A project presentation for Strategic Management

The worlds Local bank

INDUSTRY OVERVIEW

INDUSTRY STRUCTURE
Industry categorization
Public Sector Banks-225 Private Banks-28 Foreign Banks-33

Highly Fragmented industry

 Nationalized Banks
Market leaders due to Size and Penetration Have come a long way from being slow-moving banks to a fast track approach

 Private Banks
Differentiate on level of service they provide to customers Wide portfolio of products Aggressive Marketing Concentrated in High growth Urban areas Challenging PSBs dominance

 Foreign Banks
Concentrated in Metros Initially Concentrated only on premium customers Need felt to cater to wider markets

Regulatory Implications
Regulatory restrictions regarding branch expansions Caps by RBI on holdings in PSBs and Private banks By April 2009, RBI plans to remove these caps Restriction on voting rights

KEY SUCCESS FACTORS

Reach and Penetration Wide Product range Relationship Marketing Expertise of Service Provider Information Technology

Company History

 Leading global player in Banking and Financial services industry Third largest bank in the world in terms of market capitalization Range of Financial Services
personal financial services, commercial banking, corporate investment banking, private banking and

other related businesses.

 Established in 1865 to finance the growing trade between Europe, India and China Acquisition of the Mercantile Bank and the British Bank of the Middle East (BBME) in 1959 laid the foundation for the present day HSBC Group. The HSBC Holdings PIc, formed in 1991 created a holding company for the HSBC group to bring its various subsidiaries under one umbrella.

 The acronym HSBC and the red hexagon symbol to enhance recognition of the Group and its values among customers, shareholders and staff. HSBC identity carried the caption of 'The World's Local Bank,' emphasizing the Group's experience and understanding of a large variety of markets By 2000, HSBC had banking network spanning six continents, comprising over 9,500 offices in 79 countries, serving nearly 100 mn customers everyday.

 HSBC introduced India's first automated teller machine (ATM) in 1987 Managing the Value strategy Strengths
Diversity Adaptability Resilience and Commitment to its customers

Key Challenges - 2001

Lagging behind local sector private banks and other foreign banks

Assets Standard Chartered

Citibank

Deposits 180.03
177.43

Advances 130.42
126.29

Income 28.48
27.35

293.12
252.4

HSBC
ABN Amro

209.1
93.84

128.01
50.22

82.02
54.04

19.62
9.96

 Conservative bank lacking competitive spirit.

Amount of loans and advances Retail products, Mergers and Acquisitions

Competition from PSU banks because of consolidation in the banking industry.

ING buys south based Vysya bank

CHANGING PHASE OF HSBC

In 2002, Niall S K Booker was appointed Group Manager and Chief Executive Officer (CEO) of the HSBC Group in India. He found laidback work culture was the reason for the lackluster financial performance of the bank.

He gave a new direction to the bank by launching a major restructuring program.

He aimed at making HSBC more marketdriven and customer-oriented.

KEY COMPONENTS OF RESTRUCTURING

New work principles Downsizing Organizational reshuffling and

Focus on growth areas

NEW WORK PRINCIPLES

Work culture was considered most bureaucratic. Performance bonuses in all departments were disproportionate to performance.

Proportion of fixed pay for an HSBC employee was high while the variable pay component was relatively low compared to other private sector and foreign banks.
A Customer Relations Team was formed to follow up leads on products like wealth management, home loans, credit cards etc.

DOWNSIZING
Prime focus of the downsizing was not just reducing staff, but hiring the right people. Having the right people in the team is inarguably more important than having the right strategy, because the right people will in time come up with the right strategy. Aimed at making HSBC more agile to meet market demands and better customer service through skilled and motivated personnel The bank wanted to bring down the average age profile of staff to less than 40

FOCUS ON HIGH GROWTH AREAS

It did not foresee the growth in retail banking and hence was the late entrant in each of the financial services segment like the credit cards, home loans, auto loans, insurance etc. HSBC was taking a reactive approach and competed by offering the products similar to the ones offered by the other players. It recognized that taking the competition head on with the existing players will cause a drain on the resources and would not bring in the desired results

Identify what is it that you wish to sell

Research your competition in that area, see what they are doing and where you are different

Focus on YOUR difference

Unique Segmentation Model

Actual Value Strategic Value Serving Value

SEGMENTS
Private Clients(Rs1.5cr) Premier (Rs 25lacs) Power Vantage (Rs 1 lac)

Mass Market (Discontinued)

STRATEGY
Focus on Relationship marketing and not acquisition marketing Innovative products and best of the service in Industry Retention marketing Cross-selling strategy

STRATEGY
Insurance- Alliance with TATA AIG Home Loans- Alliance with South City Credit Cards- Alliance with WIAA

Corporate and Investment Banking

The corporate banking division is split into two parts:
Corporate and Investment Banking and Markets (CIBM) and

Commercial Banking

Corporate and Investment Banking and Markets (CIBM)

Concentrated on providing customized financial solutions to major clients.
Provides the private and public sector government clients with strategic and financial advise on: Mergers and Acquisition. Equity Capital Markets. Privatisation.

Corporate and Investment Banking and Markets (CIBM)

The current disinvestment and the consolidation issues in the PSUs have provided immense opportunity. The business has not being restricted to the government players but also includes the private players.

Commercial Banking
Provides financial services to the small and medium term enterprises (SMEs)
SMEs are widespread and offer more returns. Serviced mostly by cooperative banks, money lenders and small finance companies. HSBC used a different strategy and also, launched unsecured credit facility.

SWOT

Strengths
Focused

Weaknesses business and service

Network

portfolio
Quality

of service marketing

Relationship

The Worlds Local Bank Customer Retention Marketing

i.e. few branches and no penetration Marketing strategy- seen as a complacent player

product innovation and customization

Expertise

Opportunities
Can

Threats

act as an advisory to various Strong competition from companies in the ongoing phase of public sector banks consolidation Competition from private Scope in premium segment players
RBI

regulations Sector

RBI

Insurance

regulations limiting expansion

RECOMMENDATIONS
Increase network of Branches Focus on high-margin areas Focus on wealth management Business Process Outsourcing for International Operations Leveraging the Software Development advantage

THANK YOU