Development Strategy of HSBC
Introduction
The Hong Kong ad Shanghai Banking Corporation Group was established in 1865 to finance the growing trade between China and Europe, and is one of the largest banking and financial services organizations in the world. Its international network comprises over 9,500 offices in 76 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East, and Africa (‘’ 2006). Through an international network linked by advanced technology, including a rapidly growing e-commerce capability, HSBC provides a comprehensive range of financial services, including personal financial services, commercial banking corporate, investment banking and markets, private banking, and other activities (‘’ 2006).
This company has been developed successfully to become a true global bank, being the largest bank in Hong Kong and the largest foreign bank in China. It emphasizes the importance of building shareholders' value, and believes in the values and talents of its own employees, which are employed and spread all over the world. HSBC wishes to stay ahead in a very competitive global financial market, and by maintaining a great brand name, an established customer base, good and loyal employees, tight control over operating costs and constant adjustment of business strategy to cater to customers' needs, it maintains its success in its leadership position in Hong Kong's highly competitive banking industry. With this success, it is useful to evaluate the global development strategy of HSBC from the strategic marketing perspective. This is to examine the marketing strategies of HSBC, to become aware of their mission and vision, and in turn, be able to apply these global development strategies to other business organizations.
Global Development Strategy of HSBC
It has been reported that at the end of 2003, HSBC launched the ‘Managing for Growth’ program, which is a strategic plan that provides the company with a blueprint for growth and development from 2003 to 2008 (‘’ 2006). This strategy builds on the company’s strengths and addresses the areas where further improvement is considered both desirable and attainable. HSBC’s core values are integral to its strategy, in communicating them to customers, shareholders and employees, and comprise an emphasis on long-term, ethical client relationships, high productivity through teamwork, a confident and ambitious sense of excellence, being international in outlook and character, prudence, creativity and customer-focused marketing (‘’ 2006). In addition, there are several key elements in achieving HSBC’s global development objectives, and these include accelerating the rate of growth of revenue, developing the brand strategy further, improving productivity, and maintaining the company’s prudent risk management and strong financial position. Developing the skills of their employees is also given emphasis to ensure that all employees understand how they can contribute to the successful achievement of HSBC’s objectives (‘’ 2006).
Moreover, there are eight strategic imperatives included in the plan of HSBC in accordance to their global development strategy. Their first imperative is their brand, by making HSBC and its hexagon symbol one of the world’s leading brands for customer experience and corporate social responsibility. The second imperative is their Personal Financial Services, which drive growth in key markets and through appropriate channels, HSBC can be the strongest global player in personal financial services. The third one is Consumer Finance, which is extending the reach of this business to existing customers through a wider product range to penetrate new markets. The fourth imperative is Commercial Banking, making the most of HSBC’s international customer base by creating an effective relationship management and improved product offerings in all their markets (‘’ 2006).
Furthermore, the fifth imperative is Corporate, Investment Banking and Markets, which accelerates growth by enhancing capital markets and advisory capabilities, by being focused on client service in sectors where the company has critical relevance and strength. The sixth one is Private Banking, which aims to serve the company’s highest value personal clients around the world. The seventh imperative is the People, for attracting, developing and motivating the employees of HSBC, leads to rewarding success and rejecting mediocrity, and lastly, the company’s Total Shareholder Return or TSR, which is fulfilled by achieving a strong competitive performance in earnings per share growth and efficiency (‘’ 2006). These imperatives are essential for they serve as basis for the company in conceptualizing their projects and implementing their plans for the improvement of their service. In addition, these imperatives are also related to the strategic marketing objectives of the company.
Strategic Marketing Perspective
Several concepts are essential concerning the perspective of strategic marketing, and these concepts are important, for they determine the business marketing strategies of a company. These concepts include determining the customer needs, focus on product development, and the exchange between the producers and consumers in the market scene. These basic concepts became the basis for HSBC to develop their strategies in their aim to maintain their global competitiveness and reputation.
In relation to customer needs, HSBC has several strategies for growth. Their first strategy is by making customers at the heart of their strategy, having specific approaches for each of the company’s five worldwide customer groups, namely, South and North America, Eurozone, Middle East, and Asia-Pacific. The second is to maintain their position as the world’s local bank, which enables them to approach each country uniquely, blending local knowledge with a worldwide operation platform ( and 2003). This is a good approach for each of these regions are distinct from each other, having different cultures and beliefs, making it difficult to implement a single project for all clients around the world. The difference in approach is addressing the different needs of their customers, which is a good basis form the improvement of customer service of the business organization, and at their aim to find good solutions and techniques in the development and improvement of their rendered products and services. Lastly, HSBC will concentrate activities on geographies where growth and critical mass are located ( and 2003). Such activities include global outsourcing strategy, which was also implemented by the company in several countries including the Philippines. The company was able to establish itself in call centers to provide their services in relation to sales and checking of accounts. Outsourcing contributes to the aim of HSBC to focus on the needs of their customers, for these call centers are responsible for providing their customers with information regarding their accounts. Call centers agents are also responsible for answering the queries of customers regarding the company.
In response to product development, HSBC will continue to enhance certain products, which are core to the company’s customer group offering, and some products will be managed or coordinated globally. These product include the HSBC Cards, which exploits the experience and platforms provided by the Household; Cash Management, for scale and international reach; Insurance, Asset Management, Custody and Funds Administration, and Retirement Benefits ( and 2003). Moreover, improving the products of HSBC will ensure the customers that the company has the best capabilities, and will be able to offer a comprehensive service to their customers, particularly where products are sold globally, and use their product expertise globally ( and 2003). Developing and improving their product is important because aside from the trust of the consumers to the bank, this is also a good source of their profit for with good products and services, the company can attract more customers and maintain old ones, and in turn, determine their success in the market, and maintain their reputation being “the world’s local bank”. By improving and developing their products and their services, the company can deliver growth by enhancing their revenue generation culture, and this involves four aspects. Aspects include strengthening the use of marketing as a key management tool of the business lines, rewarding revenue performance and penalizing mediocrity, focusing investment on businesses and geographies with largest growth potential, and benchmarking growth targets and achievements rigorously against peer group ( and 2003). Growth can continuously be achieved if these aspects will be implemented effectively and efficiently in the market.
