Question

What did you learn from HSBC’s case when applying concepts and theories from this chapter?( I want more 600 word)

PROFESSOR'S GUIDANCE FOR THIS WEEK'S LE:

You should know that HSBC has always been one of the most controversial banks worldwide. As an example, one can refer to HSBC to pay $101.5 million to settle fraud charges. Such a large global bank is worth a fair amount of investigation before attempting to post.

CASE STUDY HSBC in 2015: Complex Global Operations and Downsizing Originally known as Hong Kong Shanghai Banking Corp., HSBC was founded in Hong Kong and Shanghai in 1865. During the past 150 years, HSBC grew by leaps and bounds and became one of the largest banks in the world. In 2014, HSBC had 6,300 offices in 75 countries and was headquartered in London, U.K. During the same year, HSBC was rated the second largest bank in the world with total assets of $2.68 trillion after Industrial and Commercial Bank of China ($2.95 trillion). Other top banks on the list included Deutsche Bank (Germany), Credit Agricole (France), BNP Paribas (Spain), Mitsubishi UFJ Financial (Japan), Barclays (U.K.), and Chase (U.S.). The pace of change and competition in the global banking industry is always dynamic and fierce. In emerging markets and developed countries, HSBC continued to be a visible brand name and dealt with the industry's traditional retail sector, commercial banking, global banking, and global private banking. In 2014, HSBC's market capitalization stood at $176.44 billion with revenues of $74.59 billion, and it employed 266,000 workers worldwide. No wonder HSBC's operations remained in major parts of the world and its main revenues came from commercial banking, retail banking, wealth management, and private banking During the 2008 global financial crisis. HSBC did lose money but was not bailed out in Europe and Asia and remained a visible business entity in the banking industry. The financial crisis created havoc in the banking industry, which witnessed systematic distress as well as spillover effects. The crisis also affected HSBC, which ended up losing money and custom- ers. Unlike American banks, HSBC's operations were somewhat spared, but growth remained stagnant during this period. The bank closed its money-losing operations and sold a few assets. This was a major disruption in HSBC's s history and weakened the bank's well-established ness model. To deal with the 2008 financial crisis, HSBC embarked on a major reorganization that changed its strategy, corporate structure, and growth patterns. In 2011, HSBC trimmed its North American operations because of losses in the area of subprime lending.* At the same time, SBC started expanding in emerging markets of Asia. China was selected to be the bank's ma- jor market for future growth. Other reorganization took place that aimed at mostly downsizing and trimming operations. In February 2012, HSBC announced its financial results and said the bank had increased s net by 27 percent. This was clearly the result of HSBC's 2010 restructuring plan, which was in the post-financial crisis period. Whereas HSBC trimmed its operations in North America, the bank's k's Asian markets witnessed a good increase in revenues because of growth in emerging markets.' Financial Times called HSBC "the world's Asian bank." No wonder HSBC planned a major expansion in China and announced increasing its share in hina's Bank of Communications. HSBC also expanded its branches in China from 110 locations to 800. This was a major part of the bank's reorganization that was initiated by HSBC's CEO Stuart Gulliver and his team from 2009 to 2010. Although competition was heightened because of the arrival of local and multinational banks. mar markets were available to financial institutions that carried efficient business models and networks. Because of its long history and operations, the bank's restructuring initiatives resulted in tangible growth and expansion. In a special research report ("The World in 2050: Quantifying the Shift in the Global Economy"), Karen Ward, HSBC's chief economist observed: Nineteen) of the 30 largest economies will be emerging economies, the emerging economies 1 ----...LL-L---- I.L. I. ------ 30 (331 / 501) 00 2

Answer 1

HSBC had mechanistic structure prior to 2008 global financial crises then HSBC had to adopt organic structure to fit it’s strategies to remain sustainable and profitable in global banking sector. During the global financial crises in 2008, HSBC was loosing money and customers like other bank and financial services. They had to sell few assets and close money loosing operations to remain a visible business entity. It was identified that HSBC’s well-established business model was under threat and it was time to establish organic business structure.

Lets look at the difference between mechanistic and organic structure -

Mechanistic structure is rigid and inflexible where as an organic structure is a flexible. Let’s compare these two structures-

Mechanistic Structure	Organic Structure
Employees are assigned for specific tasks according to their speciality	Tasks and roles are less rigidly defined
A well-defined hierarchy of authority	Decision making is more decentralized
A system of procedures for dealing with work situations	Departmental boundaries are flexible
Relations among staff are impersonal	The atmosphere is more collegial

HSBC uses global geographic structure for its foreign operation after 2008 when they realized HSBC’s “World Local Bank” model was not working. Global geographic structure allows to create divisions to cover geographic areas. Regional managers are responsible for the operation and performance of the countries within a given region. They are familiar with the local cultural environment and government rules and regulation. In this structure, the focus is on marketing and adapting products to local requirements. This is the reason why HSBC succeeded in Asian market.

HSBC structure continued to change overtime with the growth, diversity and type of strategy what was determined by the regional management when they decided to increase its presence in specific market. The structural evolution that HSBC embarked on, it is called stages model. It has been successful for HSBC and the overall result are evident in the case study where it states HSBC increased its branch number from 110 to 800 in China.

Even though HSBC adopted organic structure, over the time it became a challenge to maintain this due to expansion of HSBC’s business in emerging market in Asia. Different areas of the business operation tend to become more complex and puzzling in other word mechanistic when HSBC was expanding. It is clearly evident in the case study that due to poor monitoring system in 2012, HSBC had to pay a fine of $1.92 billion to U.S regulators for money laundering problems in Mexico. Also in 2015,it was disclosed that HSBC unit in Switzerland had been involved in tax fudging. As a result of these development HSBC was forced to trim down it’s operation.

Learning objective

• Company needs to have organic structure to fit with its strategy. The choose of structure also should be contingency based such as taking in to consideration the size of the firm, appropriate technology, organizational environment, geographic dispersion, and business practices.
• Geographic structure is a proven model to succeed across the regions.
• Senior Management needs to focus on strong monitoring system at all time and specially while corporate expansion is taking place.

PLEASE LEAVE A LIKE. IT HELPS ME A LOT. THANK YOU!!!