Advanced International Business: SBC Holdings Plc Report

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Introduction

Multinational companies continue to value overseas expansion. There are several reasons behind this strategy. Firms recognize the cost-effectiveness of moving to foreign markets. Moreover, the budding markets in Asia and Africa are presenting unlimited opportunities. In addition, competition in local markets has increased such that expansion is a necessity. Investment banks, for instance, have relied on their foreign movements to sustain growth. The increasing need for capital in emerging markets is a positive trend.

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The expansion of firms comes with challenges and risks. There are risks that can be quantified. But perhaps the most glaring problem that multinationals are the difference in culture. There is a clear gap in terms of understanding the goals of the company and maintaining cultural differences. When firms decide to operate in unknown territories, their systems and personnel need to make adjustments. The succeeding segments will tackle the capacity of HSBC to handle this challenge and maintain the company’s status as one of the world’s best banks.

Company Background

SBC Holdings PLC (HSBS) is regarded as the world’s biggest financial firm in terms of market capitalization. In terms of assets, HSBC ranks as the fourth largest firm in the world. Although HSBC is headquartered in the UK 80% of its revenues are sourced outside the country. Of the firm’s total earnings, 22% comes from the office in Hong Kong. As of 2005, HSBC is the biggest investment bank in the world in terms of Tier 1 capital. The stocks of the company are traded in London, New York, Hong Kong, Paris, and Bermuda stock exchanges.

Company History

HSBC started its operations on the building called The Bund. In 1991 the company was listed in the London and Hong Kong stock exchanges. From there, HSBC has undertaken several rounds of acquisition. These activities started numerous deals. Some of the notable acquisitions include Marks & Spencer, Household International, and The Chinese Bank. It is evident that HSBC’s deals involved firms in other industries. This method of expansion is important in the process of diversifying the business.

Products and Services

The product and service lines of HSBC are one of the most diverse in the industry. HSBC Premier is its primary financial service product. The deposits required for this product are dependent on the location. The benefits of this product include dedicated relationships with personnel, customer service access, and preferential rates. HSBC Bank International Limited serves as the offshore bank of HSBC. Banking provides multi-currency options and is preferred by several businesses. It provides financial planning and investment options to clients.

HSBC also caters to its clients through the Internet. HSBCnet is a banking arm that exists online. The system functions like a typical bank and is accessed in almost all locations. This service is also used by HSBC’s high-end customers and institutional clients. HSBC direct is designed to boost the savings of its clients. This product requires a minimum deposit and eliminates service charges. HSBC Direct is available in the US, Canada, Taiwan, and South Korea. HSBC has yet to announce the future expansion of the product.

Global Projects

The Personal Finance Service of HSBC caters to more than 100 million clients worldwide. The project is designed to provide financial support and ideas to individuals. The Consumer Finance team provides a point of sale credit and lends cash to clients. Commercial Banking is another global project that expands HSBC’s reach. The system was created to provide the financing needs of small and medium-scale enterprises. Commercial Banking provides financing options to individuals and groups planning to establish businesses.

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There is also a project to provide financial services to large firms and other institutional investors. This segment is one of the pillars of the firm. HSBC is driven by huge clients and established investors. Global Banking is the division that connects HSBC to foreign financial markets. Private Banking is another global project that HSBC is expanding. It is available in 93 locations in about 40 countries worldwide. In 2007, the Private Banking project is managing assets valued at over USD 490 billion.

Industry Analysis

Porter (1980) introduced the concept of five forces that seeks to analyze industry. The model is an effective tool to determine the trends and movements in the industry. Five Forces Model states that there are four elements that interact in an industry. The interaction of these forces defines the level of competition in the industry (McGahan, 2004). The threat of new entrants shows the openness of the industry. The emphases on investment protection and stringent regulations have limited the influx of investment banks.

There are limited substitutes for investment banks in the industry. Although governments provide financing options, these privileges are limited. Investment banks still remain the most preferred financing hub. The world has been hit by several setbacks and economic downturns. But the industry is optimistic that consumer power will bring back the usual economic order.

