HSBC Final

Strategic Management Project HSBC Strategic Plan
Strategic Management Project
Prepared by
Bassem Mohamed Salah
Karim Mohamed Salah
Mahmoud Ahmed Hassan Mehlab
Tamer Yousef Kamal El-Din
Group B
Supervisor
Dr. Sheref Delawar
HSBC Strategic Plan Page 1

Index
Content Page
I) Current Situation
03
A. Current performance and History of HSBC 03
B. Strategic Posture 04
C. Board of Directors
06
II) Corporate Governance

06
III) Environmental Scanning: Industrial Analysis
11
A. Societal Environment 11
B. Task environment 21
C. Issues Priority Matrix 30
D. Competitive Analysis 30
E. Industry Matrix 35
F. External Factors Analysis Summary (EFAS) 38
IV) Internal Scanning: Organizational Analysis 40

A. Internal Environment: Strengths and Weaknesses 40
B. Corporate Value Chain 59
C. Internal Factor Analysis Summary (IFAS) 60
V) Strategy Formulation: Situation Analysis and Business Strategy

61
A. Strategic Factor Analysis Summary (SFAS) 61
B. Strategy Matching Phase 62

VI) Strategy Selection

65
A. The Grand Strategy Matrix for HSBC 65
B. The Quantitative Strategic Planning Matrix (QSPM) 68
VII) Strategy Implementation 69

VIII) Evaluation and control
71
IX) Appendix
73
X) References
74
I) Current Situation
A. Current performance and History of HSBC
HSBC Bank Egypt was established in 1982 as Hong Kong Egyptian Bank.
In January 1994, the Bank was renamed Egyptian British Bank under the same
shareholding structure. The Bank was rebranded HSBC Bank Egypt in April 2001,
following an increase in the HSBC Group’s shareholding from 40% to over 90% of its
issued share capital.
HSBC Bank Egypt is one of the largest multinational banks operating in Egypt
providing a comprehensive range of banking and related financial services through a
network of 56 Branches, 12 Units and 189 ATMs in Cairo, 6th of October City, Giza,
Alexandria, Sharm El Sheikh, Hurghada, Luxor, Marsa Matrouh, El Mansoura, Abo
Redees and Port Said.
HSBC has been voted 'Best Wealth Management Initiative' in the GCC for its HSBC
Premier Service by readers of The Banker Middle East magazine.
Euromoney magazine, in their prestigious Awards for Excellence 2004, voted HSBC
'Best Bank' in the Middle East as well as 'Best Debt House' in the Middle East for the
second consecutive year. HSBC was also named 'Best at Risk Management' in the
Middle East.

HSBC Bank Egypt, S.A.E. offers commercial banking and financial advisory services.
The bank provides fixed depository, current account, currency exchange, personal
credit, business loan, cash management, and trade documentation services. It also
offers project financing, bond trading, institution banking, and securities trading
services. Additionally, the bank provides mergers and acquisitions, equity, corporate
restructuring, private placements, equity raising, and public and private offering
advisory services. HSBC Bank Egypt, formerly known as Egyptian British Bank was
founded in 1982 and is headquartered in Cairo, Egypt. The company operates as a
subsidiary of HSBC Holdings plc.
The Company's banking solutions target two segments, namely personal and corporate
banking. Its personal banking services include special banking packages, account
services, loans, card services, financial planning services, savings and protection plans.
The corporate segment provides banking solutions, such as account services, payments
operations, cash management, trade services, loans and finances, treasury services,
securities, institutional and investment banking. The Company holds a 98% stake in
HSBC Securities - Egypt.
B.Strategic Posture
HSBC Vision: The world’s local bank
Mission & Strategies
Mission
- Leading in our chosen markets

- Delivering an outstanding client experience based on excellence in sales, service
and solutions
- Achieving a superior, ethically based, long-term return for our shareholders
- Building highly motivated, high-performance teams
- Creating a challenging, rewarding and fun work environment
Strategic Objectives
- increase market share through attracting a large client base

- Establish legitimate and credible competitive positioning
- Leverage Group advantages with focus on international requirements of customers
- Align business initiatives to our Global Pillars
- Improve profitability
- Use our scale and technology to deliver better and more efficient services to
customers
- To be the leading international business bank
- Grow our referral system
- Align presence with global trends
- Focus developed markets businesses on international connectivity
- Maintain financial strength
- More focus on commercial banking
Strategies
- People - Attract, retain and reward top performers

- Execution - Perform with skill and speed
- Customer-Centered - Always provide exceptional customer service
- Efficiency - Lower our costs and use resources wisely
- Profitable Growth - Grow sales and increase our revenues
- Credit Quality - Maintain credit quality and understand our role in managing
losses
- Ownership - Own our performance and our results

The HSBC Group is committed to five Core Business Principles:
1. Outstanding customer service.

2. Effective and efficient operations.
3. Strong capital and liquidity.
4. Prudent lending policy.
5. Strict expense discipline.
Through loyal and committed employees who make lasting customer relationships and
international teamwork easier to achieve.
HSBC also operates according to certain key Business values:
- The highest personal standards of integrity at all levels.

- Commitment to truth and fair dealing.
- Hands-on management at all levels.
- Openly esteemed commitment to quality and competence.
- Fast decisions and implementation.
- Putting the team’s interests ahead of the individual’s.
- The appropriate delegation of authority with accountability.
- Fair and objective employer.
- A diverse team underpinned by a meritocratic approach to

recruitment/selection/promotion.
- A commitment to complying with the spirit and letter of all law regulations
wherever we conduct our business.
- The exercise of corporate social responsibility through detailed assessments of

lending proposals and investments, the promotion of good environmental practice

and sustainable development, and commitment to the welfare and development of

each local community.
HSBC’s reputation is founded on adherence to these principles and values. All actions
taken by a member of the HSBC Group or staff member on behalf of a group company
should conform to them.
C.Board of Directors
Mr. Mohammad Al-Tuwaijri Chairman of the Board
Mr. Jacques Emmanuel Blanchet Chief Executive Officer
Mr. Robert Gray Director
Dr. Ibrahim Fawzy Director
Mr. Mahmoud Abdallah Director
Mr. Basel El-Hini Director
Mr. Robert Martin Director
Dr. Maged Gobran Director

II) Corporate Governance
Banks are vital institutions in any economy as they form an important source for
providing finance to businesses. Their role becomes more important in emerging
markets, where the majority of finance to new and existing businesses comes from the
banking sector, as opposed to finance through the stock market.
It is important to ensure that banks are properly governed “internally” and to ensure
sound governance structures to their customers “externally” in order to protect the
interests of the various stakeholders and to sustain the healthy functioning of the
monetary system in the Economy.

Egyptian banks differ in size, complexity and sophistication and, hence, the Corporate
Governance model adopted for themselves and for assessing their customers may vary
from one bank to another and from one customer category to another.
The key message is that Corporate Governance is important to banks and their clients
and the extent of application should be flexible to offer the best model for each
bank/customer according to their differing size and structure.
HSBC is committed to high standards of corporate governance. HSBC Holdings has

complied throughout the six months to 30 June 2008 with the applicable code
provisions of the Combined Code on Corporate Governance issued by the Financial
Reporting Council and the Code on Corporate Governance Practices in Appendix 14 to
the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
Limited.
The Board of HSBC Holdings has adopted a code of conduct for transactions in HSBC
Group securities by Directors that complies with The Model Code in the Listing Rules
of the Financial Services Authority and with The Model Code for Securities
Transactions by Directors of Listed Issuers (‘Hong Kong Model Code’) set out in the
Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
Limited, save that The Stock Exchange of Hong Kong has granted certain waivers
from strict compliance with the Hong Kong Model Code, primarily to take into
account accepted practices in the UK, particularly in respect of employee share plans.
Following a specific enquiry, each Director has confirmed he or she has complied with
the code of conduct for transactions in HSBC Group securities throughout the period.
HSBC's key internal control procedures include the following:
- Authority to operate the various subsidiaries and responsibilities for financial

performance against plans and for capital expenditure is delegated to their
respective chief executive officers within limits set by the Board of Directors of
HSBC Holdings. Sub-delegation of authority from the Board to individuals requires
these individuals, within their respective delegation, to maintain a clear and
appropriate apportionment of significant responsibilities and to oversee the
establishment and maintenance of systems of controls appropriate to the business.
The appointment of executives to the most senior positions within HSBC requires
the approval of the Board of Directors of HSBC Holdings.

- Functional, operating, financial reporting and certain management reporting

standards are established by Group Head Office management committees for
application across the whole of HSBC. These are supplemented by operating
standards set by functional and local management as required for the type of
business and geographical location of each subsidiary.
- Systems and procedures are in place in HSBC to identify, control and report on the
major risks including credit, changes in the market prices of financial instruments,
liquidity, operational error, breaches of law or regulations, unauthorized activities
and fraud. Exposure to these risks is monitored by risk management committees,
asset and liability committees and executive committees in subsidiaries and by the
Group Management Board for HSBC as a whole. A risk management meeting of
the Group Management Board, chaired by the Group Finance Director, is held
monthly. These risk management meetings address asset, liability and management
issues. Minutes of the risk management meetings of the Group Management Board
are submitted to the Group Audit Committee and to the Board of Directors.
- A Disclosure committee has been established to review material disclosures made

by HSBC Holdings for any errors, misstatements or omissions. The membership of
the Disclosure Committee, which is chaired by the Group Company Secretary,
includes the heads of the Finance, Legal, Risk, Compliance, Corporate
Communications, Investor Relations and Internal Audit functions and
representatives from the principal regions, customer groups and global businesses.
- Processes are in place to identify new risks from changes in market practices or
customer behaviors which could expose HSBC to heightened risk of loss or
reputational damage. During 2007 attention continued to be directed towards
evolving best practice in the areas of internet banking, counterparty risk
management policy following the publication of the Corrigan report in July 2005;
best practice guidance emerging on liquidity management from the Institute of
International Finance; the implications of a slowing housing market in the US
coupled with rising payment obligations under ARMs; Group exposure to
monolines and money market funds; the impact on the Group of the market
illiquidity situation; and the implications of changed customer behavior in the UK
regarding seeking protection from credit obligations.

