HSBC bank in the Middle East is in operation since 1959 when it acquired the British bank of the Middle East. The HSBC bank in London was founded in 1889 and it has occupied the major share in the banking industry within the country. The bank has achieved rapid expansion in the various regions of the Middle East by opening its branches in Kuwait, Muscat, Dubai, Bahrain, Saudi Arabia among others (Wilson & Gilligan, 2005). However, the bank has also eliminated its representation in the majority of regions such as Iraq, Syria, and Libya during 1960s and 1970s because of the nationalization of banking sector. The group has also entered the local alliances with the Saudi British Bank and also with Hong-Kong Egyptian bank SAE. The head office of the bank was transferred to New Jersey in 1994 and it was renamed as HSBC bank Middle East in 1999. The group has also witnessed an increment in its shareholding pattern of 94.5% in 2001. Considering the products and services of HSBC bank, it has been categorized into business banking, corporate banking, global banking and markets (HSBC Bank, 2012).
PESTEL analysis is a framework used to analyze the macro-environment or the external environment of a business. The macro-environmental factors (PESTEL) include “political, economic, social, technological, environmental and legal factors” (Wilson & Gilligan, 2005). Thus, a PESTEL analysis examines how each of these factors influences the performance of businesses in a particular market. The aim of the analysis is to enable businesses to take advantage of available opportunities, as well as to mitigate the effects of threats in the industry. The macro-environmental factors can be explained as follows.
Macro-environmental Factors that Affect HSBC Bank
Economic Factors. UAE has been experiencing dismal economic growth since 2007. In 2009, the country entered a recession due to its huge public debt and the effects of the 2008/2009 global financial crisis. Moreover, the country reentered a recession in the first quarter of 2012.
The economic factors have affected HSBC Bank and the banking industry in the following ways. Poor economic growth has reduced the demand for loans from commercial banks, such as HSBC. Additionally, the default rate has increased, thereby influencing the rates of losses made by commercial banks. Thus, HSBC has been forced to limit the number of loans it can offer in order to avoid losses. The reduction in inflation rate is likely to stimulate the demand for loans offered by HSBC. This is because interest rates tend to reduce as inflation rate decreases. Finally, the recession has reduced investor and consumer confidence in UAE. Consequently, HSBC is losing its customers and investors to overseas banks.
Political Factors. The government of the UAE has been able to maintain political stability for a long time. Previous governments have been able to promote political stability by upholding the rule of law and enhancing democracy. The government of UAE intervenes in the economy by providing merit goods, such as health care, education, and infrastructure. For instance, in the 2011 budget, the government allocated more than 300 AED for the construction of railway systems and enterprise zones in order to promote exports. The government began to implement tax reforms in 2011 in order to make tax compliance easier and cheaper. The government is currently implementing a progressive tax system in order to enhance equality in income distribution. Local businesses are also supported by the government. For instance, HSBC Bank received financial assistance from the government during the 2008/ 2009 financial crisis. The current economic crisis has forced the government to implement austerity measures. This involves reducing expenditure on welfare and reducing employment in the public sector. Additionally, the government has been forced to reduce borrowing from the public in order to reduce its debts.
These political factors affect HSBC in the following ways. The tax reforms are the opportunity for HSBC to reduce its tax compliance costs. Additionally, the reduction in corporate tax will enable the bank to increase its after tax profit margin. The initiatives to promote economic growth by investing in infrastructure will increase demand for credit in the private sector. HSBC will have a high demand for its credit and savings products. As the government reduces its borrowing from the public sector, commercial banks, such as HSBC, will be left with more deposits. The bank will be able to increase its revenue by advancing more loans. The austerity measures such as job cuts in the public sector are likely to affect HSBC Bank in a negative way. This is because the demand for personal loans and deposit products such as personal savings accounts tend to decline as the level of unemployment increases.
