SWOT Analysis and Literature Review of HSBC Bank
SWOT Analysis
A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis.
The SWOT analysis provides information that is helpful in matching the firm’s resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection. The following diagram shows how a SWOT analysis fits into an environmental scan:
SWOT Analysis Framework
Environmental Scan
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Internal Analysis
External Analysis
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Strengths Weaknesses
Opportunities Threats
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SWOT Matrix
Strengths
A firm’s strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage. Examples of such strengths include:
patents
strong brand names
good reputation among customers
cost advantages from proprietary know-how
exclusive access to high grade natural resources
favorable access to distribution networks
Weaknesses
The absence of certain strengths may be viewed as a weakness. For example, each of the following may be considered weaknesses:
lack of patent protection
a weak brand name
poor reputation among customers
high cost structure
lack of access to the best natural resources
lack of access to key distribution channels
In some cases, a weakness may be the flip side of a strength. Take the case in which a firm has a large amount of manufacturing capacity. While this capacity may be considered a strength that competitors do not share, it also may be a considered a weakness if the large investment in manufacturing capacity prevents the firm from reacting quickly to changes in the strategic environment.
Opportunities
The external environmental analysis may reveal certain new opportunities for profit and growth. Some examples of such opportunities include:
an unfulfilled customer need
arrival of new technologies
loosening of regulations
removal of international trade barriers
Threats
Changes in the external environmental also may present threats to the firm. Some examples of such threats include:
shifts in consumer tastes away from the firm’s products
emergence of substitute products
new regulations
increased trade barriers
The SWOT Matrix
A firm should not necessarily pursue the more lucrative opportunities. Rather, it may have a better chance at developing a competitive advantage by identifying a fit between the firm’s strengths and upcoming opportunities. In some cases, the firm can overcome a weakness in order to prepare itself to pursue a compelling opportunity.
To develop strategies that take into account the SWOT profile, a matrix of these factors can be constructed. The SWOT matrix (also known as a TOWS Matrix) is shown below:
SWOT / TOWS Matrix
Strengths
Weaknesses
Opportunities
S-O strategies
W-O strategies
Threats
S-T strategies
W-T strategies
S-O strategies pursue opportunities that are a good fit to the company’s strengths.
W-O strategies overcome weaknesses to pursue opportunities.
S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats.
W-T strategies establish a defensive plan to prevent the firm’s weaknesses from making it highly susceptible to external threats.
HSBC
HSBC is a global financial services company headquartered in London, United Kingdom. As of 2010, it is the world’s 6th largest banking and financial services group and the world’s 8th largest company according to a composite measure by Forbes magazine. It has around 8,000 offices in 87 countries and territories across Africa, Asia, Europe, North America and South America and around 100 million customers. As of 30 June 2010 it had total assets of $2.418 trillion, of which roughly half were in Europe, a quarter in the Americas and a quarter in Asia.
HSBC Holdings plc was founded in London in 1991 by The Hongkong and Shanghai Banking Corporation to act as a new group holding company and to enable the acquisition of UK-based Midland Bank. The origins of the bank lie in Hong Kong and Shanghai, where branches were first opened in 1865. Today HSBC remains the largest bank in Hong Kong, where the Group Chief Executive is currently based, and recent expansion in mainland China, where it is now the largest international bank, has returned it to that part of its roots.
Its primary listing is on the London Stock Exchange and it is a constituent of the FTSE 100 Index. It has secondary listings on the Hong Kong Stock Exchange (where it is a constituent of the Hang Seng Index), New York Stock Exchange, Euronext Paris and Bermuda Stock Exchange. As of August 2010, it was the largest company listed on the London Stock Exchange, with a market capitalisation of £115.8 billion.
History
HSBC (acronym origin: the “Hongkong and Shanghai Banking Corporation”) was founded in the former British colony Hong Kong (in March 1865) and Shanghai (one month later) by Scotsman Sir Thomas Sutherland (1834-1922). HSBC Holdings plc established in 1990 became the parent company to The Hongkong and Shanghai Banking Corporation in preparation for its purchase of Midland Bank in the United Kingdom and restructuring of ownership domicile for the impending transfer of sovereignty of Hong Kong to China. HSBC Holdings acquisition of Midland Bank gave HSBC Group a substantial market presence in the United Kingdom which was completed in 1992. As part of the takeover conditions for the purchase of Midland Bank, HSBC Holdings plc was required to relocate its world headquarters from Hong Kong to London in 1993.