- Periodic strategic plans are prepared for key customer groups, global product
groups, support functions and certain geographies within the framework of the
Group Strategic Roadmap. Rolling operating plans are prepared and adopted by all
major HSBC operating companies, and set out the key business initiatives and the
likely financial effects of those initiatives.
- Centralized functional control is exercised over all computer system developments

and operations. Common systems are employed for similar business processes
wherever practicable. Credit and market risks are measured and reported on in
subsidiaries and aggregated for review of risk concentrations on a Group-wide
basis.
- Authorities to enter into credit exposures and market risk exposures are delegated
with limits to line management in the subsidiaries. In addition, functional
management in Group Head Office is responsible for setting policies, procedures
and standards in the following areas of risk: credit risk; market risk; liquidity risk;
operational risk; IT risk; insurance risk; accounting risk; tax risk; legal and
regulatory compliance risk; human resources risk; reputational risk; and purchasing
risk.
- Policies to guide subsidiary companies and management at all levels in the conduct
of business to safeguard the Group's reputation are established by the Board of
HSBC Holdings and the Group Management Board, subsidiary company Boards,
Board committees or senior management. Reputational risks can arise from
environmental, social or governance issues, or as a consequence of operational risk
events. As a banking group, HSBC's good reputation depends upon the way in
which it conducts its business but it can also be affected by the way in which
clients, to which it provides financial services, conduct their business.
- The internal audit function, which is centrally controlled, monitors the effectiveness
of internal control structures across the whole of HSBC. The work of the internal
audit function is focused on areas of greatest risk to HSBC as determined by a risk-
based approach. The head of this function reports to the Group Chairman and the
Group Audit Committee.
- Management is responsible for ensuring that recommendations made by the internal

audit function are implemented within an appropriate and agreed timetable.
Confirmation to this effect must be provided to internal audit. Management must

also confirm annually to internal audit that offices under their control have taken or
are in the process of taking the appropriate actions to deal with all significant
recommendations made by external auditors in management letters or by regulators
following regulatory inspections.
The Group Audit Committee has kept under review the effectiveness of this system of
internal control and has reported regularly to the Board of Directors. The key processes
used by the Committee in carrying out its reviews include: regular business and
operational risk assessments; regular reports from the heads of key risk functions
including Internal Audit and Compliance; the production annually of reviews of the
internal control framework applied at Group Head Office and major operating
subsidiary level measured against HSBC benchmarks, which cover all internal
controls, both financial and non-financial; semi-annual confirmations from chief
executives of principal subsidiary companies that there have been any material losses,
contingencies or uncertainties caused by weaknesses in internal controls; internal audit
reports; external audit reports; prudential reviews; and regulatory reports. In addition,
where unexpected losses have arisen or where incidents have occurred which indicate
gaps in the control framework or in adherence to Group policies, the Group Audit
Committee has reviewed special reports, prepared at the instigation of management,
which analyze the cause of the issue, the lessons learned and the actions proposed by
management to address the issue.
The Directors, through the Group Audit Committee, have conducted an annual review
of the effectiveness of HSBC's system of internal control covering all material
controls, including financial, operational and compliance controls and risk
management systems. The Group Audit Committee has received confirmation that
management has taken or is taking the necessary action to remedy any failings or
weaknesses identified through the operation of HSBC's framework of controls.
Reputational and operational risks
HSBC regularly updates its policies and procedures for safeguarding against
reputational and operational risks. This is an evolutionary process which takes account
of The Association of British Insurers’ guidance on best practice when responding to
environmental, social and governance (‘ESG’) risks.
The safeguarding of HSBC’s reputation is of paramount importance to its continued

prosperity and is the responsibility of every member of staff. HSBC has always aspired

to the highest standards of conduct and, as a matter of routine, takes account of

reputational risks to its business. Reputational risks can arise from ESG issues or as a
consequence of operational risk events. As a banking group, HSBC’s good reputation
depends upon the way in which it conducts its business, but it can also be affected by
the way in which clients to whom it provides financial services, conduct themselves.
The training of Directors on appointment includes reputational matters.
Communications with shareholders
Communication with shareholders is given high priority. Extensive information about

HSBC’s activities is provided in the Annual Report and Accounts, Annual Review, and
the Interim Report which are sent to shareholders. There is regular dialogue with
institutional investors and enquiries from individuals on matters relating to their
shareholdings and the business of HSBC are welcomed and are dealt with in an
informative and timely manner. All shareholders are encouraged to attend the Annual
General Meeting or the informal meeting of shareholders held in Hong Kong to
discuss the progress of HSBC.
III) Environmental Scanning: Industrial Analysis

A.Societal Environment
The Egyptian banking industry
The banking sector in Egypt is continuing its restructuring process with the aim of
increasing its robustness and enabling it to perform competitively on a regional and
international level. The government has undertaken a series of reforms to strengthen
the banking sector. The reform steps taken by the government includes addressing
asset quality problems, increasing minimal capital requirements, privatization of public
sector banks and consolidation of small private banks. Currently, the Egyptian banking
sector consists of 41 banks, down from 61 in 2004, with 3,116 branches. This number
fell as the government has expressed its intention to consolidate the sector because it
felt that the number of banks in Egypt is very high, with few of these banks having
enough capital to be competitive and most facing a larger risk of collapsing should
borrowers fail to pay back large sums of money.

The mortgage financing market in Egypt continues to evolve. A newly established

government institution, the Egyptian Company for Mortgage Refinance (ECMR), will
enable the mortgage finance companies to offer more competitive terms. The
expansion of the mortgage financing industry has been helped since 2005 by a
lowering of property registration fees from 12% to 3% of the purchase price (or a
maximum flat fee of LE2,000) and property taxes from 46% to 10%. A new law is also
making it easier to prove ownership of property, which facilitates the use of assets as
collateral. The entry of new mortgage lending companies should establish a more
competitive residential housing market and challenge the traditional shortcomings of
informal lending agreements and (mostly) unregistered property trading.
Growing at a CAGR (Compound Annual Growth Rate) of 12.9% between 2002/03 and
2006/07, the Egyptian banks’ aggregate assets reached LE937.9bn, mainly driven by
the 78.6% hike in the balance with banks in Egypt as well as the 71.4% surge in the
balances with banks abroad. Both balances’ share in total assets increased from 25.5%
previous year to 36.4% in 2006/07. The Egyptian banks’ consolidated assets in
2006/07 grew by a healthy 23.2% over 2005/06 figure. For the first time since
2002/03, the securities and investments in treasury bills account dropped in 2007 along
with an increase in the total credit facilities offered by banks in Egypt.
As the spread between the lending rates and the treasury bills rates widened, the banks
were encouraged to increase their lending facilities. In 2006/07, the securities and
investments in treasury bills account dropped by 9.2%, the same rate by which the
loans and discount balances rose. The non-government sector accounted for the lion’s
share, 92.5%, of the total credit facilities distribution in 2006/07. Out of the non-
government share from the total lending portfolio, 72.7% were in local currency
reaching LE237.8bn. The industrial sector accounted for 31.3% of the total credit
facilities granted in 2006/07. The services sector came in second with a share of
26.3%, followed by the households and external sector at 23.7%. The total credit to
non-government sectors in local currencies grew by only 4.5% during 2006/07.
As for the credit facilities in foreign currencies granted to the non- government sectors,
again the industry sector had the highest share at 41.2%. Also, the services and trade
sectors followed with 36.4% and 13.2%, respectively. It is worth noting that the
growth of lending facilities in foreign currencies rose to reach LE89.3bn in 2006/07,
an 18.4% rise over the 2005/ 06.

Deposits, which rose by 14.3% in 2006/07 to reach LE650.0bn, are the primary source
of financing for the Egyptian banks. They account for 69.3% of the total banking
sector liabilities. Banks deposits grew at a CAGR of 12.7% between 2002/03 and
2006/07. The reform program initiated since 2005 has been to able impact the banking
sector positively. After the successful privatization of Bank of Alexandria, there are
plans to privatize Banque du Caire, Egypt’s third largest bank, by mid-2008. JP
Morgan has been selected from a group of 14 institutions to advise the government on
the sale. The government has indicated that it will retain ownership of the National
Bank of Egypt and Bank Misr, the country’s two remaining state-owned banks.
The steps taken by the government have resulted in huge interest from a large number
of foreign investors, who wants to enter the Egyptian market through the acquisition
route since the Central Bank of Egypt (CBE) has not been willing to issue any new
licenses. Lebanon’s Blom Bank and Bank Audi Saradar, France’s Credit Agricole and
Greece’s Piraeus Bank are some of the foreign lenders that have bought stakes or
acquired Egyptian lenders from the private and public sectors. Gulf lenders, such as
the National Bank of Kuwait who acquired El Watany Bank of Egypt by the end of
2007, have also been vying to snap up stakes in Egyptian lenders as they seek to take
advantage of Egypt’s booming banking industry.
Economic Forces
Foreign interest was illustrated by the participation of foreign players, whether

international or regional banks in the bids that took place to acquire stakes in the
Egyptian banks. The latest acquisitions that took place in 2007 were the acquisition of
a 51.3% stake in the National Bank for Development by Abu Dhabi Islamic Bank, as
well as the acquisition of a 98.1% stake in Al Watany Bank of Egypt by the National
Bank of Kuwait.
Another attempt by the Egyptian government to enhance the performance of the

banking system was the privatization of Bank of Alexandria in 2006, where the Italian
Intesa San Paolo Bank acquired an 80% stake in the Bank, reflecting again the
attractiveness of the banking sector in Egypt.
As for the regulatory intervention in the banking system, the CBE has moved towards
targeting inflation through employing a tight monetary policy and assigning the
Monetary Policy Committee "MPC", which main responsibility was to set each six
weeks the deposit and lending rates at the CBE. This is done in accordance to the
prevailing rate of inflation. Given the economic growth that the country is witnessing,
along with skyrocketing food and energy prices internationally and in the local market,
inflation reached 22.0% in July 2008, forcing the CBE to raise its rates by 50bp to
reach 11% and 13% in August 2008, respectively.
A program of well-integrated measures is being implemented by the government to

