HSBC Holdings: Chinese Banking Sector Research Paper

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Updated: Apr 2nd, 2024

Company summary

HSBC was founded in 1865 in Shanghai and Hong Kong. It is a wholly owned subsidiary of HSBC group which has over 7,000 offices around the world. The bank’s headquarter is located in Hong Kong and serves about 570 branches in 20 countries and regions within the Asian-Pacific region.

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The bank provides a wide range of banking and financial services, and is among the world’s leading organizations in the industry. Together with its subsidiaries, the bank holds consolidated assets worth HK$5,607 billion and reported total revenue of HK$187,559 million as at the end of FY 2011 (HSBC, 2011). In addition to being the source of employment, HSBC is engaged in Corporate Social Responsibility (CSR) as well as other non-business activities that are important to the banking business.

Company performance

One of the major achievements of HSBC in the last five years is the establishment of HSBC Bank (China) Company Limited. The subsidiary is among the leading foreign investors in the Mainland China with investments worth US$5 billion.

The impact of this HSBC growth occurred when they launched gold-exchange business and became the first and only financial institution to conduct business as a party of the Shanghai Gold Exchange in 2008. Other notable developments include the expansion of banking and financial services by individual subsidiaries.

The consequence of these developments has been the continued increase in revenues which lead to profitability. The FY2010 indicated an increase of HK$12,201 million to reach HK$57,597 million as compared to HK$36,787 million in FY2009. The profits for FY2011 were HK$67,591 million which increased by HK$9,994 million (HSBC, 2011). This growth in profit is expected to continue as the bank continues to capture new markets.

Business strategies

HSBC and its subsidiaries provide banking and other financial services across the globe. The bank provides personal financial services including mortgages, private loans, wealth management, savings account, credit cards, foreign exchanges, customer lending, international payments and insurance policies.

The bank also offers commercial banking services such as foreign trade financing, treasury and capital markets, investment finance services and commercial cards.

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The firm’s international banking provides financial solutions and investment banking; world asset management and capital investment products; and market operations that provide services in credit. HSBC operates in about 21 countries and regions. The areas of operations are divided into several territory including the Asian-Pacific, China, Europe, MENA region and Africa.

Competitive position

The HK and Shanghai Banking Corporation Limited is probably the most competitive bank in terms of revenue acquisition when compared with other Chinese banks. In terms of assets and capital, the bank is the leader. However, this competitive position is attributed to the global presence of its banking and financial markets. Other banks such as Industrial and Commercial Bank of China, China Construction bank and Bank of China have indicated better performance at the local level. Indeed, the profit growth rate of the Bank of China is much higher than that of HSBC and its global expansion is a big threat.

Key questions

  • What is the firm doing to maintain the lead in the banking sector?
  • What risk management strategies are in place?
  • Does the bank prepare for economic crisis?
  • What strengths has the bank secured in order to increase profitability?
  • Given the current global economic situation, does the bank perceive any future threats?

Li & Fung Limited

Company summary

Li & Fung Limited was founded in 1906 as a small traditional trading firm by two entrepreneurs: Fung Pak-Liu and Li To-Ming. From its humble background, the company grew to become a worldwide supply chain management company. Since 1992, the company has been listed in the Hong Kong Exchange as Li & Fung Limited.

Its operations extend to more than 40 countries with a workforce of about 26,000 employees. As of the end of FY2010, the company’s worth in terms of revenue stood at US$20,030 million and the total current assets were US$9,526 million (Li $ Fung, 2011).

Company performance

Li & Fung Limited has continued to grow in terms of revenue and assets. Recently, the company announced robust growth, reflecting gains in the market share and synergistic changes of its business structure. In spite of the recent slow-down of the world economy, the company has continued to increase its revenue year after year. The FY2011 indicated the highest revenue gains of 26% as compared to FY2010.

This strong growth reflects the company’s strong position in expanding its market reach through acquisitions, organic growth and cross-selling activities from its core business networks, logistics and distribution. In the last few years, Li & Fung has concentrated its market expansion in the growing economies.

Asia in particular has become the significant platform for the company’s operations and sourcing activities. In 2011, the company completed its global distribution network which contributed greatly to its distribution operations. This expansion resulted in the operating profit growing by 22% to reach US$882 million as of FY2011. Simultaneously, shareholder profits rose by 24% in 2011 compared to FY2010.

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Business strategies

Li & Fung Limited is a global consumer products export trading company managing the supply network for large-scale, time-sensitive consumer commodities. The company’s operations are described in three business elements: business networks of trading, distribution and logistics.