Major acquisitions in South America started with the purchase of Banco Bamerindus of Brazil for $1bn in March 1997 and the acquisition of Roberts SA de Inversiones of Argentina for $600m in May 1997.
In May 1999 HSBC embarked on a major acquisition in the United States with the purchase of Republic National Bank of New York for $10.3bn.
Expansion into Continental Europe took place in April 2000 with the acquisition of Credit Commercial de France, a large French bank for £6.6bn.
In July 2001 HSBC bought Demirbank, an insolvent Turkish bank. Then in August 2002 HSBC acquired Grupo Financiero Bital, SA de CV, Mexico’s third largest retail bank for $1.1bn.
The new headquarters of HSBC Holdings at 8 Canada Square, London officially opened in April 2003.
Then in September 2003 HSBC bought Polski Kredyt Bank SA of Poland for $7.8m.
In June 2004 HSBC expanded into China buying 19.9% of the Bank of Communications of Shanghai.
In the United Kingdom HSBC acquired Marks & Spencer Retail Financial Services Holdings Ltd for £763m in December 2004.
Acquisitions in 2005 included Metris Inc, a US credit card issuer for $1.6bn in August and 70.1% of Dar Es Salaam Investment Bank of Iraq in October.
In April 2006 HSBC bought the 90 branches in Argentina of Banca Nazionale del Lavoro for $155m.
In December 2007 HSBC acquired The Chinese Bank in Taiwan.
In May 2008 HSBC acquired IL&FS Investment, an Indian retail broking firm.
SWOT Analysis of HSBC
Strengths
The bank is well capitalised and this has enabled it to perform relatively well against other banks in recent economic events.
The level of capitalisation means that, going forward, the bank is unlikely to need to borrow from the UK government: this will enable it to retain more autonomy.
The bank has a strong presence in emerging markets, putting it in a good position to take advantage of future growth in those economies.
The bank’s global presence in Europe, Asia and South America helps to spread risk and offers significant economies of scale.
Despite rebranding relatively recently (1999), the HSBC brand has become well-established and is considered particularly valuable within the industry.
Weaknesses
HSBC associates itself strongly with investment in the small business sector, but the current economic situation has led to increased risks, potentially compromising the activity levels in this area of the operation.
The bank was involved with sub-prime markets in the US and has had to write off large figures lent to high-risk borrowers.
Despite falls in the UK interest rate, HSBC has increased its mortgage rates. This may be perceived negatively by borrowers and potential borrowers, adds pressure to an already depressed housing market and could ultimately lead to more defaulting as borrowers struggle with higher repayments.
A redundancy programme announced recently may affect morale among staff, leading to decreased production and loyalty.
HSBC’s branding emphasises its global presence, and this may be seen negatively by some customers in its implication of homogenisation and lack of personalisation.
Opportunities
HSBC’s high level of capitalisation places it in a strong position to acquire assets
Banks finding trading conditions particularly difficult at present may be available at low cost
HSBC also has adequate capital to purchase stronger banks such as Bank Ekonomi in Indonesia, in which it has purchased a stake to continue its Asian expansion despite challenging economic times.
HSBC’s generally strong position presents the opportunity to outperform competitors during the economic downturn and to build a reputation for being one of the safer banks for depositors, helping to increase resources for lending.
Negative press coverage of competitors such as HBOS may encourage customers to choose HSBC instead.
Threats
Trust in banks has decreased due to financial losses suffered by investors, who may be more inclined to invest elsewhere.
Financial losses affecting banks and investors on a global scale have resulted in less credit being available to customers. In the UK this is coupled with increases in living costs resulting in less money being saved.
The falling property market has created a rise in numbers of homeowners with negative equity. If a property is worth less than was borrowed to finance its purchase, there is little likelihood that the bank will recoup all its losses if owners default.
Claims have been made that HSBC has understated losses resulting from US sub-prime markets, and this could undermine confidence in the bank.
Literature Review
Article 1:
HSBC moves private bank boss Chris Meares to Asia
The head of HSBC’s private banking business has become the latest of the bank’s senior managers to move from London to Hong Kong.
By Harry Wilson
Published: 6:00AM BST 22 Oct 2010
Chris Meares, chief executive of global private banking at HSBC, will move out to Hong Kong as part of a reshuffle of the division’s management, though the business’s will remain headquartered in London.
Mr Meares move to Hong Kong follows that of HSBC chief executive Michael Geoghegan at the start of the year.
Since then several senior HSBC managers have moved out to Hong Kong, while Stuart Gulliver, who will takeover as chief executive from Mr Geoghegan in January will also move from London to Hong Kong.