reform the political, economic, financial, regulatory and business environment. The
new tax law has reduced the highest personal tax rate from 32% to 20%, halved
corporate tax rate from 42% to 20% and implemented streamlined, automated tax
collection procedures. Investment in Egypt is enhanced by preferential market access
to the EU through the Europe Mediterranean Partnership agreement (EUTA), to the US
through the Qualified Industrial Zones (QIZs), to Arab countries through the Greater
Arab Free Trade Area (GAFTA) and to the African countries through Common Market
for Eastern and Southern Africa (COMESA).
For at least the next two years, Egypt will see plenty of opportunities for growth.
Privatization is the key word for the new government. The ministry of investment has
adopted an asset management approach to privatization. All state-owned assets are
treated as one pool, managed to maximize returns based on whether they are
considered to be saleable assets or assets to be restructured to make them ready for
sale.
Our outlook for the Egyptian banking sector is positive, on the back of the promising
prospects of the Egyptian economy and the resulting attractive investment climate.
This climate is expected to spur projects in various sectors along with attracting
foreign investments, representing enormous lending opportunities for banks in Egypt.
There are still plenty of hidden opportunities in the sector. These are represented by
many segments that do not participate extensively in the banking activity. The most
apparent opportunities rely in the retail segment, which is almost unexploited. Large
percentage of the population has no banking accounts. This represents a great potential
for Egyptian banks, as they can capitalize on growth opportunities in this segment,
given the growing demographics and the fact that more than half of the population is in
the working age. Hence, demand from this segment is huge and is expected to increase
furthermore. This is one of the reasons that triggered almost all private banks to
announce the expansion of their branches in 2007 to satisfy larger client base.

Other untapped segments are the mortgage lending and lending to the Small and
Medium Enterprises (SMEs). These segments constitute a minor fraction of the banks’
loans due to the high risks associated with them. However, the latest government
regulations concerning the registration of the housing units and the SMEs, along with
the establishment of the credit bureau are expected to boost lending to such segments.
Another key driver for potential growth is the fierce competition existing among local
players. Though the number of banks was reduced from 62 banks in 2000 to 41 banks
now, local lenders compete harshly to gain more market shares, through introducing
new products and services, as well as investing in their infrastructural system.
The growth of the banking activity over the last few years supports our positive vision
for the banking sector. This is expressed by the development of the total deposits and
loans in the sector. Total deposits (including government deposits) grew at a CAGR of
14.6% over the period from 2002/03 to 2006/07, reaching LE658.2bn, while total
loans increased at 5.6% during the same period, reaching LE352.4bn in 2006/07.
Important Economic Variables Affecting Egyptian Banking Industry
1. Interest Rate Fluctuations - When interest rates increase, banks that made loans at
lower rates will suffer from the lower income received because their cost of funds
may go up. This has sparked banks’ interest in flexible rate loan instruments, which
rise and fall in concert with prevailing interest rates. As interest rates increase, the
cost of money increases, which makes it more difficult for businesses and people to
obtain funds. Interest rate fluctuations may represent two generic threatening
situations to banks, refinancing risk and reinvestment risk. If a bank is stuck with
loans of a longer maturity than its deposits, and interest rates rise, it has to roll over
deposits at higher rates, leading to refinancing risk. A longer loan maturity than
deposit maturity is normally the case for commercial banks. However, the opposite
case can materialize as well: Longer deposit maturities than loan maturities,
combined with falling interest rates, lead to reinvestment risk, because the bank
will have to charge lower interest rates on its loans to remain competitive.
2. Inflation Rate - A changing inflation rate affects both the interest expenses and the
interest income of banks. Rising inflation rates increase the discount factor and thus
the current value of future cash flows (the time value of money) decreases.
Therefore, both the received interest payments and the interest the bank has to pay

to depositors is worth less. Depending on the characteristics of the bank's loans and
deposits (e.g. their maturity), this may lead to additional gains or losses.
3. Changes in GDP - As the economy gains momentum, businesses that are
producing, seek to gain additional sources of capital to fund further expansion.
Banks provide the necessary funding for these businesses to continue their growth.
4. Disposable Income - As disposable income increases there is a higher probability
that the savings rate will also increase. Since savings represent a major source of a
bank's funding, increases in disposable income affect banks favorably.
5. Discount Rate - A boost in the discount rate will lead to increased borrowing of
banks from CBE. This will discourage commercial banks from building up their
reserves; thereby increasing the amount of loanable funds. Loanable funds allow
banks to lend more money to more customers.
Technological Forces
Egypt's banking sector prime for adopting electronic and Internet banking
The banking sector in Egypt (which has been relatively slow to embrace modern
technology), has started showing signs of emergence into electronic and Internet
banking, in the face of a strong drive by government programs to create a Knowledge
Economy.
Egypt holds immense potential for leading edge banking solutions once the
population's mindset has changed. Egypt is home to one quarter of the entire Arab
population with more than a 20 million workforce, making it the largest retail market
in the region in terms of numbers. The fierce competition that is visible among banks
is a sign that Egypt is set to join the modern banking mainstream.
The developments taking place in information and communication technology are

increasing competition in financial institution worldwide. Thus, the deployment of
advanced technologies is essential to achieve a competitive edge.
Recently, the banking industry was highly affected by the technology evolution that
transformed the way banks deliver their services, using technologies such as
automated teller machines, phones, the internet, credit cards and electronic cash. In
live with global trends, retail banking in Egypt has been undergoing many changes.

In the past banks faced significant uncertainty regarding investments in advanced

technologies, but recently banks have been investing heavily in technology to maintain
a competitive edge and hence creating opportunities for the Egyptian banking sector.
Since the mid 80’s Egypt has focused on building its information and communication
technology infrastructure, which was reflected in the introduction of the liberalization
program of Telecom Egypt in 1998 and the establishment of the ministry of
communication and information technology (MCIT) in 1999. The tremendous
improvements in telecommunication infrastructure cost, reliability are providing a
strong impetus to substantial technology investments in the banking sector in Egypt.
Political-Legal Forces
The political system in Egypt played a significant role in the growth and expansion of
local and international banks and played a major role in attracting banks and financial
institution worldwide to establish joint ventures or representative offices in Egypt.
The banking sector has been entirely public since the late 50’s, when it was
nationalized.
However, in the mid 70’s, an open-door policy allowed the establishment of private
banks. There are a number of international players in the market, including Barclays,
Citibank, HSBC, Credit Agricole, and CIB.
Moreover a number of laws and regulations are established to help the banking sector
grow, especially focusing on the retail banking business, including an electronic law,
which is expected to have a positive effect on the growth of the internet banking of
different banks.
Additional the mortgage law represents another opportunity for banks to expand their
retail activities in the area of housing loans.
The Egyptian Government has issued the e-signature law and deployed a successful e-
commerce infrastructure. It is interested in activating e-commerce and e-business
applications through:
a) Organizing and spreading the use of electronic signature;

b) Building infrastructure for electronic signature using smart card technology;

c) Spreading the use of electronic signature, documents, and contracts at government

organizations and the banking sector;
d) Providing services of electronic signature and documents to public through mail

bureau, information technology clubs and community centers;
e) Connecting networks of electronic exchange locally and facilitating their

connection to local and international networks to increase using electronic sale
points;
f) Stimulating the private sector to invest in the development and dissemination of e-

commerce and e-business software and systems especially in the field of electronic
payment systems, production planning, management systems, and client services
systems, making use of international experience and expertise;
g) Community acknowledgment about challenges, opportunities, and work samples

application in the age of e-commerce and e- business. In addition to specific e-
commerce initiatives, Egypt has created some enabling environment for
commercial activities. Some forms of business licenses can be obtained online.
Most Chambers of Commerce provide local information through an on line
presence.
The role of the newly formed Information Technology Industry Development

Authority (ITIDA) in enhancing e-business will be through the implementation of e-
signature law, the impact of ITIDA on the development of the local market, export
development and capacity building as well as the implementation of IPR legislation is
still to be seen.
As a developer and regulator of e-signatures, ITIDA plans to promote and regulate e-

signature related activities. These include implementing the e-signature law, issuing
licenses in Egypt, providing technical counseling in disputes related to the e-signature
law, creating awareness and promoting e-document exchanges between the
government, businesses and citizens. ITIDA will also act as the catalyst, coordinator,
and national focal point with other national and international stakeholders. As a
national developer, ITIDA’s vision is to turn Egypt’s IT industries into world-class,
export-oriented industries and empower them to be among the world’s top 15 IT
exporters.

Although nowadays only 10 % of Egyptians have bank accounts, this number is

increasing at a high rate, which encourages the use of electronic bank operations.
Consequently this supports deal between clients and associations (B2C) and among
different associations (B2B). Automatic teller machines (ATM) have spread in Egypt
during the last years as there are 850 automatic teller machines in Egypt and most of
the banks in Egypt are connected now to a network of ATM, although not all banks are
connected to the same network of teller machines which leads electronic telling cards
not to work on all teller machines. Yet, Egyptian exchange bank is currently putting
criteria and specifications to connect banks together. Currently, the number of clients
using electronic banking operations is still small compared to the total population. The
Government is making efforts to increase the use of electronic banking operations
through:
a) Depositing salaries and pensions into bank accounts and national post offices;
b) The Board of Directors of the Central of Egypt has issued on 26th of April 2005 the
roles pertaining to the registration of Credit information in the general
Administration of Credit Risk Information Collection Bureau; all the information
will be submitted by banks to the Administration for consolidation and share;
c) Using e-payments in the field of governmental services and utilities including

Internet banking, mobile banking, pre-paid cards and credit/debit cards.
The Egyptian banking sector has gone through major reforms in the last few years. The
main reasons triggering such reforms were to eliminate disturbed banks and to enhance
the assets quality and capital adequacy of the banking sector.
The large four public banks, constituting approximately 50% of the sector’s total assets
in 2003, had a huge amount of Non Performing Loans "NPLs", resulting mainly from
extending large portions of loans to distressed public enterprises, in addition to having
a lack of adequate risk management practices.
Therefore, the government decided to restructure the banking system through several
methods. One of which was to sell stakes of public banks in other joint ventures in
order to solve the NPLs problem. Another form was to amend regulations concerning
the minimum required paid-in capital and the capital adequacy ratio. The minimum
required paid-in capital was raised to LE500mn from LE100mn. In addition, the
capital adequacy ratio was raised from 8% to 10% of the risk-weighted assets.