These elements are used to identify business partners, initiate business transactions and complete the transaction across many parts of the world. The company has also strategized on targeting specific markets where the flow of consumer goods is high. Some of the strategic locations are within the Mainland China, though goods are sourced via a network of outlets in 40 countries targeted for consumers in Europe, Asia, US and Southern Hemisphere.

Competitive position

By all means, Li & Fung is the leader in China trading industry in terms of revenue. The company’s position was strengthened by its acquisitions of Inchape Buying Services and the Swire Group which were the biggest competitors. However, there is considerable competitive pressure posed by Jebsen & Co limited and Mars Concord limited.

These competitors have by all means penetrated the local markets more than Li & Fung. Indeed, Mars Concord limited was largely unaffected by the Asian financial crisis. These competitors were also faster than Li & Fung in implementing B2B business models which enhanced their operations significantly.

Key questions

  • Given the stiff competition, what market should the firm pay attention to?
  • How is the company responding to the effects of the economic crisis?
  • What strategies should the company implement in future?
  • Is the company responding to globalization appropriately?
  • Does the financial position of the firm guarantee future growth?

Hutchison Whampoa Limited (HWL)

Company summary

Hutchison Whampoa Limited (HWL) is a global corporation engaged in a range of business including health and beauty trade, container ports operations, mobile video technology among others.

The company is committed to innovation and technology with operations spread across the world. Indeed, its diverse collection of holdings range from global-scale operations to infrastructure and property development to the world’s leading telecommunication operations in terms of technology and marketing. As at 31st December 2011, HWL reported a turnover of HK$ 388 billion. The company properties and assets are sprawled all over the world and include skyscrapers, industry facilities and real estates.

Company performance

The performance of HWL is mainly attributed to its global expansion and business diversity. For the last few years, the company has been expanding its market share through the establishment of businesses in new economies. In 2008 for instance, HWL engaged in the investment and development of several deep-sea ports in China.

In 2012, the company successfully implemented the establishment and IPO of Hutchison Port Holdings Trust on the Singapore Exchange. The 2011 average production of oil reached 312,500 barrels per day. The number of 3G customers served by the company has grown tremendously reaching over 31.6 million making it the market leader. Recently, the company established mobile telecommunication in Vietnam, Indonesia and Sri Lanka.

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The consequence of these developments has been the continued increase in revenues which lead to profitability. The FY2010 indicated an increase in profit attributed to shareholders of HK$25,830million to reach HK$56,019 million in FY2011 as compared to HK$20,179 million in FY2010 (HWL, 2012).

Business strategies

With operation in more than 53 countries and territories, HWL has six core businesses: property and hotels, ports services, infrastructure development, retail, energy and telecommunications. Some of the major firms are Cheung Kong Infrastructure, Hutchison port Holdings, Power assets and Hutchison Telecom. HWL holds and manages ports services in about 26 countries and territories. They own the London Thamesport in UK and Harwich Ports as well as other ports in Europe, South America, Asia and Africa.

On top of the quality hotels and properties in Hong Kong and China, HWL has interest in many foreign property developments mainly in UK and the Bahamas. The company owns several retail chains including supermarkets, boutiques, electronic stores, beauty shops and drug stores in 30 countries worldwide. HWL engages in infrastructure development mainly in Hong Kong, China, UK, Australia and Canada. Its energy operations are conducted in Canada through Husky Energy Inc while telecommunication operations are worldwide.

Competitive position

The key competitors of HWL include Swire Pacific Limited, Jardine Matheson holdings Limited, HSBC Holdings plc, The Wharf Limited, and NW Development Limited. These competitors compete with individual business segments of the company. Their revenue performance is much less than that of HWL. The capital market performance in 2011 was such that the shares traded around 9.8 times expected earnings.

The company also traded at about 40 percent discount to the net asset value. The figures are cheaper compared to the closest rival corporations: Wharf Holdings Ltd and Swire Pacific Limited. Wharf Company is second largest telecommunication firm in Hong Kong after HWL. Swire Company invests in shipping business and is a principal shareholder of the Chinese Cathy Pacific Airways. Other competitors can be sorted by location, but have little significance.

Key questions

  • Does the management have the capacity to manage the firm appropriately?
  • What issues are important in the management of diversified businesses?
  • What business segments are most strategic in the current economic state?
  • Does the Asian market satisfy the business operations therein?
  • What competitive advantage does the firm pursue?

