EMB690

Strategic Management
Section: 1

Strategic Management Analysis on

HSBC, Bangladesh

Prepared For:

Professor Dr Mahmud Shareef

Prepared By: Group 4

Name ID
Syeda Shotorupa Zafar 151 2772 660
Mrinmoy Kumar Sikder 143 0879 660
Armina Hossain 143 0778 660
Mujtahida Kawser 143 0920 660
Tamanna Zaman 142 1187 660
Tamhid Ul Islam Nafi 132 1400 660

Date of Submission: 13 August 2016

Table of Contents
Introduction:.................................................................................................................................................. 1
Background: .................................................................................................................................................. 2
HSBC Bangladesh: ................................................................................................................................... 2
SWOT Analysis of HSBC, Bangladesh: ....................................................................................................... 3
Industry Analysis: ......................................................................................................................................... 4
Porters Five Forces Model of HSBC, Bangladesh: ..................................................................................... 6
Threat of New Entry in HSBC, Bangladesh: ............................................................................................ 7
Bargaining Power of Buyers in HSBC, Bangladesh: ................................................................................ 7
Bargaining powers of Suppliers in HSBC, Bangladesh:........................................................................... 8
Threat of Substitutes in HSBC, Bangladesh: ............................................................................................ 9
Competitive Rivalry of HSBC, Bangladesh: .......................................................................................... 10
Generic Strategy of HSBC, Bangladesh: .................................................................................................... 11
HSBC Consumer Banking: ..................................................................................................................... 12
HSBC Corporate Banking: ..................................................................................................................... 13
Conclusion: ................................................................................................................................................. 15
Recommendations: ...................................................................................................................................... 16
References:.................................................................................................................................................. 17
Lecture Notes: ................................................................................................................................. 17
Interview: ........................................................................................................................................ 17
Internet: ........................................................................................................................................... 17
Introduction:

Banking is the essential part of the financial position of any country and it can play important
role in maintaining the banking system and flow of money. Various financial matters are
settled and the banks are responsible for the consistent flow of money and it can enhance to
create balance between imports and exports of the country. As one of the largest international
bank in Bangladesh, HSBC has a long-term commitment to its customers and provides a
comprehensive range of financial services: personal, commercial and corporate banking;
trade services; cash management; treasury; consumer & business finance; and securities, and
custody services.

This term paper aims to analyze HSBC Bangladeshs internal & external analysis, Porters
five forces model and Generic strategies. Basically we wanted to determine the intensity of
competition, its profitability level and regarding the banks suppliers and buyers. Also we
analyzed the type of strategies they pursue to achieve competitive advantages.

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Background:

HSBC Bangladesh:

HSBC Bangladesh started operations in 1996. The bank primarily focuses on urban areas and
has branches in most areas of the capital city of Dhaka, it also has branches in the cities of
Chittagong and Sylhet. The bank also has a good number of ATM booths in the cities
present; it also has booths in most five star hotels.

HSBC Bangladesh offers a comprehensive range of financial services such as commercial

banking, consumer banking, payments and cash management, trade services, treasury, and
custody and clearing. The bank also offers offshore banking in the Export Processing Zones,
this is only limited to investors in the EPZs.

A special service called NRB Services is also available for non-resident Bangladeshis; this
service allows consumers to maintain accounts in US Dollars, Pound Sterling and Euros.
People using this service can freely remit money from Bangladesh to any part of the world
and can access their money from any HSBC booth around the world.

HSBC Bangladesh has a help center which operates on daily basics. It is one of the very few
banks in the country to offer day night banking. It also has begun to support education
initiatives for people with disabilities; the bank recently partnered with the Blind Education
and Rehabilitation Development Organization to give scholarships to people with blindness.

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SWOT Analysis of HSBC, Bangladesh:

Strong brand name and good financial position.

Present in various business groups like
commercial banking, investment banking,
Strength financial services and private banking.
Employs over 275,000 people globally.
Has over 7500 offices in around 87 countries

Weak retail banking as compared to competition

Weakness
over-reliance on a few customers.

Explansion in other countries.

Opportunities Diversifying portfolios for customers.
Lower interest rate swill boost market share.

Changing govt regulations and financial crisis

like recessions.
Threats
Stiff competition from global leaders.

Figure: SWOT Analysis of HSBC, Bangladesh

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Industry Analysis:

The banking industry in Bangladesh is one characterized by strict regulations and monitoring
from the central governing body, The Bangladesh Bank. As the government is often the
owner and regulator as well as the supervisor and customer of a bank, there has been ample
opportunity for mismanagement over the years. The banking sector is plagued with a lack of
credit discipline, archaic loan recovery law, corruption, inefficiency, overstaffing, etc.
Several reform measures of the financial sector have been taken to improve the situation.
Relative stability achieved by the support extended by both the central bank and the
Government of Bangladesh in the past has restored public confidence in the country's
banking sector. Moreover, Nationalized Commercial Banks (NCBs) and old generation
Private Commercial Banks (PCBs) would have to lower the rate of NPAs in their portfolios.
Failure to do so would mean re-capitalization, at least for the NCBs. This may in turn lead to
a further drain on the limited resources of the Government of Bangladesh. At this time or in
the immediate future this re-capitalization would not be feasible.

