1. Why do businesses should think about international expansion strategies?

Expanding the business model to overseas countries brings multiple benefits for the firm:

- Increased market size: Businesses can get access to additional customers, which also
means potential additional revenue. Though having to manage different customer tastes
and cultures, but it can help to increase the firms’ size and performance. Not only does it
offer higher returns, but it also reduces the risk for the firm while operating. For example, if
one of the regions does not make profits, the others can fill in the loss.

- Economy of Scale and Learning: By expanding the number of markets in which they
compete, firms can enhance their ability to reduce costs, for instance, by outsourcing some
activities and exploit the core competencies and international markets. Obviously, resources
and knowledge can be shared between network partners across country borders, eventually
help the firm to produce higher quality products at a lower cost.

- Location advantages: Lower cost labor, energy and other natural resources are the things
that firms can take advantages of.

- Technology: bringing the business abroad means that there are many opportunities to
adapt and get access to the development of technology at the other country.

- Life cycle extended: as the cost of manufacturing new products are high, firms need to
expand to other countries so that the products are available to be sold in a longer among of
time before having to coming up with other new products.

- Investment opportunities: firms could attract international investment and take advantage
of incentives offered by many governments when doing business in their countries.

- Product diversification: doing business in a another country with different culture, climate,
lifestyle,… may be a good chance for the firm to come up with brilliant new ideas for
product development.

2. By making decision to become "the world's local bank", which international strategy
(global strategy, multi-domestic strategy or transnational strategy) has HSBC chosen? 
Explain why?   

HSBC started off with multi-domestic strategy but in 1991, it moved its strategic orientation
to transnational strategy. The company’s headquarter provided decisions of basic functions,
such as strategic planning, financing planning, financing control and human resource
management.
Later on, in 1998, HSBC changed its chairman, and the company started to become a strong
transnational company.

HSBC overlapped its customer groups in order to reduce its costs by expanding economies
of scale and boosting efficiency. Its intention was to reach out to the world and be more
centralized in terms of sharing best practices such as product development, management
and marketing. At the same time, HSBC was still aware of its local responsiveness. For
instance, the company can now exploit a Sharia-based Islamic finance product for
communities in regions such as Britain or Indonesia.

The risk and credit function of the corporation produced global group lending standards
based on country, sector, line of business, financial instrument, and counterparty bank
ratings. This centralized technique to loan money around the world replaced the traditional
method. The principles are based on a global strategic perspective. All transactions worth
more than $50 million were sent to London for approval to see if they matched the sectoral
and business risk and regulatory requirements. HSBC, which is known for being thrifty and
risk-averse, selects investments based on the criteria established in the guidelines, as
opposed to the competitors, which assigned risk limits geographically and left local
managers to decide.

Next, HSBC understood in 1998 that their decentralized marketing model had reached its
limits. As a result, they devised a new global marketing strategy. The new strategy's global
vision was to build a single recognizable brand by using the bank's acronym. HSBC used
IBM as an example of how it wants to be remembered in the future. The campaign "The
world's local bank" was launched by HSBC in 2002. They advertised using the acronym for
global recognition on the one hand, but they also made posters portraying the typical local
connotations of everyday acts on the other hand, to cater to local demands.

In 2000, the company’s chairman Bond planed that different divisions and main countries
work together for its most lucrative customers. Not only should customers be served
locally, but also with this transformation the most valuable customers were served
globally by changing operational procedures at HSBC.

Finally, the HSBC International Managers program has evolved into a transnational program
throughout time. The initiative began by sending bankers from the United Kingdom abroad
to gain expertise and foster information sharing among the company's managers. However,
by 2003, the program had transitioned to a high degree of international diversification. This
program not only trained London bankers, but also talented people from all around the
world. This improves the local banking service while also enhancing knowledge sharing
within the organization and generating fresh ideas from the enrichment of the more
diversified program members.