Sustainence as a strength

Commercial business
Services 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 banking


Low customer base of only 12000 international

corporations Providing general banking and trade banking products Efficient wealth management of the group

4. Establishing the HSBC hexagon as a global brand with local identity


Logo of HSBC-The Worlds local bank
Brand for customer experience and CSR initiatives

Thank You

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