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analysis of hsbc

Extracts from this document...

Introduction

INTRODUCTION Every organization must interact with its internal and external environment in its day to day operations. The nature of these interactions to a great extent determines the survival of any organization. That is why every organization has to understand what is going on within and around it. These bring into focus how economic, political, legal, technological, environmental and social forces affect HSBC. While battling with these external forces, there are other internal forces which are inherent in the banking sector that affect HSBC. In view of these, the bank has some competitive advantages which have enabled it to compete favourably with other players in the industry. However, the tool used to scan the environment of HSBC to determine its success within the environment has some limitations. These limitations are equally x- rayed in the work. QUESTION 1: HSBC AND ITS MACROENVIRONMENT ECONOMIC FACTORS It is a known fact that every organization must interact with is external environment during the course of their business. Economic factors are basically those factors that relate the organization of money and resources within HSBC especially in terms of the production, distribution and consumption of their financial services. This will be discussed under sub headings like GNP trends, interest rate, money supply, inflation, unemployment, disposable, income. GNP Trends Gross National Product (GNP) is the total value of all final goods and services produced within a nation in a particular year, plus income earned by its citizens (including income of those located abroad, minus income of non resident located in that country). The UK economy grew at its fastest rate for two years in the third quarter of 2006. It grew by 0.7% between July and September. This takes the annual growth rate up to 2.8%. It will further increase following the announcement of 5% interest rate by the Bank of England. This will make borrowing more expensive, and less attractive to investors who would refrain from borrowing for investment purposes. ...read more.

Middle

The level will affect their willingness to transact or not to transact. QUESTION 2: HSBC AND ITS MICROENVIRONMENT Competitive Rivalry This describes the intensity of competition between existing firms in an industry. It is true that highly competitive industries generally earn low returns because the cost of competition is high. In the banking industry which is the focus of discussion, competition brings about HSBC offering customers the most attractive combination of performance features, introducing new products, or creating a stronger brand image than competitors like Barclays, TSB Lloyds, RBS, and NatWest etc. The industry is not dominated by two or three banks that are battling to achieve market leader status, and the rules of the game are well established. In this case, the rivalry is not so intense. However, Customers can easily switch between some products. Intense rivalry is likely when customers in the banking industry can easily switch to other banks. In these situations, the banks will be vying for market share. The market for banks is not growing too fast. The banks are unable to grow their market without taking market away from other competing banks. In this situation, rivalry is more likely. There is no exit barrier in the industry which will make rivalry intense. The brand identity brings about intense rivalry as other competing banks will be forced to outperform their rivals by adopting active strategies. Their products are basically the homogenous. This will most likely make rivalry intense. Entry barriers The retail banking market in the UK is still extremely fragmented and characterized by a range of entry barriers. These barriers which are artificial result from specific regulation or conduct of banks and concern, for instance, access to networks or discriminatory fee structures. Some banks have products which are associated with switching cost. This cost contribute to clients holding their accounts for about a decade and restricting customer mobility which is essential to help realize the benefits of a competitive banking market. ...read more.

Conclusion

That's, recurring in nature. Most organizations at that time were positioned for survival and focused on ensuring that profits making was their overall objective. Since business entities (Companies or Organisations) operate in a larger macro environment. There are forces and trends that shape the opportunities or pose threats to their survival and growth. These forces represent uncontrollable elements that business entities ought to monitor and respond to. In his harsh external environment, the organisations have to use the most advantageous strategy to attain their purpose. Though the model still remains significant, its relevance is beginning to wane. Here, are the limitations of the five forces. Assumption of classic perfect market The model assumes that every organisation operates in a classic perfect market. This is a market that is charaterised by the following; all firms selling an identical product, all firms are price-takers, firms have a relatively small market share, buyers know the nature of the product being sold and the prices charged by each firm, the industry is characterised by freedom of entry and exit. The model finds it exceedingly difficult to have an important effect in a regulated economy. Idea of competition The model does not actually take into cognisance the strategies like planned coalition, electronic linking of information systems of all companies along a value chain, virtual enterprise networks etc. This is because the model is based on the initiative of rivalry where firms try to gain competitive advantages over other firms in the industry as well as over suppliers or customers. Simple market strucutre The model is best suited for simple market structure analysis. It is not a good tool for analysing complex industries associated with multiple interrelations, product groups, by products and segments. This is because shallow spotlight on particular segments of the company will bear the risk of not identifying important elements. Static market strucutre Finally, the model assumes that the market structures are relatively static. But, today's market structures is very dynamic as it is characterised by advancement in science and tecnology, active entry into the market and interatcions along supply chain have changed business models. ...read more.

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