Demand for financing is high and continues to increase. Moreover, the income of individuals shows upward movement boosting financing necessities.

The bargaining power of the suppliers determines the capacity of investment banks to deliver services. Most banks are partnered with reliable providers of infrastructure and supplies. Competition in the banking industry is intense among the big players. It is evident because product upgrades are rampant and advertising has improved. Banks have also invested in their creative teams to ensure that their existence remains dynamic.

Company Analysis

HSBC has emphasized improving its products and service. There are several initiatives implemented by HSBC to achieve this goal. Products are continuously enhanced to meet the demands of clients. Promotion and strong branding also serve as priorities for HSBC. Most important, HSBC maintains strategies in expanding the company. HSBC is valuing the financing demands in markets that are gearing towards development. It has maintained strategies that will strengthen its market position.

PESTLE Analysis

The political setup can serve as a driving in facilitating the success of a company venturing into different markets (Byars, 1991). HSBC understands the need for political stability in areas where it operates. Politics is critical in shaping the investment atmosphere in a country. Moreover, there are legalities that are required to be adhered to when making foreign investments (Pearce and Robinson, 2004). For instance, HSBC has to adjust its accounting practices when operating in other locations.

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Preference of clients is a major issue to HSBC. Most of the firm’s products are designed based on the needs of their clients (Johnson and Scholes, 1993). Even in banking, clients tend to make changes. It is important for HSBC to monitor these trends and anticipate any shift in preference. The economic situation of countries where HSBC is expanding is critical. There is a risk that is assessed when investing and economic uncertainties remain a high priority. HSBC targets emerging economies because of their potential to require financing and other financial services.

Kotler (1998) maintains the need for HSBC to evaluate the environment. There are methods used in assessing the environment. But the most important aspect relates to HSBC’s role in shaping the environment. In addition, HSBC needs to thrive in the modern world. Drucker (1993) predicted that the impact of information technology in the global economy will be as widespread as that during the Industrial revolution. HSBC needs to expand its products that provide online services.

Value Chain Analysis

To maintain its competitive edge, HSBC has to maintain the value of its products and services. Porter (1985) identified primary activities and support activities in the process of value-adding. To reduce the cost of operations, HSBC has been active in outsourcing some of its activities. There are several facilities established by HSBC in foreign locations. Aside from the cost, these overseas offices are tasked to maintain constant contact with customers. Facilities are built in areas where labor is cheap and infrastructures are available.

Value-adding also relates to the manner in which products and services are distributed. HSBC has its banks to provide services to clients. There are also online banks to cater to the needs of busy customers. HSBC has established a network that makes products accessible. Marketing is also another aspect that HSBC tries to strengthen. HSBC has installed personnel to handle the promotion of its products and service. The company maintains a marketing audit which is the initial phase of developing sound marketing strategies (Brownlie, 1993).

SWOT Analysis

The company has several strengths that are evident in the company. HSBC’s funding is considered one of the largest in the industry. The firm’s reputation as a trusted financial partner is established. In addition, HSBC has the support of technology and infrastructures. In addition, HSBC is operated by the best financial minds and strengthened by established customer service networks. But the company has some weaknesses. The most critical is HSBC’s exposure to risk. The manner in which HSBC operates makes it vulnerable to economic shifts and industry trends. HSBC is also focused on banking and needs to explore other investment opportunities.

Emerging markets overseas are the primary target of HSBC. Expansion is expected to increase as demand for financing improves. Another opportunity that HSBC recognizes is the cost-effectiveness of foreign facilities. When cost is limited, HSBC is more capable of growing. Aside from these opportunities, there are some threats that need to be addressed. Over expansion has become a problem for some banks. Failure to assess all aspects in foreign markets leads to failure and losses.