Wal-Mart (China)

Company summary

The parent organization of Wal-Mart China is the American Wal-Mart superstore, the world’s largest retailer and company. The company started retailing in China in 1996 by establishing a supercenter and Sam’s Club in the city of Shenzhen. Since its establishment, the company has grown its sales, store base and market share at over 40 percent. As at December 2011, the firm’s sale revenues climbed with 21 percent to reach US$10.6 billion.

Their first profits were reported in 2009 which forced the company to focus on expanding in the Mainland China. The firm settled on changing the business concept that was used in US to accommodate the diversity of the Chinese consumers, but maintained their key segments and brand names. Currently, the store operates 319 hypermarkets under the banners of Wal-Mart and Trust-Mart.

Company performance

With the many opportunities in the Chinese market as a result of the high population and stable economy, Wal-Mart has continued to expand its operations. Currently, there are about 373 retail units including Supercenters, Sam’s Clubs, Trust-Mart Hypermarkets, Neighborhood markets, Discount Compact Hyper and Smart Choice.

In 2007, the company bought a 35% interest in Trust-Mart. In 2011, the company signed a memorandum of understanding (MOU) with the Shanghai government to develop the company’s China e-Commerce headquarters in the city. Wal-Mart growth within the Chinese market is partly attributed to its business concept and partly to the corporate social responsibility.

The firm is involved in social and economic activities that promote the life of the Chinese people. These developments have resulted in increased sales revenue and profits. The sales figure in FY2010 and FY2011 were US$7.5 and US$ 10.6 billion respectively (Burkitt, 2012). This trend indicates the growth opportunities for the firm in the Chinese market.

Business strategies

Wal-Mart China engages in retailing consumer goods through several business concepts. The concepts reflect those offered by the mother company and include superstores, Sam’s Club, hypermarkets, Neighborhood markets, Discount Compact Hyper and Smart Choice.

The core marketing strategy is focused on low pricing. Within this market, the major segment is the grocery segment and takes 96% of the total products offered. Wal-Mart stores are located in the major cities as most of the Chinese consumers are concentrated within the urban areas.

Competitive position

Wal-Mart is the second largest retailer in Chinese market in terms of market share, after Sun Art Retail Group Limited which is a business partnership between France and Taiwan. Sun Art Company was established earlier and has attained the lead by understanding consumer needs and enjoying first mover advantages.

The competitor also employs a decentralized management structure where department managers can make pricing and production decisions quickly to meet the needs of local people unlike Wal-Mart whose decisions originate from its headquarters.

Most of the other close competitors such as Beijing Hualian Group Stores have been able to increase profits by establishing upscale stores catering to consumers wishing to purchase premium and imported goods. Despite this stiff competition, the Chinese market is far from saturation and Wal-Mart is poised to make more profits in future.

Key questions

  • What opportunities can the firm exploit in the Chinese market?
  • Does the company’s current performance promise a better future?
  • Can the financial position of the company allow for future expansion?
  • How are the Chinese consumers different from American consumers?
  • Does decentralization prevent the firm from understanding the market?

Foxconn (targeted)

Company summary

Foxconn is a world leading Technology Company that has its roots in China. The company is the principle founder and member of the Foxconn Technology Group that was established in 1974. Its facilities are spread across the world particularly in its principal markets: Europe, Asia and America.

Headquartered in Taiwan, the firm employs over 900,000 employees across the world. As at December 2010, its turnover was 2.997 billion NTD with a continuous increase of 53%. The company supplies technological products to some of the word’s renowned brands such as Apple, Nintendo, Nokia, Motorola, Dell and Sony Ericsson.

Company performance

In an effort to become a global company, Foxconn has continued to support its market with designs and developments of modern technology. In the recent past, the company has expanded from its principal manufacturing locations in China to other countries. Through a series of investments, the company transformed itself into a market leader in the technology industry.

Currently, the firm has established numerous subsidiaries throughout Asia, America and Europe which offer products and services of high quality and low cost with high efficiency. Throughout its regions of operations, the company has established a research network with an integrated intellectual property management system and completely functional innovation platform.

As at December 2010, the company had about 88,000 patent applications comprising about 40,000 that were authorized. Apparently, these developments have led to the continued growth in revenue and profits. By the FY2011, the firm made a net profit of US$75 million which was an increase from the previous year profits (FIHL, 2011).

Business strategies

Foxconn (target) is a member of Foxconn Technology group that engages in the production and assembly of technology products. The company focuses on six key technologies namely: manufacturing computers, consumer electronics, car electronics, telecommunications, digital contents and channel business.

