Prepared by Syahputra 808909 Muhammad Yushar Mustafa 807312

Case 14 :
HSBCs Internationalization Strategy

May 20, 2011

Video

History
HSBC is named after its founding member, The Hongkong and Shanghai Banking Corporation Limited, which was established in 1865 to finance the growing trade between Europe, India and China.

The bank's new head office in Hong Kong (1935) and the new buildings at major branches such as Bangkok (1921), Manila (1922) and Shanghai (1923).

The purchases of the Mercantile Bank and the British Bank of the Middle East in 1959 took HSBC into new pastures.

In the 1980s, the purchase of Marine Midland Bank in the US.

History
CONTND in UK,HSBC made a recommended offer for full ownership of Midland in July 1992 and HSBC became headquartered in London.

In November 1998 HSBC announced the adoption of a unified brand, using HSBC and the hexagon symbol everywhere it operated, with the aim of enhancing recognition of HSBC by customers, shareholders and staff throughout the world.
The slogan the worlds local bank was introduced in 2002.

Fast facts
Headquartered in London, HSBC is one of the largest banking and financial services organisations in the world.

Its international network comprises some 7,500 offices in 87 countries and territories in Europe; Hong Kong; Rest of Asia-Pacific; the Middle East; North America and Latin America.

Listings on the London, Hong Kong, New York, Paris and Bermuda stock exchanges, shares in HSBC Holdings plc are held by over 221,000 shareholders in 127 countries and territories. The shares are traded on the New York Stock Exchange in the form of American Depositary Shares;

Fast facts
CONTND HSBC provides a comprehensive range of financial services to around 95 million customers through four customer groups and global businesses: Personal Financial Services (including consumer finance); Commercial Banking; Global Banking and Markets; and Private Banking;

HSBC's earnings are diversified geographically and by by customer group and global businesses

HSBCs Core Business

Personal Financial Services : Personal loan, Credit Card, Home Buying, Saving & Investing, Retirement Planning, Insurance

Commercial Banking : Receivables Finance, Business Insurance, Trade and Supply Chain, Business Accounts, Foreign Exchange, Business Direct

HSBCs Core Business

CONTND Global Banking and Markets: HSBC Global Banking and Markets is an emerging markets-led and financing-focused business that provides tailored financial solutions to major government, corporate and institutional clients worldwide.

Private Banking : Private banking is about much more than traditional banking services of deposits and loans. It's about providing the personal one-to-one service that is essential after a certain level of wealth. To open an account with HSBC Private Bank, you need to have at least $2 million USD in liquid assets, excluding your primary residence.

HSBC SWOT Analysis

Strengths
International Finance. Since HSBC is a multinational company itself, it is well-qualified to advise other companies on aspects of international business. With offices around the world, for the cosmopolitan client, HSBC often cannot be beaten in this area. HSBC knows how to succeed in M&A and organic and effective growth-- it was mostly an Asian bank until it took over a UK bank in 1992 and now has become the world's second-largest bank by profit. China. HSBC is the "Hong Kong Shanghai Banking Corporation" and it has 140 years of experience in China. HSBC has the largest network of any foreign bank in China and deeply understands the Chinese market and customer. In a world that is increasingly going China's way, this is quite a boon to HSBC. Listed in London. HSBC is primarily listed on the London and Hong Kong stock exchanges, which saves the company much grief in complying with new American Sarbanes-Oxley laws. Many companies have chosen to list on foreign exchanges other than America because of the expensive new regulations. Record profits 2010. HSBC experienced the most profits ever for a UK high street bank, with profits of $19.97bn for the whole year.

Cont
Weaknesses
Branding. While it is certainly a global company, HSBC came late to the game on deciding to perform an integrated marketing strategy and capitalize on its global brand. Because it had set up so many different banks in different countries at different times over a hundred year period, it set them up under different names-Hong Kong Bank of Canada, British Bank of the Middle East, HSBC Banco Roberts. Not even all of these banks, prior to 1998, carried the HSBC logo. In 1998, they were all branded together, but the previous lack of branding and the name changes may have hurt HSBC in brand recognition. Customers may have thought that HSBC was taking over their local bank and not realized that HSBC had already been serving them for decades. In any case, the re-branding was an overdue move that should have occurred before 1998.

Record profits ending. As is usually the case, record profits can only last so long. HSBC announced in December 2006 that it was doing just as well as last year, but not as well in revenues. It announced that each year, its bad debt rises. Other banks' shares fell as well on the news.

Cont
Opportunities
The Middle East, South America, and Asia. Other banks are running scared of this region. However, HSBC has run its regional business locally and been rewarded for its efforts with numerous awards and honors for the Middle East, South America and Asian market. HSBC is a trusted name there, and the company has taken advantage of Iraq's new democracy by creating a presence in the country. HSBC is the largest international bank in the Middle East. Emerging economies. In addition to the growing Chinese middle class, Brazilians and Indians are beginning to emerge as growing consumers, and therefore growing consumer spenders. Some denizens of these countries previously did not even own a bank account, but companies like HSBC are poised to move in and take advantage of the growing middle class in these areas. In places like Argentina and Turkey, HSBC experienced pre-tax profits of 50% last year. This is where it is growing the most. By investing in these countries, HSBC can offset problems it may have as spending in the US and UK declines.