With these conditions in place, the World Bank anticipates the likelihood of a situation where
the ever-increasing burden of non-performing loans and growing rate of debt servicing would
place the economy under enormous strain and result in a crisis in the banking sector in the
long term. The main concern is that currently there are far too many banks for the bank to
sustain.

As a result the market will accommodate only those banks that can transpire as the most
competitive and profitable ones in the future.

Currently the major financial institutions under the banking system include

Bangladesh Bank
Commercial Banks
Islamic Banks
Leasing Companies
Finance Companies

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Generally, the commercial banks and the finance companies provide myriad of banking
products to cater to the needs of their customers. However, the Bangladeshi Banking industry
is characterized by the tight Banking rules and regulations set by the Bangladesh Bank. All
banks and financial institutions are highly governed and controlled under the Banking
Companies Act 1993.

The range of banking products and services is also limited in scope. With the liberalization of
markets competitions among the banking products seems to be growing more instances each
day. In addition, the banking products offered in Bangladesh are fairly homogeneous in
nature due to the tight regulations imposed by the central bank. Competing through
differentiation is increasingly difficult and other banks quickly duplicate any innovative
banking service.

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Porters Five Forces Model of HSBC, Bangladesh:

Porters Five Forces Model identifies and analyzes five competitive forces that shape every
industry, and helps determine an industries weakness and strengths. They are:

Threat of
Enry

Bargaining Bargaining
Industry
Power of Power of
Rivalry
Suppliers Buyers

Threat of
Substitutes

Figure: Porters five Forces Model

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Porters five model of HSBC, Bangladesh is given below:

Threat of New Entry in HSBC, Bangladesh:

In Porters five forces, threat of new entrants refers to the threat new competitors pose to
existing competitors in an industry. A profitable industry will attract more competitors
looking to achieve profits. Threat of new entry of HSBC bank is given below:

Threat to entry for HSBC is medium since

the capital needed to enter the banking
sector in Bangladesh is very high (400
crores approx.)

Next, there are government regulations for

example, paper works, taxes, permissions,
trade license etc.

Next, There are 57 banks in Bangladesh.

Number of newly joined banks in the
banking industry of Bangladesh is 10.

Moreover, HSBC is also a threat to the

newly entered banks as they have cost
advantage, good will, customer loyalty and
good customer base.

Figure: Threat of New Entry in HSBC Bangladesh

Bargaining Power of Buyers in HSBC, Bangladesh:

Porter's Five Forces of buyer bargaining power refers to the pressure consumers can exert on
businesses to get them to provide higher quality products, better customer service, and lower
prices. When analyzing the bargaining power of buyers, the industry analysis is being
conducted from the perspective of the seller.

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HSBC has a good customer base. They have 2000 corporate customers and around 1, 00, 000
regular customers. Therefore:

Buyers power for HSBC, Bangladesh is moderate since people are always sensitive to
price and switching cost & ability to substitute is medium.

Next, in banking industry corporate buyers are large in size and it is economically
feasible for buyers to play one suppliers against another.

Moreove, Still HSBC has some control on buyers as having an HSBC account adds
value to any corporate organizations portfolio since an HSBC bank account will
increase peoples reliance when it comes to giving credits.

Figure: Bargaining Power in HSBC, Bangladesh

Bargaining powers of Suppliers in HSBC, Bangladesh:

The presence of powerful suppliers reduces the profit potential in an industry.

Suppliers increase competition within an industry by threatening to raise prices or reduce the
quality of goods and services.

HSBC has actually no direct suppliers; however it has different regulators who can be
counted as their suppliers.

Bangladesh Bank is one of the prime regulators as it operates and decides how other
banks operate in Bangladesh.

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 Bangladesh Bank usually controls the amount of cash supply in the economy.

Other regulators include Hong-Kong central Bank of US and UK.

These regulators can actually control the quality and service of HSBC Bank. Therefore, the
suppliers of HSBC bank have moderate power.

Threat of Substitutes in HSBC, Bangladesh:

A substitute product is one that may offer the same or similar benefits to a company as a
product from another industry. The threat of a substitute is the level of risk that a company
faces from replacement by its substitutes. Threats of substitute for HSBC are given below:

There are some financial

institutes like IDLC,
Lanka Bangla Finance, The increased number of
United Finance Limited, financial institute will
The threat of substitute is
Shanta Securities which challenge the Bank to
low for HSBC
also provides loan so some drive down prices and
customer might shift to profits.
substitute if they get better
opportunities.

Figure: Threat of Substitutes of HSBC, Bangladesh

9
Competitive Rivalry of HSBC, Bangladesh:

The last of Porters five forces deals with firms competing within the industry and the extent
to which they exert pressure on each other. This pressure leads to limits on the profit potential
of these firms. In industries where there is fierce competitive rivalry to contend with, there
are efforts to gain the most profit and market share from each other. This battle can end up
decreasing the potential for profit for all of the companies. Competitive rivalry of HSBC is
given below:

The competitive rivalry is high since the

number of customers is high and their
needs for Banking services out numbers
the insufficient number of Banks in
Bangladesh.