A consolidation trend prevailed in the banking sector, during the last few years. Small
banks and poor performers were easy acquisition targets, as they couldn't abide by the
regulations modified by the Central Bank of Egypt "CBE", while foreign banks were
involved in such actions, in an attempt to enter the Egyptian banking sector, especially
after the government’s announcement that no banking licenses will be granted for the
time being.
Socio-cultural Forces
The Egyptian population of more than 76 million represents many attractions and
opportunities for local and foreign banks to expand their business.
The current individual bank customers represent around 16% of the population.
Among these customers, the number of credit and debit card holders is approximately
9%, which directly reflects the great potential for plastic money in Egypt.
According to age, bank customers can be divided into 3 segments:
1. Youth (20-30 years old) represent the most important target group, with their
accounts and marriage plans, car loans and student loans.
They easily adopt technology but their loyalty to the bank they deal with is not
guaranteed, acquiring continuous innovative financial services to attract them and
cost switching to keep them.
2. The second age group ( 30- 50 years old), represent good potential due to the large
numbers of housewives within that segment who are willing to use different
electronic delivery channels like ATMS, phone banking and internet banking.
3. The last segment above 50 years of age shows some reluctance to deal with banks
in general and to using technology-based services in particular, requiring special
care and incentives such as retirement package and special senior accounts.
For a long time, the market in Egypt was dominated by cash society values with
people reluctant to go to the bank and open an account for purely cultural reasons,
opting to keep their cash at home.

However recently, the private sector started to include their employees in various
payroll plans offered by different banks.
As a result, the number of individual bank customers increased, and a relatively high
level of awareness was established among certain segments of the society which
started to recognize the benefits of retail banking.
However it is important to note that the society highly values human interaction, which
affects the penetration of retail banking through electronic delivery channels,
especially among the less educated, who are not comfortable dealing with technology-
related equipment. An additional threat is the fact that credit cards are scary for some
people due to the high interest rates. Very few people are using ATMS for deposits or
are willing to use their credit cards over the internet.
It is important to note that the average illiteracy among the population is more than
39%, and a large portion of the remaining 61% is considered un-educated hence
representing a threat to the banking sector. Consequently ease of use, simplicity and
Arabic interfaces are key factors for the adoption of new services provided by banks.
In general consumers in Egypt are considered flexible and fast to adopt new habits,
which is obvious in the penetration role of mobile telephoning.
B.Task environment

Of the five forces, determining the current competitive rivalry within an industry is
probably the most important consideration. If the industry is already a tough one with
profits under constant pressure, then further investigation into the possibility of new
entrants and substitutes may not be required.
Porter writes: "Rivalry in some industries is characterized by phrases as 'warlike',

'bitter', or 'cutthroat', whereas in other industries it is termed 'polite' or 'gentlemanly'.
Long-term investors should avoid industries where 'warlike' conduct is the norm.
Porter notes the following 'interacting structural factors' can cause intense rivalry (and
most likely, shareholder grief).
The Strong Barriers to Entry
geographic segmentation of the market, and high personal cost of switching in the
banking industry are all factors that might lead to a decrease in competition. However,
after long periods of extended expansion and consolidation, a lack of growth
opportunities will lead to an industry stagnation that will counteract these forces. Over
time stagnation may single handedly be enough to start a period of further
consolidation or price competition among the major national banks.

Regulatory barriers to entry also weaken competition in the banking industry. The
CBE is apparently reluctant to license new domestic banks as it regards the number of
existing ones large enough for establishing a competitive market. The CBE’s
reluctance to issue new licenses is reflected in the high entry costs, which are
excessive by international standards. The minimum authorized capital for new banks is
set at LE 100 million, of which LE 50 million has to be fully paid up (LE denotes
Egyptian pound; these figures are equivalent to about US$ 30 million and US$ 15
million, respectively). For branches of foreign banks, however, the minimum
authorized capital is set at US$ 15 million or the equivalent in other major currencies.
It is also alleged that the CBE does not particularly favor an expansion of the private
banks branch network in locations already dominated by the public sector banks in the
major cities. While there appear no restrictions on branching in locations which are
deprived of adequate banking services such as the new communities and the provinces,
the public sector banks continue to maintain a large market share. In particular, since
the opening of branches is influenced by the expected level of business activity, which
is normally higher in the city, branches of the private banks are considerably
outnumbered by branches of the public sector banks.
Basel II: Driving Enterprise-Wide Change In preparation for Basel II, major banks
have been working for the last several years to improve their management of credit
and operational risk. Now, leading banks are using the Basel II requirements as a
catalyst to achieve competitive advantage by enhancing the quality of information and
decision-making.
Threat of New Entrant
The average person can't come along and start up a bank, but there are services, such
as internet bill payment, on which entrepreneurs can capitalize. Banks are fearful of
being squeezed out of the payments business, because it is a good source of fee-based
revenue. Another trend that poses a threat is companies offering other financial
services. Also, when analyzing a regional bank, remember that the possibility of a
mega bank entering into the market poses a real threat.
As highly regulated and well established industries, there are several barriers that
prevent entry into both the retail banking and the financial services industries.

There are a series of formal steps in the application process to becoming a banking
entity. Permission must be granted from the government to operate locally. Banks must
also follow extremely strict accounting and reporting procedures to ensure their
operations are transparent.
The knowledge, experience, and effort required to comply with these various
regulations poses a serious obstacle to entrants in the industry.
Even though the banking and financial services industries are not dominated by
economies of scale, network externalities give large, established firms definite
advantages. Modern day banking customers expect to have full access to all their
banking services over increasingly large geographic areas. This requires banking
entities to have a large network of branches and ATM’s, as well as an extensive
customer service and online banking infrastructure, if they wish to compete nationally
or even regionally. Because of these network externalities it is unlikely that a
completely new firm will ever enter the banking industry
Economies of Scale: A substantial majority of banks have at least an informational

Web site, and close to a majority and virtually all large banks now offer transactional
Internet sites. Because the basic Internet banking transaction has low variable costs,
there are economies of scale associated with this production process and distribution
channel. This gives a cost advantage over any new rival.
Technological advance and financial innovation created new strategic opportunities for
banks in Egypt, and, as competition increased, banks had incentives to pursue those
opportunities. The average size of commercial banks began to increase because of
within-market mergers and the disparity in bank size within the industry also
increased. Although increased size yielded scale economies for banks of all sizes, the
largest banks gained access to the lowest unit cost structures.
Rivalry among existing firms
1. Number of Competitors. The banking industry in Egypt is highly competitive,

recently there are many banks. The financial services industry has been around for
hundreds of years and just about everyone who needs banking services already has
them. Because of this, banks must attempt to lure clients away from competitor
banks. They do this by offering lower financing, preferred rates and investment
services. The banking sector is in a race to see who can offer both the best and

fastest services, but this also causes banks to experience a lower ROA. They then
have an incentive to take on high-risk projects. In the long run, we're likely to see
more consolidation in the banking industry. Larger banks would prefer to take over
or merge with another bank rather than spend the money to market and advertise to
people.
2. Rate of Industry Growth. High industry growth turns competition into a market
share game for firms seeking expansion. The banking industry in Egypt is one that
has a high potential for growth. Attempts to expand largely rest on luring customers
from elsewhere. This is evidenced for example by the constant introduction by
newer players of cheaper mortgages and credit cards, and higher-paying savings
accounts.
3. Product or Service characteristics. Large banks may attempt to differentiate their

products and services from those of their competitors by creating brand images and
other perceived differences, but offering true person-to-person service (as well as
other high-value-added retail and small business services) is difficult to achieve at a
large scale.
4. Some banks offer customized services to certain sets of clients with
idiosyncratic financial needs, such as corporate investment banking clients and
high-net-worth “private banking” customers. Furthermore, some Internet banks
specialize in providing extremely standardized retail banking services. Brand name
is the only significant entry barrier of retail banking.
Despite attempts at product differentiation through attention to customer service, fee

policies, online convenience, and general dedication to clients, most consumers view
the banking services of the different major firms as being close substitutes. Although
this lack of product differentiation might tend to increase competition in the industry, it
is mitigated by the high switching costs facing a banking customer. Switching banks
requires transferring funds, establishing new accounts, and replacing checks and/or
debit cards among other things. Most individual consumers are reluctant to go through
such a potentially time consuming process.
Potential opportunity for the Egyptian Banking Industry:
Islamic finance is growing at a rate of about 15 percent annually, the study found.
Consulting firm McKinsey & Co. predicts at least a 20 percent growth over the
next five years.