Cont
Threats
Downturn in American spending. As interest rates rise and the housing boom ends, Americans are predicted to rely less on consumer credit and more on their saving skills to get by. The drop in American spending will be bad for the global economy as a whole, and HSBC will certainly be affected. In 2005, HSBC pretax profits rose 5% to $10.64bn (6bn) for the first six months of the year, largely on the rise in consumer finance for growing consumer spending. * Employees striking. Last year, British employees held a strike involving 1,500 workers at HSBC branches in London. At its annual meeting, striking workers stood outside, handing out bags of nuts and saying that they are paid "peanuts" while HSBC experiences record profits. Strikes such as this, especially in union-conscious Europe, are bad for image reasons and HSBC needs to take action to ensure that its workers are happy just as its customers are. Identity theft. With a trillion dollars in managed assets, taking over HSBC is a cracker's dream. HSBC has to remain on the front lines of security and protect its customers, at the same time reassuring them that online banking is safe. In August 2006, HSBC was accused, despite its claimed airtight security, of having left its online customers open to a security glitch for two years without fixing. Researchers at Cambridge University claimed that any HSBC account could be broken into within nine attempts.

Geographical contribution

Europe 22.6% Hong Kong 29.9% Rest of Asia Pacific 31.0% Middle East 4.7% North America 2.4% Latin America 9.4%
Total without North America : 97.6%
(*Reported Pre-tax profit for the year ended 31 December 2010)

Customer group / Global Business Contribution

Personal Financial Services 18.5%

Commercial Banking 32.0%

Global Banking and Markets 50.1%

Private Banking 5.5% Other (6.1)%
(*Reported Pre-tax profit for the year ended 31 December 2010)

Issue HSBCs Internationalization Strategy

Whatre the main global trends in the banking industry? What have been the internationalization strategies of HSBC and Citi? Why did HSBC acquire Household, and was it a good strategic move? Is HSBC strategically aligned? What can explain HSBCs relatively higher of resilience in the face of the global crisis that erupted in late 2008?

Banking Industry Trend

FIVE KEY TRENDS
GLOBAL BANKING. According to the World Bank, although many banks such as American Express, Citibank and JPMorgan Chase conduct business in multiple countries, they are relatively regional in the United States. In order to grow, the financial industry will have to infiltrate emerging markets. For companies that have a more aggressive growth strategy, the spread to emerging markets such as Africa and Asia presents unparalleled opportunities for profit and increased market share. IT PLATFORM SHARING. Network World confirms that financial service firms' business strategies must be altered for the new dynamics and intricacies of today's market. Immediate access to information and integration along product lines and geography are a must for future success. With the need to supply information to a global market, firms must decrease cost. One cost effective initiative is the use of platform sharing; like cell phone companies that collaborate with local companies in order to decrease cost and increase access, financial firms can do the same. E-BANKING. A special report from The Economist sees that with 3.5 billion people with cell phones and an expected 10-20% year over year growth, personal and business banking transactions are conducted through cell phones more and more. Thus, E-banking capability is quickly becoming an increasing requirement in order to compete in the marketplace. E-banking capabilities provide companies with essential flexibility and differentiation in the market through Internet-based service applications. MOBILE MONEY. The increase of mobile phone usage in emerging markets makes mobile money a safe, low cost initiative for the financial sector. It is an easier way to transfer money to family and friends, money is sent, and payments and withdrawals can be made without ever going to a physical bank or payment center. M-Pesa, an early developer of mobile money, concluded that mobile money "has enormous social and economic benefits." SELF-SERVICE. Self-service and the customer should be a primary focus for firms in this new financial service world, according to IBM. AppViewXS is a self-service portal firms can purchase, so customers can check the status of their account and gain instant access to available services. Customer questions and concerns are addressed more quickly, states an IBM representative. This technology automates many processes; the result is that staff workload is reduced while representatives operate faster and more efficiently.
Article Source: http://EzineArticles.com/3962737

Internationalization strategies of HSBC and Citi

HSBC CITI To be the leading international Funding small businesses and bank. International connectivity, micro entrepreneurs basically assumed that the major Helping companies globalize, we economic regions and financial help them diversify their revenues, hubs of the world, and the grow their earnings and create linkages that exist today in trade jobs and wealth capital flows. Focused on becoming the world's Focused on Retail Banking only digital bank to where we can achieve scale as Citi Foundation supports a a full-scale retail bank. variety of non-profit organizations Streamline some of IT processes Most of revenue came from US Most revenue came from outside US

HSBC TO ACQUIRE HOUSEHOLD INTERNATIONAL

Meets HSBCs stated objective of growing consumer assets, adding a significant business with over 50 million customers worldwide and total owned assets as at 30 September 2002 of US$101 billion Improves the geographic balance of HSBCs earnings, significantly increasing the contribution from North America. Delivers national coverage in the USA for consumer lending, credit cards and credit insurance with approximately 1,400 offices in 46 States. Creates a top 10 credit card player globally. Offers exciting opportunities to extend Households business model into countries and territories currently served by HSBC. Broadens the product range available to the enlarged customer base. Provides the opportunity for significant funding, cost and revenue synergies.
http://www.hsbc.com/1/PA_1_1_S5/content/assets/news/hsbc_11142002.pdf

Conclusion

Dont put your eggs in one basket

THANK YOU