Learning Issues

Hill (1999) states that culture and competitive advantage affects the success of international businesses. The connection between cultures the firm’s competitive edge provides insights on locations where competition is weak. Culture is a primary indication of companies deciding to relocate their facilities abroad. In most countries, client preference is influenced by the ruling culture. Clients that are exposed to cultures become more confused when in the process of making buying decisions (Bartlett and Ghoshal, 1992).

Conflict Resolution

The idea of Soft System Methodology (SSM) has been introduced by Checkland (1981) to deal with situations that pertain to social, political, and human activity components. A decision to treat a part of the real world as a system for problem-solving purposes has to be made consciously with transparency. The method suggests that systems capable of producing desired outputs frequently fail because the participants in these systems have differing views of the world, based on differing values and standards. In many situations including management, the resolution of these competing views can be a political process, based on the exercise of power.

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Malcolm (2004) explained that SSM is most used in responding to symptoms when the underlying problem is not yet understood. Following the process outlined in this article will help analyze the different needs of various players in the environment. Its strength in this application is its holistic view of the business systems, helping to ensure that convincing effects of a change are recognized and accommodated. The methodology provides firms with different dimensions in addressing the problems that stall future growth and development.

SSM is highly dependent on the judgment of the solution and on the definition of a desirable system that can accommodate the needs of multiple stakeholders. In essence, it creates several satisfying alternatives. SSM is acknowledged the reality of changes and how these modifications affect effective measures. It emphasizes the changing nature of the system and the system environment. It is goal-driven in that it focuses on the desirable future and helps define the actions and changes that will help to achieve this future.

Sustainable Strategies

Herbert (1999) identified several methods that need to be done to limit the conflicts. The process begins with the anticipation of cultural problems. Managers have to assume that cultural difference exists and problems in the future are possible. Then, managers have to study the patterns regarding cultures. When such is established, then the assumptions need to be confirmed. Managers have to identify the areas affected. This included assessment of resources that operates within the company. Since the problem has been identified, possible solutions need to be tested. Managers have to communicate with segment heads for feedbacks. Transparency is critical in this process.

Recommended Strategy

There are several empirical pieces of evidence that point to the extensive use of learning in organizations. In a study conducted by Tucker, Nembhard, and Edmonson (2006) the process of organizational learning is better approached by creating project teams. Normally, individuals become more receptive to the changes and become more cooperative in the learning process. Also, project teams have the capacity to get over barriers that resist change. In addition, it was emphasized in the study that the knowledge transfer becomes more successful when the source is highly reputable (Klein, et al., 2001)

Another research conducted by Badger, Chaston, and Sadler-Smith (2001) suggested empirically, that organizational learning provides positive effects in small firms. In particular, small firms enhance the management of knowledge that is relevant to the operations. Learning enables small firms to be equipped with the capacity to manifest changes, for instance, technology transfers. Teo, et al. (2004) conducted a study on the impact of learning in guiding employees towards successful adjustments in complex technology situations. Based on empirical evidence, the learning approach used by firms can assist the employees to adjust in complex situations.

The development of organizational learning has created several models. Chen (2005) introduced a systemized method to promote organizational learning. Basically, the system has adapted some conventional models developed by several theorists. The system emphasizes the continuous process of gaining knowledge and incorporating the information in the operations using management tools. Moreover, the system is designed to ensure that the learning initiatives are flexible enough to adjust to the uncertain changes in the environment. Finally, the system focuses on maximizing the dimensions that make learning processes function with efficiency.

Since learning covers all organizations, it is interesting to explore the use of learning in education. Empirical evidence suggests that learning is an important contributor to the success of educational institutions (Bauman, 2005). Friedman (2002) suggests five approaches in the organizational learning process that closely resemble some of the models discussed in the previous section. An individual recognizes a discrepancy or any form of contradiction between the current situation and the standard by which the individuals assess performance.

After performing the initial approaches, proposals and ideas are devised to create a change. The change has to be accepted by the entities that will manifest the activities planned. Moreover, the individual has to ensure that the ideas have to be undertaken. This is the climatic step that will lead to the final stage of the process. The organization recognizes the learning and inserts it into the organizational process. Once an organization is successful in inserting new learning into its organizational schemes, new capacities for learning are enhanced and become available for the organization (Thomas, 2002).