Legal Factors. Business activities in UAE are guided by an effective legal framework. It is needed to facilitate legitimate trade and competition. For instance, a person who fraudulently obtains money from another person cannot be prosecuted if the legal system is not effective. The antitrust laws ensure that businesses engage in fair and legal business practices. For instance, the antitrust laws prohibit activities such as insider trading. This is because insider trading benefits investors with classified information about a company at the expense of other investors. Additionally, the antitrust laws prohibit using personal influence to prevent others from accessing services such as financial bailout of banks. The consumer laws ensure that clients are supplied with safe and high quality goods.
The legal factors affect HSBC Bank in the following ways. The high regulatory capital requirement means that commercial banks such as HSBC can not hold investments that increase the chances of default. However, it also limits the banks’ ability to advance loans using deposits. Thus, it is a threat to HSBC’ plans to increase revenue through advancing loans. Restrictive terms and conditions for accessing personal loans also reduce the demand for HSBC’ credit products. Finally, regulating the investment products offered by commercial bank limits HSBC’ ability to develop new products.
This entails the analysis of the immediate external environment in which HSBC Bank operates. In this regard, the analysis focuses on the HSBC Bank Online Bonus Saver products market, competitive environment, and the costs involved. This can only be achieved by continuous surveys of the HSBC Bank Online Bonus Saver product competitors’ actions in this market. Under HSBC Bank company’s strategic marketing plan/approach, it will continuously monitor potential benefits/opportunities offered by the new line of products/HSBC Bank Online Bonus Saver products to ascertain its financial viability.
HSBC Bank that is planning to launch its new product (HSBC Bank Online Bonus Saver product) should employ better marketing segmentation criteria. The criteria that a HSBC Bank company uses to classify its customers are measurable, responsive to the marketing mix, and reasonable. Therefore, the segmentation criteria that HSBC Bank should apply include economic, geographic, demographic, behavioral, and psychographic (Belch & Belch, 2009). Under economic segmentation, the market can be categorized according to the levels of income.
Geographic segmentation acknowledges different variables on climate, population growth, region, and population density. The HSBC Bank invests more on regions with more business people, high population growth, and density. Moreover, demographic segmentation relies on human variables including age, ethnicity, gender, occupation, education, and family status. These variables are different aspects and the company applies them only in areas deemed essential, in the sense that those factors do not affect the consumer choices and preference.
Behavioral segmentation enables the company to use variables such as the price sensitivity rate of usage, benefit sought, and brand loyalty. In this area, the HSBC Bank uses such attributes to improve the quality of its products. In addition, psychographic segmentation helps the company determine the consumers’ lifestyle, attitude toward the product, and the value he/she attaches to it. It can be proposed in this plan that through this segmentation, HSBC Bank is able to understand the customers’ preference and desires, thus to make informed choices during distribution of the HSBC Bank Online Bonus Saver products.
Current Product Description
HSBC Bank Online Bonus Saver product provides customers with a 0.75% variable rate. This is a gross rate that is provided to the bank customers, if they do not make monthly withdrawals. However, a 0.25 percent AER is earned by a customer when he or she makes a monthly withdrawal or closes the account.
It costs a customer 5.97 AED or more to open HSBC Bank Online Bonus Saver account. It is also necessary to note that customers earn interest at lower rates on their account balances, which are above AED 298,588.50. This product is easy to operate, because it provides customers with an adequate security platform to access their money online. The HSBC Bank Online Bonus Saver account holders are paid standard interest rates and bonuses for a calendar month in which neither a withdrawal was made nor the account was closed. Moreover, applications for this new account product can be made online.
Current Market Target
HSBC Bank is mainly targeting at the banking consumers, especially business people in the United Arab Emirates (UAE). The bank is in a strong position as it enters the UAE market because it is famous. However, competition in the country is high. Therefore, the management requires putting strong marketing in place by means of media to attract the bank to potential customers.
