HSBC (HSBA) SWOT Analysis / TOWS Matrix / MBA Resources
Regional Banks
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for HSBC (United Kingdom)
Based on various researches at Oak Spring University , HSBC is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels,
increasing transportation and logistics costs, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that HSBC can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the HSBC, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which HSBC operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of HSBC can be done for the following purposes –
1. Strategic planning of HSBC
2. Improving business portfolio management of HSBC
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Regional Banks sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of HSBC
Strengths of HSBC | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of HSBC are -
Ability to recruit top talent
– HSBC is one of the leading players in the Regional Banks industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.
Organizational Resilience of HSBC
– The covid-19 pandemic has put organizational resilience at the centre of everthing HSBC does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– HSBC is one of the most innovative firm in Regional Banks sector.
Successful track record of launching new products
– HSBC has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. HSBC has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Strong track record of project management in the Regional Banks industry
– HSBC is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of HSBC in Regional Banks industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- HSBC is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at HSBC is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at HSBC emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Regional Banks industry
– HSBC has clearly differentiated products in the market place. This has enabled HSBC to fetch slight price premium compare to the competitors in the Regional Banks industry. The sustainable margins have also helped HSBC to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– HSBC has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – HSBC staying ahead in the Regional Banks industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Regional Banks
– HSBC is one of the leading players in the Regional Banks industry in United Kingdom. Over the years it has not only transformed the business landscape in the Regional Banks industry in United Kingdom but also across the existing markets. The ability to lead change has enabled HSBC in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy of HSBC comprises – understanding the underlying the factors in the Regional Banks industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Training and development
– HSBC has one of the best training and development program in Financial industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Weaknesses of HSBC | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of HSBC are -
Capital Spending Reduction
– Even during the low interest decade, HSBC has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Regional Banks industry using digital technology.
Increasing silos among functional specialists
– The organizational structure of HSBC is dominated by functional specialists. It is not different from other players in the Regional Banks industry, but HSBC needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help HSBC to focus more on services in the Regional Banks industry rather than just following the product oriented approach.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of HSBC supply chain. Even after few cautionary changes, HSBC is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left HSBC vulnerable to further global disruptions in South East Asia.
Slow to strategic competitive environment developments
– As HSBC is one of the leading players in the Regional Banks industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Regional Banks industry in last five years.
Need for greater diversity
– HSBC has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Interest costs
– Compare to the competition, HSBC has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Skills based hiring in Regional Banks industry
– The stress on hiring functional specialists at HSBC has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative at HSBC, in the dynamic environment of Regional Banks industry it has struggled to respond to the nimble upstart competition. HSBC has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of HSBC products
– To increase the profitability and margins on the products, HSBC needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners in Regional Banks industry
– because of the regulatory requirements in United Kingdom, HSBC is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Regional Banks industry.
No frontier risks strategy
– From the 10K / annual statement of HSBC, it seems that company is thinking out the frontier risks that can impact Regional Banks industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
HSBC Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of HSBC are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Regional Banks industry, but it has also influenced the consumer preferences. HSBC can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help HSBC to increase its market reach. HSBC will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Manufacturing automation
– HSBC can use the latest technology developments to improve its manufacturing and designing process in Regional Banks sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Building a culture of innovation
– managers at HSBC can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Regional Banks industry.
Creating value in data economy
– The success of analytics program of HSBC has opened avenues for new revenue streams for the organization in Regional Banks industry. This can help HSBC to build a more holistic ecosystem for HSBC products in the Regional Banks industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Use of Bitcoin and other crypto currencies for transactions in Regional Banks industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for HSBC in the Regional Banks industry. Now HSBC can target international markets with far fewer capital restrictions requirements than the existing system.
Loyalty marketing
– HSBC has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Regional Banks industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. HSBC can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. HSBC can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Low interest rates
– Even though inflation is raising its head in most developed economies, HSBC can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Leveraging digital technologies
– HSBC can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for HSBC in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Regional Banks industry, and it will provide faster access to the consumers.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for HSBC to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for HSBC to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– HSBC can develop new processes and procedures in Regional Banks industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Threats HSBC External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of HSBC are -
High dependence on third party suppliers
– HSBC high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for HSBC in the Regional Banks sector and impact the bottomline of the organization.
Regulatory challenges
– HSBC needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Regional Banks industry regulations.
Increasing wage structure of HSBC
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of HSBC.
Stagnating economy with rate increase
– HSBC can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Regional Banks industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, HSBC may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Regional Banks sector.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. HSBC will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of HSBC.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for HSBC in Regional Banks industry. The Regional Banks industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Environmental challenges
– HSBC needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. HSBC can take advantage of this fund but it will also bring new competitors in the Regional Banks industry.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of HSBC business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on HSBC demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Regional Banks industry and other sectors.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Regional Banks industry are lowering. It can presents HSBC with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Regional Banks sector.
Weighted SWOT Analysis of HSBC Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at HSBC needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of HSBC is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of HSBC is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of HSBC to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that HSBC needs to make to build a sustainable competitive advantage.