HSBC Bank as the Financial Institution

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Requirement

Write a Reflective commentary on Business as Global Context taking HSBC Bank as the Financial Institution

Solution

Introduction

HSBC Oman is a financial institution and also one of the largest organizations regarding financial and banking services in the world. The bank serves more than 38 million customers globally. The main services of the bank are commercial banking, markets & global private banking, global banking, and wealth management and retail banking. The bank is operating nearly in 67 countries and territories in Asia, Europe, Latin America and North America, Africa and the Middle East (Singh et al., 2015). The HSBC Bank established in 1948 and currently the organization has more than 900 employees. The HSBC Bank opened its first branch in Oman in Muscat. For the two decades since 1948 HSBC was the only bank operating in the Sultanate of Oman. The HSBC bank is also the first bank which provided ATM services in the country. In 2012 the HSBC bank merged with the Oman International Bank and the bank was renamed HSBC bank S.A.O.G. Sir Sherard Cowper-Coles is working as Chairman of the HSBC Oman (Singh et al., 2015).

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Business Environment of the Bank

The bank has ranked fifth in the Business today regarding performance. The bank has also registered strong growth in net profit with almost 30.7% growth rate in 2016. The bank also reduced its non-performing loans. The growth rate of gross loans was 16.8% in 2016 as compared to 1.8 % in previous year. The overall performance is excellent for the HSBC Bank (Al-muharrami et al., 2017).  
Micro Environment
The microenvironment of the business greatly influences the functioning of the organization, and the organization has the control over the factors of the microenvironment. The microenvironment is also known as internal environment of the business. The microenvironment includes the following (Mishra et al., 2014);

  1. The suppliers: the suppliers affect the business of an organization significantly if the number of the supplier is limited in the market. Therefore, it is very important to maintain a good relationship with the suppliers. The HSBC Bank maintains a strong relationship with its all the suppliers around the globe. Due to the strong relationship with the bank the suppliers always ready to provide any possible help to the bank.

  2. Customers: customers are the one who determines the success and failure of any organization. So, fulfilling the needs and demand of the customers should be the priority of the organization. The HSBC Bank aims to target especially five types of customers such as business clients, consumers, international customers, government, and reseller market. The bank maintains a strong relationship with its all customers but especially with the international customers for the long-term profitability.

  3. Competitors: competitors are those who compete with the organization either in the same market or from another market, but the nature of the product of competitors is same. Therefore, one of the major threats to any organization is from its competitors. There is very high competition for the HSBC bank, but due to its strategy, it has some competitive advantage. For example, the HSBC bank is the first bank of Oman. Therefore, it has gained the trust of its customers through its excellent services.

  4. Shareholders: one the major factors which affect the functioning of any business is its shareholders. They support the organization financially. Therefore, maintaining a strong relationship with the shareholders and fulfilling their demand is essential for the organization. The HSBC bank also maintains a very strong relationship with the shareholders.  

Macro Environment
The macro environment also influences the functioning of the organization, and the organization does not have control over the macro environment. The macro environment is also known as external environment of the organization. Therefore, it is necessary to keep close eyes on the macro environmental factors to avoid any uncertainty. The macro environment includes the following (Mishra et al., 2014);

  • Political factors: political factors determine the extent of government influence or intervention in the economy. For example- the government can impose tax and duties, etc. The government of the country also supports the financial institution in the country and provides necessary assistance. Therefore, the bank has great opportunities to grow in the country.  The company has also expanded its business with the help of government initiatives, and the performance of the bank is also excellent.  

  • Economic factors: economic factors such as growth rate of GDP, inflation rate, employment rate, exchange rate, etc. influence the performance of the organization significantly. The economic slowdown in the country has affected the performance of the bank. Due to the slow growth of the economy, almost every organization has been affected.

  • Technological factors: technological factors are one of the important factors which determine the success and failure of the organization. The bank has up to date technology which provides the competitive advantage to the bank and helps in the growth of the bank. The performance of the bank is also high due to the use of high and up to date technology. 

  • Social and legal factors: social and legal factors are related to the cultural trends, population, laws, and regulation, etc. The bank follows the legal requirement of the government to ensure smooth functioning as well as follow the trends of culture to satisfy the cultural demand of the country to avoid any obligation by the citizen of the nation.