The banking segment is divided into upper

and lower segment. The upper segment
usually contains international rivals (for
example SCB and Citi NA), whereas local
Banks like EBL, MTB, BRAC etc. are the
lower segment rival.

In comparison to other Banking services

HSBC has competitive advantage in cash
management.

Figure: Competitive Rivalry of HSBC in Bangladesh at a Glance

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Generic Strategy of HSBC, Bangladesh:

There are 5 Generic Competitive strategies that companies usually follows to get competitive
advantage which are-

1. Overall Low-Cost Provider Strategy

2. Focused Low-Cost Provider Strategy
3. Broad Differentiation Strategy
4. Focused Differentiation Strategy
5. Best-Cost Provider Strategy

The characteristics of these strategies mainly depend on the type of competitive advantage
being pursued and market targeted by the company.

Figure: Focused Differentiation Strategy of HSBC, Bangladesh

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Based on Generic Strategies currently HSBC is following Focused Differentiation Strategy.

Focused Differentiation Strategy means, offer niche buyers something different from rivals.
HSBC Bangladesh always tries to offer something unique to its customer than its rivals. At
present HSBC is following only some specific segments:

HSBC,
Bangladesh

Corporate Consumer
Banking Banking

Figure: HSBC Bangladesh focuses on two Banking Sectors

HSBC Consumer Banking:

Consumer banking of HSBC has a primary focus on building deposit and making loans from
individuals. But they follow some specific conditions, like:

To open an account an individual must deposit the amount of minimum 10, 00, 000
BDT.
Have an agreement with HSBC to open employee salary accounts.

Unique Offers of HSBC Consumer Banking:

Phone Banking: Need any banking service and information just call 16240
(Applicable only for Bangladesh)
Value added Service by Personal Internet Banking: Save time by using Value Added
Services from HSBC Personal Internet Banking (PIB). This feature is a faster and

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 more convenient way for you to apply for different HSBC products and services
anytime, anywhere.

Select send Fill the

Log in to PIB messages and necessary
and select select the details and
contact center desired service send the
as the subject message

Loans: Personal Loans, Home Loans and Other Life style Benefits.

HSBC Corporate Banking:

Corporate banking of HSBC in Bangladesh deals with corporate clients but at present this
bank only focusing some special criteria.

Give loans only to those companies thats annual sales is over USD 30M equivalent.
The parent company banks with HSBC in other countries.

Unique Offers of HSBC Corporate Banking:

For Export
Growth Lending and Credit
For Import
Money Clearing and Payment Foreign Currencies

HSBC always chooses a market niche where buyers have distinctive preferences, special
requirements and unique needs. Moreover it develops unique capabilities to serve needs to its
unique buyer segment. Like:

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 Geographic Uniqueness
Specialized requirements of using and getting their services

In conclusion, we can say that HSBC in Bangladesh follows only focused differentiation
Generic Strategy because,

HSBC does not follow the Low Cost Provider Strategy as its overall cost of every
service is very high
HSBC does not follow the best cost provider strategy as it provides good services to
its client but at an excellent cost.

HSBC never follows broad differentiation strategy as from the very beginning this bank is
very focused to provide its services.

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Conclusion:

The Hongkong and Shanghai banking Corporation (HSBC) started its financial activities in
Bangladesh with a debutant branch in 1996. Now at 2016, it has 13 offices. 39 ATMs and 9
Customer Service Centers are providing its clients with world class service all the time. More
over it has one offshore bank and offices at 7 EPZs of the country. This bank is very much
focused regarding its service from the very beginning. Means at present they are following
Focused Differentiation Strategy. It has no supplier in Bangladesh. Basically, Bangladesh
bank controls their activities very strongly. HSBC is considered as Mature Bank in the
Banking Sector because:

HSBC is moving toward rapid growth in Bangladesh

Nearly all potential clients are already existing clients of other banks.
Head to Head competition occurs for market share in the market. As HSBC is the 3rd
most profitable bank in Bangladesh, it faces a huge competition continuously.
Moreover at present, international al competition is also increasing.

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Recommendations:

HSBC may introduce a finger print scans system for identifying clients. It will
increase the safety and security in case of banking transactions.

HSBC should begin an automated system to notify clients without manually calling
them up. So, that customer can get regular updates of their transactions which will
create distinctive competencies for this company.

HSBC shouldnt lag behind to keep its current customer base, at the same time
attracting new customers through attractive offers.

HSBC should establish a personal relationship with each individual customer. So that,
HSBC can creates customer relationship and increase the number of loyal customers.

HSBC is a popular bank nowadays. So they may expand their service sectors in
Consumer Banking a little bit more.

They should introduce more technological and web based banking platforms for their
clients.

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References:

Lecture Notes:

EMB 690 class lecture notes, Professor Dr Mahmud Shareef, North South University

Interview:

Nashid Hassan, Vice President, Corporate Banking, HSBC Bangladesh

Internet:

https://www.hsbc.com.bd/1/2/

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