HSBC: GLOBAL POSITION ENHANCEMENT Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

HSBC: GLOBAL POSITION ENHANCEMENT Case Solution

5.Why did HSBC fail in its Initiative?

The main reasons for the failure of the Initiative of HSBC are as follows:

The CIBM division, as it was new and wanted to create something new as synergizing the global funds of that division in order to create global benefits for the organization. However, this did not happen as CIBM also provided the same prefix as HSBC heritage organization with stressing out the parent. This only created only increased problems in future as strategy adopted was already being followed and there was nothing as such new in it.

Another reason of the failure of the Initiative to get global market leadership in CIBM was due to being overshadowed by the securities and trading businesses in Hong Kong which became the management’s focus, thus CIBM lacked the organizational strategic plan to counter changing environment which led to the restructuring being done again.

There was no specific Strategy being followed and the chain of command was rather high. They hired global competent staff such as Studzinski but he had problems implementing his plans against other board members.

Lack of focus and direction will conclude the initiative failure for HSBC.

6.Risks to HSBC shareholders in creating a Global Banking Institution

The risks being considered in this question here links to the effect of shareholders if HSBC continues its plan to develop the CIBM department and eventually increasing the performance and market share of the CIBM department.

The main risk to the shareholders for the Global Banking Institution Department, links to the organizational plan which was being considered from the year 1993, when the CIBM department was initiated with a plan for 10 years, with capitalization of $ 1.2 Billion Pounds and 4000 staff in 19 countries. The organization came back with its focus and the plan failed as the organization didn’t have a good strategy to compete with rivals when considering its competition. The organization did forego that in favor of a new plan in 2003 which was managing for growth initiated from 2004 – 2008. For that Mr. Studzinski was lured from a competitor and a further $ 1 Billion was invested in remaking of the department; this also failed later. In both of these attempts, the organization had lost Billions of Dollars and further in 2006 they appointed another head who received the highest salary of $20 Million from the organization.

The risk were the continued ill-used development funds which were expensed on getting to the top, these funds could have been used in other areas and if further failed, it would create further funds that would be put into the purpose of reaching the top, which was not necessary as the organization would not receive substantial benefits for that.

Another risk that will be considered here was the global nature of the business itself, the investments not being considered around the shareholders, and it somehow jogged the memory to the ENRON case, where funds were just being moved into other units and profits being window dressed.

7.UK Ring-Fencing rules affecting Global Banks

The ring fencing rules which will come into existence by 1st January, 2019; implements that the banking institutions separate the retail banking departments as separation from the wholesale banking departments. This reason for this is to create a control flow on the major public not get affected by the other departments of the banking institutions. The rules are suggested to create a control flow and to protect the consumer assets in banking institutions not being affected by different effects which does not consider their assets position.

((FCA), 2018)

This law will affect the Universal Banks, as they will have to produce financial statements separating their public and organizational consumers, this will also affect the retail assets of the consumer which are being used by the banking industry to aggressively finance their emerging ventures and creating unwanted liability on consumer assets which does not have a connection.

The finances and operations for the banking institutions will be limited as there will be a percentage applied to the usage of those finances for operations.

Justification will also be needed for financial institutions as to the correct usage of funds.

8.HSBC: Ring-Fencing Strategy; and Post Crisis Regulations affecting it

The main Ring-Fencing Strategy implemented by HSBC bank is to divide the HSBC plc, in HSBC UK and the HSBS PLC. (HSBC UK, 2018)

The HSBC UK, will be originated for all the consumer banking clients and their retail banking clients will have operations inside the UK. This also consider their other entities such as M&S Bank, First Direct, and other Private banking institutions in the UK.

The rest of the accounts of the global consumers and global commercial customers including Isle of Man and other areas will be considered in the HSBC Bank Plc.

The post crisis regulatory requirements setup after the Ring-fencing Act will affect the strategy of HSBC in the sense that only HSBC UK will be under the ring fenced identity with protection assistance for the consumer market.

Rest of the global markets will be opened to HSBC for fund management and their operations.

The post regulations might affect HSBC as HSBC Bank plc, might be asked to divide the retail and consumer banking totally in the future, which can limit the operations and the maintenance of funds.

9.Major Competitors

Competitors	Business Models	Strategic Choices
Barclays Bank	The business model of Barclays Bank initiates under 2 segments: Barclays UK, and Barclays Corporate & International. The major part is handled by Barclays Corporate with services such as Barclaycard Business (From US, Germany, and Norway), and Barclays Business Solutions.	· Playing a key role in UK economy such as launching a business trade center in Birmingham. · Initiating Artificial intelligence into the fabric of Wall Street to enhance predictions and financial probabilities.
Lloyds Bank	Business model is Risk – Neutral approach which makes the organization boast its earnings with less volatility. Focused the Digital area with the largest Online consumer database in UK economy.	· Major restructuring changes in cutting down costs and closed up more than 60 branches in the year 2018.

The strategy of HSBC as compared to its competitors is different with Barclays Bank choosing differentiation approach by creating a business support center boosting in the country’s economy. While Lloyds bank has a different approach to cut down costs to limit their overheads and their profitability will remain the same for the Ring-Fencing regulations.

HSBC on the other hand as discussed above has created 2 plc companies which reduces their standard and poor rating to AA-. This is a good strategy as the organization will not lose shares or business in the process.

10. SUGGESTIONS FOR THE FUTURE

As per the 2017, financial Statements; HSBC recognized a 5% increase in the operating profit. Considering the organizational focus on the Investment Market suggested by their Vision and Mission Statement. The organization has to consider investment in the emerging economies as the UK business will be limited.

Differentiation policy of the Barclays Bank seems like a good policy that can thump the organization in the right direction with increased profits for future.

Further, the current policy and strategic choices made by HSBC have been rather at a normal level, making them one of the best but not “THE” best banking institution. The answer is not into paying but coming up with a policy that will successfully implement the organizational goals and make them focus on CIBM division.

A Diagram below is attached, which shows the PWC Report of banking in 2050, of emerging markets. The organization needs to focus on a long term strategy............

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