SWOT Analysis

SWOT Analysis stands for strengths, weaknesses, opportunities, and threats. It is a tool that is used by the organization to analyze their strengths and weaknesses to strengthen the strengths and minimize the weaknesses as well as opportunities and threats to get benefited from and exploring the opportunities and minimize the threats (ElMassah, 2015). 

Strengths        Weaknesses
The resources of HSBC are its major strengths

  1. •    Cost-advantages from propriety know how

  2. •    High value of trademark and patents

  3. •    High value of brand name

  4. •    The distribution network and its accessibility 

  5. •    High profitability as well as revenue 

  6. •    The high rate of growth

  7. •    Access to natural resources    •    There is lack of protection of patent

  8. •    Poor access to the main channel of distribution 

  9. •    High cost of its structure 

  10. •    Limited access to the natural resources 

  11. •    The market size

Opportunities        Threats 

  1. •    Technology innovation 

  2. •    Global access

  3. •    Elimination of the international trade barriers 

  4. •    Increasing demand for financial services in the domestic market

  5. •    Establishment of industries in the domestic market also increases the demand for financial service

  6. •    Increase in the income level of the people

  7. •    New products and services    •    The shift of consumers to different brands

  8. •    Strict regulation by the government

  9. •    Cultural barriers

  10. •    Introduction and arrival of substitutes products and services 

  11. •    Imposition of new taxes and duties 

  12. •    Increase in the cost

Strengths
The resources available to the HSBC bank are the major strength of the bank. The available resources support the smooth function of the bank and provide necessary financial assistance. The bank has also cost advantages from its propriety know how. The propriety knows how is the total knowledge which provides advantages to an organization over its competitors. The propriety knows how includes technical information, formulae, concepts, etc. The other strengths of the bank are its high rate of growth as well as its brand name. The brand name of the bank is very popular in the domestic market as well as international market. Even though the economic growth rate of the country was very slow in 2016 and 2017 the bank has registered high growth rate. The distribution of network is also one of the important pillars of the bank (ElMassah, 2015).

Weaknesses  
One of the major weaknesses of the bank is its lack of patent protection. This is a serious issue for the bank. Protection of patent is necessary to build an image of the bank in the eyes of customers. The high cost of the structure is also one of the weaknesses of the bank. The other weaknesses are the limited market size of the domestic market, limited access to the natural resources as well as poor access to the distribution channel (ElMassah, 2015). 

Opportunities
Introduction of globalization or the boundary-less world is the best opportunities for any organization. It opens the scope to enter the international market. The bank also has the same opportunity, and the bank is utilizing the opportunity significantly. Elimination of international barrier is also opportunities for the bank because without any restriction it can operate into the global market actively. One of the important opportunities is increasing demand for financial service (ElMassah, 2015). 

Threats
The HSBC bank has a major threat from the changing pattern of the consumer. The preference of consumers is shifting to the different brand which is very serious for the HSBC bank. There are several substitute products and services which are also creating threats for the bank. There is some strict regulation by the government which is creating barriers to the smooth functioning of the bank. The culture of the country is also a threat to the bank because most of the population is the follower of Islam and in Islam interest is prohibited. The increase in the cost is also threat to the bank (ElMassah, 2015). 

Competitive Advantage of HSBC bank in Oman

Competitive advantage is the strategy adopted by the organizations which help the organization in making an outstanding performance concerning competitors. Competitive advantage is attained by making the changes and advancements in the existing services that have been offered to the customers in comparison with the competitors. (E. Dobbs, 2014)The concept of value proposition also plays an important role in the attainment of competitive advantage. Value proposition adds value to the existing offerings and creates a competitive advantage for the organization. 

Porter’s five forces analysis

The five force model of Porter helps the organization in highlighting the external factors of an organization. (Eskandari,2015) These forces help the organization in showing the ability regarding competitors. These factors act as the driving force for the competition, by generating of business with the help of competitive forces.The factors that are included in the analysis model are the bargaining power of buyers, suppliers, rivalry among competitors, a threat of new entrants and the threat of substitute products.

