A project presentation for

Strategic Management
“The world’s Local bank”
INDUSTRY OVERVIEW
 INDUSTRY STRUCTURE

• Industry categorization
• Public Sector Banks-225
• Private Banks-28
• Foreign Banks-33
• Highly Fragmented industry
• Nationalized Banks

» Market leaders due to Size and Penetration

» Have come a long way from being slow-moving
banks to a fast track approach
• Private Banks

» Differentiate on level of service they provide to

customers
» Wide portfolio of products
» Aggressive Marketing
» Concentrated in High growth Urban areas
» Challenging PSB’s dominance
• Foreign Banks

» Concentrated in Metros
» Initially Concentrated only on premium customers
» Need felt to cater to wider markets
• Regulatory Implications
» Regulatory restrictions regarding branch expansions
» Caps by RBI on holdings in PSB’s and Private banks
» By April 2009, RBI plans to remove these caps
» Restriction on voting rights
KEY SUCCESS FACTORS

• Reach and Penetration

• Wide Product range

• Relationship Marketing

• Expertise of Service Provider

• Information Technology
Company History
• Leading global player in Banking and Financial services
industry

• Third largest bank in the world in terms of market

capitalization

• Range of Financial Services

– personal financial services,
– commercial banking,
– corporate investment banking,
– private banking and
– other related businesses.
• Established in 1865 to finance the growing trade between
Europe, India and China

• Acquisition of the Mercantile Bank and the British Bank

of the Middle East (BBME) in 1959 laid the foundation
for the present day HSBC Group.

• The HSBC Holdings PIc, formed in 1991 created a

holding company for the HSBC group to bring its various
subsidiaries under one umbrella.
• The acronym HSBC and the red hexagon symbol to enhance
recognition of the Group and its values among customers,
shareholders and staff.
• HSBC identity carried the caption of 'The World's Local
Bank,' emphasizing the Group's experience and understanding
of a large variety of markets
• By 2000, HSBC had banking network spanning six continents,
comprising over 9,500 offices in 79 countries, serving nearly
100 mn customers everyday.
• HSBC introduced India's first automated teller
machine (ATM) in 1987

• “Managing the Value” strategy

• Strengths
– Diversity
– Adaptability
– Resilience and
– Commitment to its customers
Key Challenges - 2001
• Lagging behind local sector private banks and
other foreign banks

  Assets Deposits Advances Income

Standard Chartered 293.12 180.03 130.42 28.48

Citibank 252.4 177.43 126.29 27.35
HSBC 209.1 128.01 82.02 19.62
ABN Amro 93.84 50.22 54.04 9.96
• Conservative bank lacking competitive spirit.
– Amount of loans and advances
– Retail products,
– Mergers and Acquisitions

• Competition from PSU banks because of

consolidation in the banking industry.
– ING buys south based Vysya bank
CHANGING PHASE OF HSBC
• In 2002, Niall S K Booker was appointed
Group Manager and Chief Executive Officer
(CEO) of the HSBC Group in India.

• He found laidback work culture was the

reason for the lackluster financial
performance of the bank.

• He gave a new direction to the bank by

launching a major restructuring program.

• He aimed at making HSBC more market-

driven and customer-oriented.
KEY COMPONENTS OF
RESTRUCTURING

 New work principles

 Downsizing

 Organizational reshuffling and

 Focus on growth areas

NEW WORK PRINCIPLES
• Work culture was considered most bureaucratic.

• Performance bonuses in all departments were

disproportionate to performance.

• Proportion of fixed pay for an HSBC employee was

high while the variable pay component was
relatively low compared to other private sector and
foreign banks.

• A Customer Relations Team was formed to follow

up leads on products like wealth management,
home loans, credit cards etc.
DOWNSIZING
• Prime focus of the downsizing was not just reducing
staff, but hiring the right people.

“Having the right people in the team is inarguably

more important than having the right strategy,
because the right people will in time come up with
the right strategy.”

• Aimed at making HSBC more agile to meet market

demands and better customer service through skilled
and motivated personnel

• The bank wanted to bring down the average age

profile of staff to less than 40
FOCUS ON HIGH GROWTH
AREAS
• It did not foresee the growth in retail
banking and hence was the late entrant in
each of the financial services segment like
the credit cards, home loans, auto loans,
insurance etc.

• HSBC was taking a reactive approach and

competed by offering the products similar
to the ones offered by the other players.

• It recognized that taking the competition

head on with the existing players will
cause a drain on the resources and would
not bring in the desired results
Identify what is it that you wish to sell

Research your competition in that area,

see what they are doing and where
you are different

Focus on YOUR difference

Unique Segmentation Model
• Actual Value

• Strategic Value

• Serving Value
SEGMENTS
• Private Clients(Rs1.5cr)

• Premier (Rs 25lacs)

• Power Vantage (Rs 1 lac)

• Mass Market (Discontinued)

STRATEGY
• Focus on Relationship marketing and not
acquisition marketing

• Innovative products and best of the service in

Industry

• Retention marketing

• Cross-selling strategy
STRATEGY
• Insurance- Alliance with TATA AIG

• Home Loans- Alliance with South City

• Credit Cards- Alliance with WIAA

Corporate and Investment Banking

• The corporate banking division is split into

two parts:
– Corporate and Investment Banking and Markets
(CIBM) and
– Commercial Banking
Corporate and Investment Banking and
Markets (CIBM)

• Concentrated on providing customized

financial solutions to major clients.
• Provides the private and public sector
government clients with strategic and financial
advise on:
– Mergers and Acquisition.
– Equity Capital Markets.
– Privatisation.
Corporate and Investment Banking and
Markets (CIBM)
• The current disinvestment and the consolidation
issues in the PSU’s have provided immense
opportunity.

• The business has not being restricted to the

government players but also includes the private
players.
Commercial Banking
• Provides financial services to the small and
medium term enterprises (SMEs)
– SMEs are widespread and offer more returns.
– Serviced mostly by cooperative banks, money
lenders and small finance companies.
– HSBC used a different strategy and also,
launched unsecured credit facility.
SWOT
Strengths Weaknesses
Focused business and service
portfolio Network i.e. few branches and
Quality of service no penetration
Relationship marketing – Marketing strategy- seen as a
complacent player
The Worlds’ Local Bank
Customer Retention Marketing
Expertise – product innovation and
customization

Opportunities Threats
Can act as an advisory to various Strong competition from
companies in the ongoing phase of public sector banks
consolidation
Competition from private
Scope in premium segment players
RBI regulations RBI regulations limiting
expansion
Insurance Sector
RECOMMENDATIONS

• Increase network of Branches

• Focus on high-margin areas
• Focus on wealth management
• Business Process Outsourcing for International
Operations
• Leveraging the Software Development advantage
THANK YOU