Egypt began experimenting with Islamic finance in 1963 in the form of the Mit Ghamr
Savings Bank, but that’s as far as the country’s pioneering spirit on Islamic banking
went.
Market players say Islamic banking has been in a “deep freezer” since the 1980s. The
number of Islamic financial institutions is estimated at about 396 in 53 countries.
Egypt has only two: Faisal Islamic Bank of Egypt and the Egyptian Saudi Finance
Bank.
There are 13 conventional banks with Islamic windows, and although they have
thousands of branches nationwide, Islamic finance products are offered at no more
than 128 of these branches.
Since there are only two fully operational Islamic banks working in a monopolizing
environment — mainly one institution, the Faisal Islamic Bank — there is low
incentive for development because there is no competition. Meanwhile, the market is
booming elsewhere. Record high oil prices, an emerging Muslim middle class and
liquidity returning to Muslim markets following September 11 have all led to the rapid
development of Islamic finance in Gulf and European markets.
Earlier this month, Reuters reported that “the global credit crisis presents the $1 trillion
Islamic finance industry with an opportunity to expand its appeal beyond devout
Muslim investors as a haven from speculative excess. While conventional banks are
suffering losses of more than $400 billion from the credit crisis, Islamic banks are
nearly unaffected. This is showing shareholders, bondholders, borrowers and
depositors that Islamic banks may present “comfort [because of] the stricter rules
imposed on lending by Islamic law. In Egypt, Islamic banks are looking to the Central
Bank of Egypt (CBE) for support, regulation and governance so the industry can
flourish. With minimal regulation and disclosure of Islamic services offered by
conventional banks, sizing Islamic financial assets, deposits or loans is a challenge for
the CBE.
Industry experts agree that while the Islamic banking market was estimated at 3
percent of Egypt’s banking sector two years ago, the potential is so much greater.
Exit Barriers. It was not only the restricted entry that made the Egyptian banking
market suffers from lack of competition and contestability, restricted exit was also
responsible. Indeed, whereas it is important to remove barriers to entry, it is also

crucial to maintain a reliable exit mechanism to improve the efficiency and the
soundness of the Egyptian banking. In Egypt banks are not allowed to fail. This policy
was given effect neither through prudential policy, nor measures that enhance the
efficiency of banks. Instead, weak banks were allowed to continue in business using
support from the rest of the banking system and public money. This was ‘justified’ by
the fear of a public misunderstanding that the failure of bank may imply that others
will follow in the future, made the banking system adopt a form of collective self-
preservation.
According to this approach inefficient banks were left to operate through support from
the banking system, while adequate measures like restructuring, merging or liquidation
were not applied. This policy encouraged inefficient banks to continue their violation
of credit standards by indulging in high risk lending and bidding for deposits.67 In
addition, because all banks are supported by an implicit rescue mechanism in which
bad banks are cross subsidized by good ones, banks' clients cannot distinguish between
an efficient bank and an inefficient one.
Bargaining power of suppliers
The suppliers of capital might not pose a big threat, but the threat of suppliers luring
away human capital does. If a talented individual is working in a smaller regional
bank, there is the chance that person will be enticed away by bigger banks, investment
firms, etc.
For Retail banks and as diversified financial services firm it is difficult to clearly
delineate all their factors of production. The basic physical inputs are in both these
industries are similar to those for most any basic professional service.
These include computer hardware (PC’s, servers, communications networks…),

business software (payroll, accounts, other database management), and real estate for
office locations. Though the computer hardware industry (IBM, Dell,) and business
software industry (Oracle, Microsoft, IBM) are both fairly concentrated, there are
enough firms offering substitutable products such that price competition exists in those
industries and no one firm has extensive pricing power.
Banks in Egypt do not depend upon any single physical input. As a result, none of
these factor markets provides a serious threat to the bank’s profits, through monopoly
rents in pricing, or market share through vertical expansion.

Egypt’s retail banking operations also require several industry specific inputs (check-
processing and money handling machinery, ATM’s…), but the banking industry is
large enough that it provides frequent and steady enough demand to keep these
supplying industries competitive. Both retail banking and financial services also rely
heavily on more intangible assets such as financial securities and human capital.
However, these markets are so enormous that it is difficult to imagine any one entity
having pricing power in these markets. The overall conclusion to be drawn is that
upstream supplying industries pose little threat to Banking industry position.
Bargaining power of buyers
The individual doesn't pose much of a threat to the banking industry, but one major
factor affecting the power of buyers is relatively high switching costs. If a person has a
mortgage, car loan, credit card, checking account and mutual funds with one particular
bank, it can be extremely tough for that person to switch to another bank. In an attempt
to lure in customers, banks try to lower the price of switching, but many people would
still rather stick with their current bank. On the other hand, large corporate clients have
banks wrapped around their little fingers. Financial institutions by offering better
exchange rates, more services, and exposure to foreign capital markets - work
extremely hard to get high-margin corporate clients.
With regards to the retail banking sector’s operations, its customers are individuals
who are unorganized, price takers. It is therefore safe to conclude that buyer power is
not a significant threat to the banking profits or market share. On the other hand,
Egypt’s investment banking and asset management clients are almost exclusively large
institutions (except for a few wealthy individuals). Most investment banking and asset
management contracts are bid on competitively by several different firms. Investment
banking and asset management contracts can be extremely large and are infrequently
awarded. This means that Egypt’s larger investment banking and asset management
clients do possess significant market power and for this reason financial services firms
often put a great deal of effort into securing and maintaining client relationships.
The buyer power of downstream clients makes Egypt’s investment banking and asset
management operations vulnerable, especially when the economy and these industries
experience a downturn.
Threat of substitute products

As you can probably imagine, there are plenty of substitutes in the banking industry.
Banks offer a suite of services over and above taking deposits and lending money, but
whether it is insurance, mutual funds or fixed income securities, chances are there is a
non-banking financial services company that can offer similar services. On the lending
side of the business, banks are seeing competition rise from unconventional
companies. If car companies are offering 0% financing, why would anyone want to get
a car loan from the bank and pay 5-10% interest? As you can probably imagine, there
are plenty of substitutes in the banking industry. Banks offer a suite of services over
and above taking deposits and lending money, but whether it is insurance, mutual
funds or fixed income securities, chances are there is a non-banking financial services
company that can offer similar services. On the lending side of the business, banks are
seeing competition rise from unconventional companies.
The relationship between substitutes, complements, and economies of scope play an

extremely important role in determining the structure of firms in the banking and
financial services industries. There are several reasons the rest of the major players in
the banking industry operate in so many different industries. For one, different
financial assets and services are often close substitutes for one another. Investors
(individual and institutional) have a choice between saving in a bank, investing in the
financial markets through a brokerage house, hiring someone else to manage their
assets, or some other investment/savings vehicle. Since some combination of the
possible choices is usually preferable, most banking and financial institutions try to
offer their clients a wide variety of services.
Another reason to offer such a wide scope of services is that many consumers prefer
the convenience advantages of being able to deal with one firm for as many of their
needs as possible. Cross-selling ability, where business lines within the bank co-
operate to sell multiple products to clients, has become an important variable when
evaluating banks. Available banks are offering a diversity of financial services as an
attempt to simultaneously limit the negative impact of substitutes while trying to
maximize on the revenue gains arising from economies of scope in the banking and
financial services industry.
Of course, one bank’s services are a substitute for another’s, but the geographic
expanse of this country provides a firm’s market share some protection.

The banking industry is especially regionally segmented, and the major consolidated
banks, and the main rivals, compete only on the boundaries of their respective
territories. This limits the extent to which one bank’s services can be substituted for
another’s.
From a broader perspective, the retail banking industry as a whole also competes
against other extremely secure investment vehicles, such as credit unions, money
market accounts, and some mutual funds, that offer many of the services normally
associated with banking accounts. Such financial services/assets could also be
considered a direct substitute for banking services. As mentioned before, competitors
attempt to minimize the threat from a broader perspective, the retail banking industry
as a whole also competes against other extremely secure investment vehicles, such as
credit unions, money market accounts, and some mutual funds, that offer many of the
services normally associated with banking accounts. Such financial services/assets
could also be considered a direct substitute for banking services. As mentioned before,
the existing competitors attempt to minimize the threat they face from substitutes by
offering many of them in its product line.
C.Issues Priority Matrix
Probable Impact on Organization

High Medium Low
Technological advances and
Booming economy (O)
Financial Innovation (O)
High
Product similarity (T)

Governmental Economic
Increases in FDI (O)
Reform Strategy (O)
Medium
US Financial Crisis (T) Exchange rate

Aggressive Competition (T)
fluctuations (T)
Interest rate fluctuation (T) Islamic Banking (O)

Bargaining Power of
Low
Probability of Occurrence
Customers (T)
D.Competitive Analysis
1. Strategic Group
Mapping of strategic groups in Egypt's banking industry
High HSBC
Barclays
vcb
Credit
Agricole
BNP
Marketing Research Paribas
Ahly
Bank
NSGB
Low Service
Low High
2. Strategic type
How banks' strategies affect their development of new services. There are certain
banks, known as Prospectors continuously seek to introduce new services to new
customers such as Credit Agricole. Other banks, referred to as Defenders, routinely
seek to improve the quality and value of their services to their regular customers such

as BNP Paribas. Another set of banks, identified as Analyzers, alternately seek to

provide new services to their current customers, or to introduce their existing services
to new markets such as Barclays, HSBC and CIB.
3. Main Competitor
BARCLAYS
Mission Statement
To provide best value, by listening to our clients, enabling us to produce high quality,
appropriate products, supported by exemplary service.
Barclays PLC: the banking eagle, the group's emblem is an eagle, which has become
a great symbol after more than three hundred years of activity. The English bank began
operations in the 17th century in the financial center of London, but has since then
become a strong entity in 60 international countries, in Europe, the United States,
Africa, and Asia. It is now one of the major players in financial services. Barclaycard
is the leader in the issue of credit cards in Europe, Barclays Global Investors were one
of the very first asset management companies in the world, and Barclays Capital is an
investment bank well-known for the services it offers to companies relating to their
financial requirements and hedging of risk exposures. Barclays is also an international
bank with 800 global branches. The company is aligning its business and operations, in
terms of capability and geographic footprint, to capture the opportunities provided by
changing market trends. Barclays is investing heavily in retail and commercial banking
businesses in Western Europe, primarily in Italy, Spain and Portugal, and in emerging
markets such as India, Egypt.
Foremost to continually compete internationally, Barclays must strive to perform