Bargaining power of suppliers
The bargaining power of suppliers reflects the bargaining power of buyers. This factor focuses on the two main points. The first point is the size and intensity of suppliers, and the other one is the differentiation of materials that have been supplied to the suppliers concerning competitors. HSBC uses the charging market strategy with differentiated prices that will vary according to supplier’s needs and demands.

Bargaining power of buyers
The value has been created by the organization in the eyes with the help of customers. If the customers are delighted and satisfied it will create a value proposition for the company. Porter five force model also focus on the buyer concept in the competitive advantage. (ArabianBusiness.com. (2018) This force plays the role of concentrating the customers according to their demands.HSBC manage the customers by maintaining customer loyalty by providing the best services in the Gulf area, which make them the leader in the banking industry. 

Rivalry among competitors
In any form of business, the existence of competitors is always there which act as an opportunity for the organization in creating the differential image in the market. In the same way, HSBC also has many rivals and competitors in the banking and financial sector. (Dälken,2014) For coping up with the existing competitors, HSBC used the differentiated strategy for ensuring its leadership position in the market between the competitors.

Threat of new entrants
HSBC is facing many threats from the local banks of Oman, as the natives believe more in those banks. In spite of that many other global banks tried to enter the country because of highly diversified and lucrative market conditions in the financial sector. Large and global competitive banks like Bank of China and ABC bank of China seek to enter in the gulf market, and for managing the threats from these banks, HSBC is creating high standards for the competitors by making the strong brand image, that helps the bank in retention of more and more customers. 

Threat of substitute products
HSBC is well aware of the fact that the competitors will provide better and new products and services in the market. These possible threats allow the organization to work harder for the sustainability of market position. The company is also focusing on the strategy of focussing on four distinctive customer segments, through which the company will satisfy the needs of each customer by decreasing the impact of other competitive products.

Ethical and Corporate Social responsibility measures

HSBC bank in Oman plays an important role in the Omani Community, by adopting the Corporate Sustainability Program in education, community and environmental projects. (Hsbc.com.kw.2018) The company has made the partnership with “Globe” program in which the volunteers of the company have visited schools that are linked with “Globe” in the areas of Muscat, Batinah, Dhahira, and Dhakhliyah, for motivating the students for playing an active role in the protection of resources of Earth, among which the most important is the water. 
The organization believes in the concept of ethical responsibility in the more sustainable manner by addressing the issues which help in the long-term success of the company. (Crane,2016) As an ethical organization, the main concern of the bank is to address the expectations of the shareholders, employees and, customers by investing in a responsible way, by avoiding the projects that will act as the social and environmental damage. (Trevino,2016) In the year 2001, the company concern in light of worries around promoting to youngsters and existing science on the age when kids distinguish and comprehend publicizing thought processes, they kept from publicizing to kids under eight years old where they are most of the group of onlookers.
HSBC yearly Global People Survey goes about as an estimation of representative engagement and fulfillment. (Abe, 2014)With a 91% reaction rate in 2009, their workers consider the review important. In 2009, 77% of representatives said they felt sure that HSBC is moving the correct way and 83% said that they were pleased to work for HSBC.HSBC bank is in support of Dar Al Atta, a charity organization, in which the support will be provided to the underprivileged children and Ramadan Community. (Vitell,2015) In this way, the HSBC bank in Oman is committed towards the fulfillment of ethical responsibilities towards its stakeholders by adopting the CSR initiatives by contributing to the social and economic development of the country.  