The firm has grown from a manufacturer to technology innovator and developer. With its headquarters based in New Taipei City, Taiwan, Foxconn has its operations spread across three continents: Asia, America and Europe. The firm is committed to strengthening its market position as a responsible business entity across the globe, with the present six key competencies as the platform.

Competitive position

The original equipment manufacturer industry is dominated by firms from the Asian continents and in particular from Far East. However, Foxconn is a leader in both manufacturing and supply of technological products. Their innovation capability and market research are the key competitive strengths that lead to competitive advantage. This has resulted in the company becoming the preferred supplier by many electronic product marketers around the world such as Dell, Apple, Motorola, Sony and Nokia.

This dominance indicates little pressure from competitors especially those from foreign markets. But, several competitors such as Quanta Computer, Austek, Pegatron Corporation and Compal Electronics have an impact on the industry. These competitors have particularly responded to employee concerns which have been the major drawback in Foxxon.

Key questions

  • How is the firm responding to labor issues?
  • What future plans does the firm have as pertaining to internationalization?
  • What can the firm do to position itself better in the rising competition?
  • How is the firm’s relationship with key customers?
  • Is the financial strength enough to maintain future profitability?

Lenovo

Company summary

Lenovo brand was established in 2004 after Legend Holdings acquired the Personal Computer Segment of IBM. The strategic acquisition had the advantage that the former was the Chinese leader in electronic industry while the latter had invented the personal computer industry. Lenovo thus grew rapidly as a result of the two strengths.

Currently, the company is worth US$21 billion in revenue and is the second largest PC vendor in the world. The company employs over 26,000 employees in about 60 countries and territories serving consumers in about 160 countries and territories. It is a global Fortune 500 firm that is headquartered in Beijing, China with manufacturing facilities spread across the world.

Company performance

Lenovo being the leader in the Chinese PC market and holding about 30% of the market share has grown fast and even won market share in many parts of the globe. The company has continuously outgrown the global PC market in production and attained substantial market share in significant geographical areas, customer segments and product portfolio.

This has made the company to be the fastest glowing among the major PC manufacturers for the last two years. The company has emerged to be the PC leader in Japan, China and Germany. Their Smartphone and notebooks have hit several consumer segments. According to the Wall Street Journal, Lenovo net profits rose by 88 percent in the recent quarter due to strong shipments growth which drove the firm past Dell to take the second position as a PC maker (Fletcher, 2011).

Business strategies

The business strategy for Lenovo is to develop a unique personal touch through innovative technology. All along, the company has created and built outstandingly engineered personal technology. The company is always defining new ways of doing business and positioning itself as the next generation corporation.

Its core strength is in China, substantial growth in developing economies and a distinct global trail. The company builds on its dominant platform in the Chinese market to grow internationally. Their new way of doing business is expanding from East to West; introducing new products in the home market and then extending them to the next potential market.

Competitive position

Despite the stiff competition in the PC industry, Lenovo has indicated tremendous growth which has made it to be the second largest manufacturer after Apple. Unfortunately, the larger part of the market share is from the Chinese market unlike other competitors who have concentrated on international markets.

Apple, HP and Dell in particular have a substantial presence in the global market as compared to Lenovo. Their distribution and supply chains are well established uplifting their competitive advantage. Lenovo could be a leader due to the dominance it has in the Chinese market, yet its global appearance is weaker than the four key competitors.

Key questions

  • What future strategies does the firm have in place?
  • Can these strategies maintain the present growth rate?
  • Which markets have the best opportunities for the company?
  • Why should the firm focused on increasing revenue than internationalizing?
  • Which are the firm’s core strength and their viability in future economic dynamics?

References

Burkitt, L. (2012). . The Wall Street Journal. Web.

Fletcher, O. (2011). . The Wall Street Journal. Web.

Foxconn International Holdings Limited. (2011). 2011 Annual report. Web.

Hutchison Whampoa Limited. (2010). 2010 Annual report. Web.

Li & Fung Limited. (2011). 2011 Annual report. Web.

The HK and Shanghai Banking Corporation Limited. (2011). 2011 Annual report. Web.

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IvyPanda. (2024) 'HSBC Holdings: Chinese Banking Sector'. 2 April.

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IvyPanda. 2024. "HSBC Holdings: Chinese Banking Sector." April 2, 2024. https://ivypanda.com/essays/chinese-company-research/.

1. IvyPanda. "HSBC Holdings: Chinese Banking Sector." April 2, 2024. https://ivypanda.com/essays/chinese-company-research/.


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