customer service at an utmost level of excellence. This will promote Barclays
worldwide as a business that can be relied upon time after time for small individual
accounts as well as huge corporate accounts. To accomplish this, Barclays must
identify their customer groups and the needs associated with each particular group and
develop products and services that will be of great value to their customers. The
practices that have worked in the past must be reconfigured to work for years to come
and keep Barclays updated with the high changing IT world. This will call for new
investments into new levels of technology that can help offer higher levels of service
to its customers. Along with the apparent increase in speed that IT will allow Barclays

to accomplish routine tasks, technology will also reduce risk of errors and fraud. This
leads straight into a second integral point of interest for Barclays. The need to place
major investments into the most modern and efficient IT systems available that enables
top of the line business transactions to transpire unhinged. IT will allow up to date
information to be at the fingertips of Barclays’ managers, giving managers a huge
advantage when it comes to making decisions and in pin pointing groups of customers
that can have a high added value to Barclays. The fine-tuning of IT will also eliminate
weaknesses within Barclays practices, preventing failures that effect customers and
thus reducing excessive and unnecessary costs.
Barclays Bank Egypt Corporate & Investment Banking offers comprehensive

banking services for more than 600 corporate clients in Egypt, covering all types of
corporate clients operating in diversified economic sectors. The bank extends the full
range of standard corporate products and services in addition to tailored solutions for
large corporate clients.
Barclays Bank Egypt has a long history of world class financial servicing in Egypt,
having been strongly present in the Egyptian market since 1864. Barclays operated as
a joint venture company with Banque du Caire with Barclays PLC increasing its
shareholding equity to 60% by 1999. In March 2004, Barclays Bank Egypt acquired
the remaining 40% with 100% ownership and control of the local business.
Being an active member of the international Barclays conglomerate, Barclays Bank

Egypt capitalizes on the expertise and empowerment of the global enterprise to offer
high value and unique products and services across the Egyptian market.
Barclays has been actively expanding its Retail Banking in Egypt by providing
carefully designed and innovative product offerings. These are helping to place
Barclays amongst the leading financial institutions and renowned provider of
excellence when it comes to Credit Cards, Car Loans, Personal Loans, and
Bancassurance products.
Barclays Bank Egypt continues to provide its corporate clients in various business
areas with expert financial solutions relying on its extensive knowledge of the local
market as well as its longstanding experience in international markets. The main lines
include all forms of contingent facilities of large corporate and small businesses, cash
management services and sophisticated treasury products including derivatives.

Barclays has launched it proposition for SMEs in 2007, offering full-fledged banking
services especially tailored to address the needs of this segment.
Net income results reflect a positive combination of an enhanced income momentum

and accelerated investment, which created a good platform for growth in 2006. The
positive financial results for the first half of 2006 reflect the bank’s commitment to
deliver strong performance and growth. During the first six months of the year,
Barclays achieved a 13.4% increase in net operating income to LE 206 million from
LE 182 million during the same period in 2005.
In addition, the Bank’s total assets saw an increase in the first half of 2006 to reach LE
7.8 billion compared to LE 7 billion as of December 31, 2005 with a percentage of
10.8 %. Customers’ deposits have reached LE 6.4 billion for the first six months of
2006 compared to LE 5.8 billion as of December, 31 2005.
The banks net operating income has reported an increase of 36% ahead of last year up
from 139 million in the first quarter of 2007 to LE 189 million in the same period of
2008. The net profit was reported to be 60 million in the first three months of 2008
Business Intelligence
Evaluation of Barclays in terms of Product Leadership, Operational excellence and

Customer intimacy
Barclays has unmatched scale and efficiency, which are reflected its strong margins
and highest capital generation, and have enabled it to grow over the years while
weathering different economic environments.
Barclays delivers value through customer intimacy
One of Barclays’s key strengths is its ability to understand the full range of customers’
financial needs across their different life stages. While Barclays offers a wide range of
personal credit services, including personal loans, it’s also aware of the need to help
customers protect themselves against unforeseen risks. The bank introduced the
pioneering 8-8 branch hours, personal loan and auto loan products, investment as well
as insurance services, wealth management plans, and a host of banking relationships
that fit different customer needs. The unique Barclays relationship meets the increasing
multiple needs of customers for a flexible current account that offers best savings rates.

It also provides account holders with a desire for investing with investment options
that span all asset classes across different geographies.
In banking, reward programs were first attached to credit cards, and banks have had
some success in this area. Barclays has brought reward programs to a new level by
awarding points to clients based on their relationship with the bank and not strictly on
credit or debit card transaction volume. Whether relationship-based reward programs
will drive profit growth remains to be seen. The hope is that these new reward
programs will provide a retention and acquisition tool for banks to ensure that existing
clients are rewarded for their business and loyalty, while new customers are given
incentives to establish relationships with banks.
Although Barclays offers a wide variety of services, it is still matched and sometimes
surpassed by its competitors.
In an effort to make its product more accessible to its customers, Barclays has
established a strong online banking system, yet this addition is now considered as a
fundamental aspect of banking and not as an accessory as it once was.
Barclays is a leader in customer intimacy (Best total solution) as it tailors its

products according to its customers wants. They are offering wider variety of
products to a wider variety of incomes (segments).
Operational Excellence
To achieve operational excellence and through the creation of shared service Centers
of Excellence (CoE), HSBC delivers the highest levels of Service excellence to
customers.
Centers of excellence model are built around process standardization, migration of

common and high end process, robust business continuity plans and best practice
sharing.

 Excellence principles provide strategic guidance to HSBC’s development and

management from an operational perspective
 Key stakeholders‘views in HSBC are considered to ensure a balance between
diverging strategic and operational targets, as well as front and back-office
functions.
 Building blocks cover all operational areas ensuring the framework‘s

comprehensiveness
E.Industry Matrix
Industry’s key success factors
HSBC Barclays
HSBC Barclays
Key Success Factors Weight Weighted Weighted
Rating Rating
Score Score
Capital and Branding
0.3 4 1.2 3.5 1.05
Effectiveness
Human Capital Investment 0.35 4 1.4 3 1.05
IT Infrastructure 0.2 3 0.6 3 0.6
Product Innovation 0.05 2 0.1 4 0.2
Local Market Presence 0.1 3 0.3 4.5 0.45
Total 1 3.6 3.35

1. Branding Effectiveness
Branding effectiveness is essential to differentiate any company from its competitors

and to unite all stakeholders behind a firm’s effort to create sustainable value
proportion. And this is especially true in an industry like banking where product and
services are often perceived as ubiquitous from one bank to another. In this business,
brand is often the single most obvious differentiator. An important success factor is a
top-down commitment to highly effective and rigorously accountable marketing and
brand management programs. Because of changes in the industry an array of products,
increasing numbers of customer touch points, diverse ( and more demanding and
highly educated) customer types and preferences, the challenges facing marketing
professionals within banking are considerable.
When we compare competitors branding effectiveness we talk about better internal

buy-in and communication between stakeholders, more accurate customer opinion,
experience and needs information, more consistent brand messaging, more accurate
customer value data , better understanding of the customer relationship life cycle.
Brand effectiveness had a high weight of 0.3 because this is what differentiates the
company. HSBC had weighted score of 1.2 higher than that of Barclays, which had a
weighted score of 1.05.
HSBC‘s sophisticated CRM and the staff’s understanding of using the CRM
effectively helped HSBC in Branding effectiveness.
2. Human Capital investment
Nowadays every multinational realizes and develops its strategies by putting into
consideration the importance of the Human capital. Human capital has the greatest
weight, a weight of 0.35 due to the fact that it is the employees who deal with the
customers; it is them who have a major influence in a company’s success.
HSBC had a weighted score of 4 while Barclays had a weighted score of 2.5.
Although Barclays states it’s believe in Human capital. The problem is in the real
implementation.
No company can thrive without quality people at all levels. What does evolve is the
skill base. As the financial sector increasingly focuses on developing and sustaining

enduring and profitable relationships, the coming years are likely to see an even
greater need for customer-facing capabilities, people with the data analytical expertise
needed to profile clients’ changing product demands and service expectations.
The quality of customer facing staff is especially critical in fostering customer loyalty,
developing applications fro cross-selling and managing complaints that could damage
client satisfaction. When we talk about investing in Human capital, it is in how the
bank invests in the selection process of staff, having specific criteria and being very
selective in hiring future staff. It also includes the belief in providing the best training
programs and not seeing them as a cost but as an investment.
HSBC invests in Talent retention, Barclays invests most efforts into training on
products and services, while HSBC invests on both into training on products and
services as well as on employee engagement. Through engagement score, performance
management rating, satisfaction with leadership.
3. IT Infrastructure
In a highly competitive and mature environment where merger and acquisition activity
continues to be prevalent, increasing technology in secure transmission of information
is expected to accelerate the use of networks...and reduce costs. With medium barriers
to entry and volatility, a good reputation can't be bought in this heavily regulated
environment.
From an IT standpoint, the banking industry is struggling to catch up with its own
success. Deregulation of the financial services industry on a global scale has fueled an
ongoing stampede of mergers and acquisitions and opened up many new business
scenarios for banks -- from money market operations to bond underwriting to financial
advisory work. To compete in new markets, and to address ever-growing consumer
demand for convenient services delivery, banks have embraced new technology in both
the front and back office, often through integration with legacy systems.
For many banks, this has resulted in massively complex IT architectures and soaring
costs. Many are now striving to modernize their IT infrastructure in order to make their
operations simultaneously more responsive to business drivers and more cost efficient.
Both HSBC and Barclays had a weighted score of 0.2.