Reflective Summary 

Throughout the case study of HSBC Bank, I learned a lot. First of all, I learned about the HSBC Bank and its growth and performance. It is quite interesting that despite the slowdown in the economy the bank has performed very well and registered as high as 30.7 % growth rate in its net profit. The growth rate in the net profit was below 2%. The non-performing loan has also been reduced by the government.  The growth in the gross loan is also very high as compared to the previous year. The growth rate of the gross loan was 1.8% in 2015, but it increased significantly in 2016 and reached as high as 16.8%. Therefore, we can say that the growth and performance of the HSBC bank are excellent. I also learned about the internal as well as the external environment of the HSBC Bank. It is very essential to know the internal and external environment to analyze the capabilities of the organization. The micro and macro environment of the business tell much about the capabilities of the organization and its scope to operate in the domestic as well as international market. As I analyzed the internal environment of HSBC Bank I got to know that the Bank has maintained well and strong relationship with its suppliers, customers, and fulfilling the interest of the shareholders. Apart from this through the SWOT analysis, I came to know the strengths and weaknesses and opportunities and threats of the bank. Through the SWOT analysis, we can improve the performance the organization by maximizing the strengths and minimizing the weaknesses. It also provides the scope or opportunities to expand the business. Besides this, I also came to know how to gain a competitive advantage in this competitive market. Competitive advantage is necessary to sustain the market and be profitable. The HSBC Bank has a competitive advantage due to its compatibility know how. The HSBC Bank is also performing its social responsibilities. The Bank has introduced several programs such as "Protecting our World, Protecting our Resources" which aims to make the student aware about the importance of playing an active role for protecting the earth as well as its resources, "Kid's Read" which aims at encouraging the children to enjoy the reading outside the classroom. 

Recommendation 

The following are the recommendation to HSBC Bank;
The economy of Oman is very fluctuating therefore the bank should adopt "wait and see" approach to deal with the fluctuation and to escape from the economic downturn. The bank should go for risk analysis and risk management as well as crisis management before entering into a new venture. Globalization is an opportunity as well as threats to the organization because globalization opens scope for a new entrant to enter the market (Musaev et al., 2015). It increases the level of competition. Therefore, the bank should be careful in the international market from the new entrants. The bank should also fulfill the cultural requirement of the country to avoid any issue from the people. The bank should also follow the legal requirement of the government to avoid any legal action by the government against the bank (Musaev et al., 2015). 

 

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References 

  • Singh, D., & Fida, B. A. (2015). Technical efficiency and its determinants: An empirical study on banking sector of Oman. Problems and Perspectives in Management, 13(1), 168-175.

  • Al-muharrami, S., & Murthy, Y. S. R. (2017). Interest Banking Spreads in Oman and Arab GCC. International Journal of Emerging Markets, (just-accepted), 00-00.

  • Prajogo, D. I. (2016). The strategic fit between innovation strategies and business environment in delivering business performance. International Journal of Production Economics, 171, 241-249.

  • Mishra, D., Rabi, N., Rath, D. P., & Al Yahai, Q. (2014). Concentration and Competition in Oman's Banking Sector Implications for Financial Stability.

  • ElMassah, S. S. (2015). Islamic Economy Option: SWOT Case Study Analysis.

  • Musaev, E., & Yousoof, M. (2015). A review on internet banking security and privacy issues in Oman. In ICIT 2015 The 7th International Conference on Information Technology(pp. 365-369).

  • Hsbc.com.kw. (2018). HSBC Corporate Social Responsibility Oman. [online] 

  • E. Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), pp.32-45.

  • Eskandari, M. J., Miri, M., Gholami, S., & Nia, H. R. S. (2015). Factors Affecting The Competitiveness of The Food Industry by Using Porter's Five Forces Model Case Study in Hamadan Province, Iran. Journal of Asian Scientific Research, 5(4), 185-197.

  • Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.

  • ArabianBusiness.com. (2018). HSBC's rich pickings in Qatar. [online] Available at: http://www.arabianbusiness.com/hsbc-s-rich-pickings-in-Qatar-502508.html [Accessed 8 Jan. 2018].

  • Dälken, F., 2014. Are porter’s five competitive forces still applicable? A critical examination concerning the relevance of today's business (Bachelor's thesis, University of Twente).

  • Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.

  • Trevino, L.K., and Nelson, K.A., 2016. Managing business ethics: Straight talk about how to do it right. John Wiley & Sons.

  • Vitell, S.J., 2015. A case for consumer social responsibility (CSR): Including a selected review of consumer ethics/social responsibility research. Journal of Business Ethics, 130(4), pp.767-774.

  • Abe, M. and Freeman, N., 2014. The 3Cs for Responsible Banking in Asia and the Pacific: Corporate Governance, Corporate Social Responsibility, and Corporate Sustainability.

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