The relationship between the producers and consumers in the market scene is being linked by the company’s brand image. It has been reported that the brand has been an outstanding success, and now that the HSBC brand is sufficiently strong, the company can accommodate brand variety at customer, product, and even country level as and when required by the business model ( and 2003). Having the specific and distinct brand in the market leads to establishing a reputation, this is a key element of brand proposition and brand equity. A positive reputation or brand equity makes the market react to the company favorably, and enables the market to become familiar to the company and the brand. Positive brand awareness leads to holding favorable, strong and unique associations, which enables the company to become associated with other big companies and develop stronger establishment and reputation in the global market.
Recent Global Developmental Strategies
The global development strategies of HSBC would not be appreciated without the concrete examples of their projects, which indicate the changes and success in the market. (2006) reports that two years ago, HSBC spends more that 2.5 billion euros a year on IT systems and in-house application development, and set itself a target of cutting per-unit processing costs by 10% every year. This year, HSBC expects to make an 11% saving on transaction processing this year after cutting 8.8% off costs in 2005, after 370 successful system deployments in the past three years, and the continued expansion of its pool of global platforms ( 2006). In addition, the bank has also set up a single, self-managed global network and consolidated on four global datacenters and two regional ones. Moving application development work to low-cost centers such as India is another key part of the company’s strategy, leading the bank to estimate that 4.2% of its technology development work takes place in low-cost locations, such as India and the Philippines ( 2006).
In addition, HSBC’s offshore IT operations enjoyed higher employee retention rates than those run by major outsourcing suppliers, and added that lower staff turnover had brought greater continuity and efficiency to projects. On the other hand, the direct banking side of the business, painted a similar picture of development with a global focus. This is in relation to the company’s launched program, the HSBC.com. (2006) reports that HSBC.com has a single global center of excellence for e-commerce IT, made up of co-located businesses and employees. The main offices are in New Jersey and Chicago, with functional reporting units in Canada, Hong Kong, and London, plus a 740-strong team of application developers in Canada and India ( 2006). HSBC.com was able to develop a key global platform, the HSBCnet, which is designed for commercial customers, covers 60 countries and offers some account functionality across 115 countries. This program includes services for global markets, global cash management and investment banking ( 2006).
As an added feature, security was added to a system with such global reach and extended functionality, so the bank has recently put in place two-factor authentication security where appropriate, including password generators and smartcards that are available to all business customers ( 2006). Furthermore, the other attribute of HSBC.com’s IT strategy is the development of the second-generation internet technologies. The company and online bank is already exposing customers to intelligent, personalized content and better-targeted marketing, which allowed the company to develop a sales campaign management tool to test the effectiveness of its web marketing strategies. This real time tool allows the bank to react to customer preferences and change content on the site within two hours ( 2006).
In addition, HSBC’s most successful global technology roll-outs is its Whirl/eChamps credit card authorization and accounting platform, consisting of 17 linked applications, including credit assessment, risk-based pricing, card ordering and transaction processing and reporting. The use of this program has reduced transaction-processing costs, generating an estimated annualized saving 23 million euros, and allowed the bank to handle a 25% growth in credit cards at no incremental cost ( 2006).
Just this year, Fair Isaac Corporation, the leading provider of analytics and decision management technology, announced that HSBC would utilize Fair Isaac’s proven software technologies, analytic models and development processes for Enterprise Decision Management, and this integrated solution will help HSBC grow its ability to optimize profitability across the bank’s consumer lending portfolios, and support its long-term growth objectives in the Asia-Pacific region (‘’ 2006). Moreover, to build upon rapid growth of its credit card portfolios and strengthen its leadership in Asia-Pacific’s booming consumer lending market, HSBC required a highly scalable solution to roll out optimized decision strategies across products, countries and decision areas (‘’ 2006).
It is evident that the Hong Kong and Shanghai Banking Corporation or HSBC invest on software programs and applications, in response to the fast-paced technological changes today. With the use of the Internet and other web-based applications, it is easier for the company to reach their customers globally and serve them better and faster. With the pleasant response of consumers to the efficient use of the World Wide Web, HSBC will not have a hard time relating to their customers globally, and even implementing projects and new programs to serve and relate to their customers effectively.
Conclusion
HSBC is obsessed with customer value and strives to be an "all-weather umbrella" to its customers, by adopting different strategies for different situations. It had to diversify in order to balance revenue and expenditure, minimize risk and stay profitable, with an equal importance in its ability to anticipate change. The investment banking business of HSBC has begun a strategy of significant expansion and development with one clear objective, which is to establish themselves as one of the world’s top three investment banks, and these strategies are based around a philosophy of organic growth and a transition towards becoming a client-oriented investment bank.
With this information, the company must continue to find innovative software programs and relate effectively to other companies that produce these software programs to become updated with the latest improvement in the World Wide Web. The company must efficiently and effectively create a good relationship with their customers and shareholders, to continually operate. HSBC must continually conceptualize and implement good projects to be able to set trends in the banking industry. Aside from developing marketing strategies, the company must focus on building employee and customer relationships, in accordance to strategic marketing concepts, for it is essential to determine and focus on the needs of the customers, as customers are the reason for being alive in the business and marketing industry.
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