4. Product innovation
Product innovation has a weight of 0.05; it has the weakest weight since in Egypt all
banks provide more or less similar banking products. Barclays had a weighted score of
0.2 while HSBC had 0.1. Barclays provides different types of cards to customers,
depending on their needs. Barclays is one of the market leaders in the field of
consumer credit cards, providing its products to various customer segments and
tailoring its products to different income levels.
Traditional innovation literature would suggest that organizations innovate by getting

new and/or improved products to market. However, in a service, the product is the
process. Thus, innovation in banking lies more in process and organizational changes
than in new product development in a traditional sense.
Consumers are demanding and receiving a larger variety of traditional and new
banking products and delivery systems. The question, however, is how banks capture
the value generated by this increase in variety. At present, one only need to look at the
controversy surrounding ATM fees to understand that this increase in variety may be
detrimental to a bank’s profitability.
5. Local Market Presence
The Egyptian consumer places high emphasis on service accessibility in terms of

extended working hours, availability of ATMs, number of branches and IT reliability.
Local Market presence had a weight of 0.1. Barclays had a weighted score of 0.45
higher than that of HSBC which scored 0.3. Barclays has a larger number of branches
and ATMs in Egypt.
F. External Factor Analysis Summary (EFAS)

Weighted
External Factors Weight Rating Comments
Score
Opportunities
Increase in consumer saving
Booming Economy
0.15 2.5 0.375 ability doesn’t exploit full
(Increase GDP)
potential.
Capitalizing on brand name with
Increases in FDI 0.15 3.5 0.525
multinational firms

Technological advances
Offering various technological
and Financial 0.075 3 0.225
business solutions
Innovation
Governmental
Offers wide array of opportunities
Economic Reform 0.075 4 0.3
to SMEs
Strategy
Islamic Banking Trend 0.05 1 0.05 Totally neglected
Threats
Conservative and strong crisis
US Financial Crisis 0.15 3 0.45
management strategy
Aggressive Competition 0.12 4 0.48 Well positioned
Adequate risk management
Interest rate fluctuation 0.08 3 0.24
policies and procedures
Exchange rate
0.08 3 0.24 Strong financial position
Fluctuation
Product similarity 0.07 2.5 0.175 Market follower not market leader
Total Scores 1 3.06
The highest possible score for the EFE matrix is 4.0 and the lowest possible score is 1.
The company scored a 3.06 on the EFE matrix. This means that HSBC has adequately
positioned itself to take advantage of opportunities which arises as well as the ability
to handle and cope with threats which may also arise.
Reasoning for Weights and Rating:
Opportunities:
The opportunities of the industry haven’t been given the same weight because some
external factors are more important. Both increases in GDP as well as Increases in FDI
have the same weight of 0.15. In order to be a competitive player a multinational bank
needs to take advantage of all these opportunities. HSBC is doing excellent with the
following opportunities: Increases in GDP, increases in FDI and Technological
advances and financial innovation .The bank is doing well with the other opportunity,
but not as well as it could. In increases in GDP, HSBC isn't using all its resources fully.
Need to focus on consumer banking and retail. The last opportunity had the lowest
weight of 0.1. Although HSBC Global applies Islamic banking in Egypt it is neglected.
Threats:

There are several threats that the banking industry faces. The most significant is the
US financial crisis. This threat was given a weight of .15. This was one of the highest
weights out of the threats and opportunities. The threat to the industry is enormous.
HSBC because of its financial strength and reputation has done a good job of
positioning themselves against this threat.
The second largest threat is that of the Aggressive competition due to a large number
of competitors. The threat was given the second largest weight of 0.12. HSBC has also
done a good job of protecting itself against this threat. The bank is well positioned and
is very strong in the market.
Both interest rate fluctuation and exchange rate fluctuation have the same weight of
0.08. HSBC is doing well against these risks.
The last threat, which is similarity of Products, has the lowest weight of 0.07.
This is due to the large number of competitors offering more or less the same variety
of products and services.
IV) Internal Scanning: Organizational Analysis

A.Internal Environment: Strengths and Weaknesses
Corporate Structure

Abbreviations

COO: Chief Operating Officer SGM: Senior General Manager
NSC: Network Service Center PCM: Payment Cash Manager
EHO: Egypt Head Office CMB: Commercial Banking
HUB: HSBC Universal Banking CIB: Commercial Investment Banking
CRM: Credit Risk Management GTB: Global Transaction Banking
PFS: Personal Financial Service DMD: Deputy Manager Director
CLD: Classified Loan Division DGM: Deputy General Manager
MDR: Managing Director CPD: Card Processing Department
HSBC organizes its business around customer groups, which are based on a
geographical structure with regional offices. HSBC’s Group Head Office provides
overall strategic and functional direction.
The heads of the customer groups are responsible for establishing and implementing
strategies for the development of their business. They work with regional and country
managers to deliver the Group’s strategies around the world.
The decision-making authority is decentralized to many units, as we can see from the
organization structure. In Egypt each region has its General Managers. They are divided
into zones. Zone I for Cairo branches, Zone 4 for Red sea & October 6th, Zone II for
other Cairo branches and Zone III for Alexandria branches, El Mansoura and Port Said.
Although HSBC as a bank is mechanistic, the bank is delegating authority to different

business units to flatten the organization structure, therefore enabling it to speed up the
decision making process. Each zone is considered as an independent decision center as
opposed to referring all matters to the headquarters in Cairo.
HSBC places great importance to cultivating its own talent and to promoting from
within the organization. It values team work and a collegiate management style. Senior

management succession is seamless. Lines of communication are kept short and speed
of decision-making is emphasized.
Everyone in the organization understands the structure, from the General Manager to
the Teller. The organization emphasizes the importance of understanding the structure.
When an employee is hired, he/she goes to an induction course, where the Human
resources ensure that the future employee understands the structure, the company’s
strategies, culture and goals. Policies and procedures are clearly defined.
Corporate Culture
HSBC has a strong culture, and it has a powerful influence on the behavior of the
employees at all levels. The bank’s culture motivates and facilitates coordination and
control and hence gave HSBC a superior competitive position.
The group’s Culture is aligned to the group’s strategies.
HSBC’s Culture: The best place to work. HSBC wants to be recognized as the world’s
most respected and customer-driven financial services employer because it knows that
the motivation, or engagement, of its employees is a critical success factor in business
performance.
HSBC has developed a set of internal values to guide employee behaviors that will help
the organization deliver its brand promise.
HSBC’s strong corporate culture also means recruiting the right people. HSBC tries to
build its products, services, competencies, networks and people around its brand values.
HSBC recruits local people whose diverse backgrounds and personal values reflect the
global brand while their understanding of local markets and customs enables them to
tailor services to different communities and reflect regional customs and attitudes.
Therefore, the bank’s core values are articulated in its advertising and marketing and put
into practice throughout the organization, cascading down from global strategy to local
HR policy and service delivery.
HSBC’s brand is strengthened by a commitment to consistent service standards in every

location. The first requirement is to keep local branches up to date with the latest
products and initiatives. In addition to printed and online material in different

languages, a sophisticated intranet-based knowledge sharing system helps keep
managers and employees everywhere in touch with new developments. But it’s also
important to encourage local managers to interpret the brand promise for themselves
and their employees and use its inherent values to guide their working practices.
EMPOWERING LOCAL MANAGERS
Although HSBC’s cultural identity is defined by its global brand, the bank relies heavily
on local management to put its principles into practice. HSBC gives local branch
managers the flexibility and support to make day-to-day decisions around its core
values.
HSBC’s brand identity creates an expectation of particular attitudes and behaviors

among its employees. Its advertising is based on respecting local attitudes and customs
and that gives their employees a sense of pride.
It gives them the feeling that they represent an intelligent company and this makes them
work harder to live up to the brand.
AN AUTHENTIC CULTURE REINFORCES THE BRAND
There is a powerful business case for having a strong and authentic corporate culture.
Increasingly, culture and values have become the factors that differentiate one company
from another. As more and more companies offer the same products and services,
people tend to choose brands that reflect their personal values.
It’s worth recognizing that small companies and start-ups that trade on authentic values
and culture set the corporate ethos these days. So corporate culture has to be transparent
and represent what a company truly stands for. It’s no longer about positioning; it’s
about taking a position and reinforcing it in every part of the organization. HSBC’s
global brand has become part of its corporate DNA.
In HSBC:
 Brand values are developed by marketing and tend to relate to a customer

proposition.

 Corporate values are developed by corporate communication and relate to what it’s
like to belong to this particular organization.
 Employee values are developed by HR and tend to be about behavior, respect and
the employee brand.
HSBC has a culture and strategy that are clearly aligned, so that the organizational
culture drives behaviors that are helpful and supportive in delivering the strategy.
Corporate Resources
1. Marketing
The company established its international brand name, which ensured that the Group's
corporate symbol became a familiar sight all across the world. HSBC differentiates its
brand name from those of its competitors by describing the unique characteristics which
distinguish HSBC, namely being, 'The world's local bank.
The HSBC group provides a comprehensive range of financial services namely:
 Personal Financial Services: It provides a full range of personal finance services,

including current and savings accounts, mortgages, insurance, loans, credit cards,
pensions, and investment services. It is one of the world's top ten issuers of credit
cards.
 Consumer Finance: The Company's Finance Corporation's consumer finance
business ensures point of sale credit to consumers, and lends money and provides
related services to meet the financial needs of everyday people.
Products: Current, checking and savings account, loans and home finance; cards,
payments insurance, investment services and HSBC premier.
 Commercial Banking: HSBC is a leading provider of financial services to small,

medium-sized and middle market enterprises.
Products: payments and cash management, e-banking, wealth management services,

loans and insurance.

 Corporate Investment Banking and Markets: Tailored financial services are

provided to corporate and financial clients. Business lines include Global Markets,
Corporate and Institutional Banking, Global Transaction Banking, and Global
Investment Banking. Global Markets includes foreign exchange, fixed income,
derivatives, equities, metals trade, and other trading businesses. Corporate and
Institutional Banking covers relationship management and lending activities. Global
Transaction Banking includes payment and cash management, trade services, supply
chain, securities services, and wholesale banknotes businesses. Global Investment
Banking involves investment banking advisory, and investment banking financing
activities.
 Private Banking: HSBC is one of the world's top private banking businesses,
providing financial services to high net worth individual and families.
HSBC's business units includes, personal financial services, consumer finance,

commercial banking, corporate investment banking and markets, and finally, private
banking. Strategic planners within the group therefore must recognize the different
performance capabilities of each business unit and carefully allocate resources or
strategically implement its business objectives in order to meet the company's long term
goals. They must also ensure that the business units complement each other for the
greater good of the overall business.
The process of strategic market planning yields a marketing strategy that is the
framework for a marketing plan. A marketing plan includes the framework and entire set
of activities to be performed; it is the written document or blueprint for implementing
and controlling an organization’s marketing activities. Thus a strategic market plan is
not the same as a marketing plan; it is a plan of all aspects of an organization’s strategy
in the marketplace.
Marketing environment variables play a part in the creation of a marketing strategy.

