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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