Among the global issues, globalization is regarded as an impact maker in organizations. Le, et al. (2002) studied the effect of globalization in practicing organizational learning. Based on the findings, globalization has the capacity to distort the learning process. The study underlined the importance of analyzing the current global market situations to decrease the tendency of learning distortions. The next approach involves individuals engaging in a process of inquiry and data collection to make sense of the mismatch. This requires recognition of underlying circumstances relative to the situation.

Conclusion

HSBC is poised to push for further global expansions. The company has the resources and reputation to make an impact in emerging markets. Because of this strategy, HSBC is expected to increase its market reach. But there are challenges associated with this strategy. HSBC will be exposed to different cultures and various points of view. The company has an established culture and making adjustments will be difficult.

There are several methods in handling this situation. HSBC can install systems to monitor disturbing trends in different global locations. As suggested, organizational learning has to be emphasized. It is important for employees to be on the same page with the management. Communication is also an important element in this endeavor. The connection established by all entities in the firm will overcome any form of cultural differences in HSBC.

References

Badger, B., Chaston, I., and Sadler-Smith, E. (2001). Journal of Small Business Management. “Organizational learning: An empirical assessment of process in small U.K. manufacturing firms.”

Baumann, G. (2005). Wiley Periodicals. “Promoting organizational learning in higher education to achieve equity in education outcomes.”

Brownlie, D. (1993). Marketing Intelligence and Planning. “The marketing audit: A metrology and explanation.”

Byars, L. (1991). Strategic Management, Formulation and Implementation – Concepts and Cases. New York: HarperCollins.

Checkland, Peter. (1981). Systems Thinking, Systems Practice. London: John Wiley.

Chen, G. (2005). SAM Advanced Management Journal. “Management practice and tools for enhancing organizational learning activities.”

Drucker, Peter. (1993). The Practice of Management. London: Harper Collins.

Friedman, V. (2002). California Management Review. “The individual as an agent of organisational learning.”

Hill, C.W.L. (1999). International Business, Competing in Global Marketplace. New York: McGraw Hill

Herbert, T.T. (1999), Long Range Planning. “Multinational Strategic Planning: Matching Central expectations with local realities.

Johnson, G. and Scholes, K. (1993). Exploring Corporate Strategy – Text and Cases. Hemel Hempstead: Prentice-Hall.

Klein, K., Conn, A., and Sorra, J. (2001). Journal of Applied Psychology. “Implementing computerized technology: An organizational analysis.

Kotler, P. (1998). Marketing Management – Analysis, Planning, Implementation, and Control. Englewood Cliff: Prentice-Hall.

Le, Z., Collins, A., Egmon, J. (2002). Organizational Learning in the Globalization Process. Evanston, IL: Northwestern University Press.

Malcolm, Eva. (2004). “Soft System Methodology.” Glasgow: Association of Chartered Certified Accountants.

McGahan, A. (2004). How Industries Evolve – Principles of Achieving and Sustaining Superior Performance. Boston: Harvard Business School Press.

Pearce, J. and Robinson, R. (2005). Strategic Management, 9th Edition. New York: McGraw-Hill.

Porter, M. (1980). Competitive Advantage: Techniques for Analyzing Industries and Competitors. New York: Free Press.

Porter, M. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. New York: Free Press.

Teo, et al. (2004). Journal of the American Society for Information Science and Technology. “Organizational learning capacity and the attitude towards complex technological innovations: An empirical study.”

Thomas, G.F. (2002). Journal of Business Communication. “Individual and organisational learning: A development perspective on Gilsdorf, Rymer and ABC.”

Tucker, A., Nembhard, A., and Edmondson, A. (2006). Implementing New Practices: An Empirical Study of Organizational Learning in Hospital Intensive Care Unit. Boston, MA: Harvard Business School Press.

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