Mr Gulliver, who currently runs HSBC’s global investment banking business as well as its European operations, has spent much of his career in Asia.
Speaking recently, he refused to confirm whether HSBC’s headquarters would remain in London, with speculation growing that the bank could return to its historic home.
In September, Mr Gulliver said he was “genuinely concerned” that the Government-appointed Independent Banking Commission could recommend the separation of retail and investment banking businesses.
Hong Kong is keen to promote itself as an alternative to London and the senior officials from the city have been visiting the UK to promote the advantages of moving business there.
Standard Chartered, which has large Asian operations, is also seen as another bank that could move its headquarters out of London and its chief executive, Peter Sands, has made clear his concerns over the increasing amount of regulation in Europe and the UK.
HSBC’s decision to move of its private banking head to Asia in large part reflects the opportunities the bank sees in capturing a larger slice of Asia’s growing wealth.
In a statement yesterday, HSBC said Mr Meares, along with the other management changes in its private bank was part of a strategy to “take advantage of the entrepreneurial wealth creation taking place in emerging markets”.
Analysis Of Article
This article is regarding transfer of chief executive of global private banking,Mr Chris Meares, who is being replaced by Michael Geoghegan at the start of this year.
Since the transfer of Mr Meares several more managers of HSBC have moved out of Hong Kong. Mr Stuart Gulliver who is taking over Mr Geoghegan is also moving out of Hong Kong
Mr Gulliver, currently running HSBC Investment Banking and European Operation, has spent much time in Asia.
He recently, while talking to media, refused to confirm that if the business is moving its headquarters to its native home that is Hong Kong.
In September Mr. Gulliver expressed genuine concern over Independent Banking Commission appointed by government to recommend separate banking for Retail banking and Investment Banking.
Hong Kong section of HSBC is much interested in promotion itself as an alternate to London. Official of Hong Kong are visiting UK to convey advantages of moving to Hong Kong.
Standard Chartered, having large Asian operation is also seeking to move its headquarters out of London and their chief executive too.
HSBC’s idea of moving its private banking head to Asia reflects the opportunities that the bank is seeing to capture Asia’s growing wealth.
Conclusion
Positive Point:-
It will help to increase profits for the company.
Will help to gain wealth of Asia.
Will provide employment
Will help to further improvement of the company.
Efficient and Effective working of management.
Negative Points:-
Very risk
Can lead to losses
Can also lead to demoralisation of other managers.
Article 2 :
HSBC, Deutsche Bank Complete 1st Yuan-Denominated IRS In HK
OCTOBER 22, 2010, 6:01 A.M. ET
HONG KONG (Dow Jones)–HSBC Holdings PLC (HBC) and Deutsche Bank AG (DB) completed the first yuan-denominated interest rate swap deal in Hong Kong, the U.K. lender said Friday, in another sign of growing activity in the offshore yuan market.
The IRS deal, which was completed Thursday, will be delivered in two years and is based on the three-month Shanghai Interbank Offered Rate of 3.37%, HSBC said.
HSBC declined to disclose the size of the deal, though a local broker said the deal was valued around CNY5 million.
The new deal came amid China’s efforts to boost yuan circulation in Hong Kong and to internationalize the currency.
The market for yuan-denominated instruments outside mainland China has begun taking off as China experiments with loosening its controls on the currency, which isn’t freely convertible.
Yuan IRS products in Hong Kong had earlier been denominated in the U.S. dollar and were non-deliverable.
Analysis
HSBC and Deutsche Bank AG completed first Yuan-denominated interest swap rate deal (IRS) which is another sign of growing activity in the offshore yuan market.
This deal was completed on Thursday and will be delivering in two years and based on three month shanghai Interbank offered rate of 3.37%.
HSBC denied to disclose size of the deal but a local broker estimated this deal for about CNY5 Millions.
This deal came after china’s efforts to boost yuan circulation in Hong Kong ant to internationalize the currency.
The market for yuan denominated instruments outside china has started to take off as China is experimenting with loosening its control on the currency, which isn’t freely convertible.
Yuan IRS products in Hong Kong had earlier been denominated in the U.S. dollar and were non-deliverable
Conclusion
Positive Point:-
Growing activity in offshore of Yuan market.
Boost yuan denominated instruments outside china.
China loosening its control on the currency of yuan.
Internationalize the currency.
Promote IRS products.
Negative Points:-
Delivering in two years.
Big market of US to compete with,which can result in losses