The HSBC Bank will develop a strong relationship with the Emmirati customers because it will offer a 10% discount off the actual price. In addition, the HSBC Bank offers online delivery to those customers who do not have enough time to transact financial services over the bank counter. For example, online withdrawals will be done at no extra cost.
HSBC Bank plans to start in a busy location that has busy business traffic. This will give the bank the chance to get many customers. The best option is to target at an area near a heavily populated territory (Loudon, Stevens, & Wrenn, 2004). The members of the business community are expected to form a large portion of the customers. The presence of different accounts will also make HSBC Bank popular. The idea of opening the HSBC Bank Online Bonus Saver account is also encouraged by higher economic statistics that show that the number of business people in UAE is increasing every year. This makes it convenient to launch the HSBC Bank Online Bonus Saver account. The increasing number of business opportunities is likely to give the HSBC Bank a new market. Although there are strong competitors in the UAE market, the usage of the HSBC Bank Online Bonus Saver account are likely to be different from those of the other banks. This will make the HSBC Bank appealing to a certain group of people. The favorable working environment that exists in UAE will make it possible for HSBC Bank Online Bonus Saver account to spread and open new HSBC Bank Online Bonus Saver accounts in different parts of the country. Therefore, HSBC Bank Online Bonus Saver account has a high probability of success in the UAE.
The HSBC Bank can also use the Matrix to predict its chances of success (Belch & Belch, 2009). The bank will evaluate all the activities it must carry out during the first stages of operation as a part of the market penetration. The bank will then develop its products to make them suitable and this will contribute to market development. After the bank has developed, it will diversify its services to other locations and also to offer additional products to customers.
In conclusion, the strategic direction of the company can be analyzed through the use of the marketing mix strategy. The 7Ps of marketing that the company applies currently include people, product, price, promotion, place, process, and physical evidence. They determine the success of the business if well articulated. In business, the 7Ps are called the marketing mix and are available to the authority, managing the company affairs (Nisbet, Thomas, & Barreti, 2003). Primarily, the marketing mix combines the product and service aspects, thereby making the 7Ps. In the case of HSBC Bank, the marketing mix is considered in the situation of HSBC Bank Online Bonus Saver product marketing. The report outlines the various ways in which the company has used the elements to improve the HSBC Bank Online Bonus Saver products and marketing plan for the business operations.
In reality, people are the most important aspect of the marketing mix, an issue that the company had recognized. For instance, the use of HSBC Bank Online Bonus Saver is capable of altering the dynamics, which surround those delivering the HSBC Bank products.
Through improved HSBC Bank Online Bonus Saver product technology, the company has provided a means of delivering new and unique products, which are intended to match many other available products. Besides, the purely new products are presumed to develop new business opportunities for the company. Some of the products they make are in line with the technological development.
Pricing of the HSBC Bank Online Bonus Saver product that HSBC Bank intends to supply is very significant in determining the overall sales volume. In addition, the pricing of the HSBC Bank Online Bonus Saver product that HSBC Bank intends to provide in the Russian market are very significant in determining the overall sales volume. This implies that the firm will need to offer better quality and affordable HSBC Bank Online Bonus Saver product, which attract more customers. As a result of the pricing strategy, the firm will be in a good position to attract and retain many clients.
Carrying out promotion is one of the means through which HSBC Bank can create awareness on its new product line. For HSBC Bank, the HSBC Bank Online Bonus Saver product will provide them with many opportunities for doing promotion to sensitize the public on the products.
HSBC Bank can create a new interaction place for their consumers so that the communication between them could be cordial and with maximum efficiency, especially considering its new product line/ HSBC Bank Online Bonus Saver products.
The issues relating to the process involve the channel through which HSBC Bank follows in delivering its HSBC Bank Online Bonus Saver products to customers. It also outlines the various ways through which the customer should follow to receive the products. In the case of HSBC Bank, the management understands and outlines the other ways of making the customers have personalized knowledge about the HSBC Bank Online Bonus Saver product that the company offers.