When environment variables affect an organization’s overall goals, resources,
opportunities or marketing objectives, they also affect its marketing strategies, which
are based on the factors mentioned previously. They impact consumers needs, desires
and they affect competitors' plans.
Branding in the classic sense is all about creating unique identities and positions for
products and services, hence distinguishing the offerings from competitors. Corporate
branding employs the same methodology and toolbox used in product branding, but it
also elevates the approach a step further into the board room, where additional issues
around stakeholder relations (shareholders, media, competitors, governments and many
others) can help the corporation benefit from a strong and well-managed corporate
branding strategy. Not surprisingly, a strong and comprehensive corporate branding
strategy requires a high level of personal attention and commitment from the CEO and
the senior management to become fully effective and meet the objectives.
Corporate branding is a serious undertaking that entails more skills and activities than
just an updated glossy marketing facade with empty jargon. A strong corporate branding
strategy can add significant value in terms of helping the entire corporation and the
management team to implement the long-term vision, create unique positions in the
market place of the company and its brands, and not the least to unlock the leadership
potential within the organization. Hence a corporate branding strategy can enable the
corporation to further leverage on its tangible and non-tangible assets leading to
branding excellence throughout the corporation.
HSBC has in recent years acquired a vast number of companies across the globe and
adopted them fully under its international corporate brand with great success and within
a surprising short timeframe. A strong brand is about building and maintaining strong
perceptions in the minds of customers. This takes time to establish and many resources
to keep, but eventually no one remembers what the local banks used to be called, and
HSBC has managed to transfer the brand equities from the acquired brands into its own
corporate brand equity.
There are several benefits for employing a branding strategy that a corporation can
exploit. First of all, a strong corporate brand is no less or more than the face of the
business strategy, portraying what the corporation aims at doing and what it wants to be
known for in the market place. The corporate brand is the overall umbrella for the
corporations' activities and encapsulates its vision, values, personality, positioning and
image among many other dimensions.
HSBC has successfully implemented a stringent corporate branding strategy. HSBC

employs the same common expression throughout the globe with a simple advertising
strategy based on the slogan The world's local bank. This creative platform enables the

corporation to bridge between many cultural differences, and to portray many faces of
the same strategy.
Additionally, HSBC's brand name has enabled a number of key mergers and
acquisitions around the globe, which has so far strengthened its market presence in the
banking world, Brand Finance (2000).
The Marketing Strategies of the HSBC Group
Towards the end of 2003, HSBC launched 'Managing for Growth', a strategic plan that
provides HSBC with a blueprint for growth and development during the next five years.
The strategy is evolutionary, not revolutionary. It builds on HSBC's strengths and it
addresses the areas where further improvement is considered both desirable and
attainable.
HSBC concentrates on growing earnings over the long term at a rate which will place it
favorably when compared with its peer group. Also it focuses on investing in its
delivery platforms, its technology, its people and its brand to support the future value of
HSBC as reflected in its comparative stock market rating and total shareholder return
('TSR'). HSBC remains committed to benchmarking its performance by comparison
with a peer group.
Its core values are integral to its strategy, and communicating them to customers,
shareholders and employees is deemed as intrinsic to the plan. These values comprise an
emphasis on long-term, ethical client relationships; high productivity through
teamwork; a confident and ambitious sense of excellence; being international in outlook
and character; prudence; creativity and customer focused marketing.
Under the 'managing for growth' scheme, eight strategic imperatives were identified as
the key marketing and business strategies for 2004 - 2008. They are:
 Brand: make HSBC and its hexagon symbol one of the world's leading brands for
customer experience and corporate social responsibility
 Personal Financial Services: drive growth in key markets and through appropriate
channels to make HSBC the strongest global player in personal financial services

 Consumer Finance: extend the reach of this business to existing customers through a
wider product range and penetrate new markets Commercial Banking: make the
most of HSBC's international customer base through effective relationship
management and improved product offerings in all the Group's markets
 Corporate, Investment Banking and Markets: accelerate growth by enhancing capital

markets and advisory capabilities focused on client service in defined sectors where
HSBC has critical relevance and strength
 Private Banking: serve the Group's highest value personal clients around the world
 People: attract, develop and motivate HSBC's people, rewarding success and
rejecting mediocrity; and
 TSR: fulfill HSBC's TSR target by achieving strong competitive performances in

earnings per share growth and efficiency.
Central to achieving a company's corporate vision is the need to build up a loyal

customer base of satisfied customers. HSBC did not overtake its major competitors by
chance in acquiring foreign financial institutions; it developed a clear marketing
strategy based on a desire to fully satisfy a carefully targeted set of market segments.
Market segmentation is at the core of robust marketing strategy development. This

involves identifying customer needs, expectations, perceptions, and buying behavior so
as to group together homogeneous customers who will be satisfied and marketed to in a
similar manner. One segment will differ from another in terms of customer profile and
buying behavior, and also with regard to the sales and marketing activity likely to
satisfy these customers. Having sufficient knowledge of these customers is fundamental.
It is important to remember that the process of market segmentation involves more than
simply grouping customers into segments. Shrewd targeting of certain segments and the
development of a clear brand positioning are part and parcel of the market segmentation
process.
Now, HSBC launched a marketing strategy called 'Managing for growth', which is to
cover and deal with its strategic outlook for the period 2004 - 2008. From the company
website, they have stated that they will deliver this by; focusing on enhancing HSBC's

revenue generation culture, develop its brand name further (hexagon logo), manage
costs strategically, maintain a prudent credit/market risk stance, and invest further in its
people. Addition ally, acquisitions still remains an integral part of their strategy.
As stated from the company's website, they will concentrate on growing earnings over
the long term at a rate which will place it favorably when compared with its peer group.
It will also focus on investing in its delivery platforms, its technology, its people and its
brand to support the future value of HSBC as reflected in its comparative stock market
rating and total shareholder return ('TSR'). HSBC remains committed to benchmarking
its performance by comparison with a peer group.
They argue that their core values are integral to its strategy, and communicating them to
customers, shareholders and employees is intrinsic to the plan. These values comprise
an emphasis on long-term, ethical client relationships; high productivity through
teamwork; a confident and ambitious sense of excellence; being international in outlook
and character; prudence; creativity and customer focused marketing.
They state that their brand name has been an outstanding success and they will continue
with the next phase of their strategy. They argue that the brand name is now sufficiently
strong that they can accommodate brand variety at customer, product and even country
level as and when required by the business model. Adding, reputation on their part is the
key element of the brand proposition and cannot be overstated. Their policies for
corporate social responsibility and the environment are part of their brand name in
which they reach their objectives through the philanthropic objectives of the company.
HSBC is an international company, which deals with a variety of clients, HSBC is

service-oriented. In response to the need of HSBC to develop and improve in terms of
technology and the use of the World Wide Web, it has been able to come up with
marketing strategies that would provide the needs of their customers.
In line with HSBC’s aim for development with global focus, the company was able to
adopt a strategy, which enhances its technology development through information
systems operations. This strategy was able to increase staff retention rates, and decrease
staff turnover, which brings greater continuity and efficiency to the company’s projects.
Moreover, in terms of internet communications, HSBC has a single global center of
excellence for e-commerce IT, made up of collocated businesses and staff, distributed in

international offices, such as in New Jersey, Chicago, Canada, Hong Kong and London.
In accordance to this, HSBC was also able to implement and introduce another feature
of HSBC.com, the HSBCnet, which is its developed key global platform, designed for
commercial customers in other countries. HSBCnet includes services for global
markets, global cash management and investment banking that are being used regularly
by corporate customers. Moreover, as an response to the need of security, the company
has developed a second-generation internet technologies, exposing customers to
intelligent, personalized content and better targeted marketing, and this feature allows
the customers to save time, avoid repetition of tasks by pre-filling in application forms,
to come back to a product offer, and get to the end of an application process.
Furthermore, the company has also developed the successful credit card authorization
and accounting platform, which consists of linked applications, such as credit
assessment, risk-based pricing, card ordering and transaction processing and reporting.
These strategies enabled HSBC to gain competitive advantage over their competitors,
by implementing an effective and efficient Internet-based information system.
2. Product Life cycle
The Customer Life Cycle (CLC) has obvious similarities with the Product Life Cycle
(PLC). However, CLC focuses upon the creation of and delivery of lifetime value to the
customer i.e. looks at the products or services that customers NEED throughout their
lives. It is marketing orientated rather than product orientated, and embodies the
marketing concept. Essentially, CLC is a summary of the key stages in a customer's
relationship with an organization. The problem here is that every organization’s product
offering is different, which makes it impossible to draw out a single Life Cycle that is
the same for every organization.

In the Banking sector we don’t talk about the product life cycle but about the customer
life cycle. HSBC has a number of products that it aims at its customers throughout their
lifetime relationship with the company. Here we apply a CLC. You can start young
when you want to save money. 11-15 year olds are targeted with the Livecash Account,
and 16-17 year olds with the Right Track Account. When you begin work there are
many types of current and savings account, and you may wish to buy property, and so
take out a mortgage. You could take out a car loan, to buy a vehicle to get you to work.
It would also be advisable to take out a pension. As you progress through your career
you begin your own family, and save for your own children's education. You embark
upon a number of savings plans and schemes, and ultimately HSBC offer you pension
planning.
This is how an organization such as HSBC, which is marketing orientated, can recruit
and retain customers, and then extend additional products and services to them,
throughout the individual's life. This is an example of a Customer Life Cycle (CLC).
3. Finance
The Board of Directors and the Group Management Board monitors HSBC’s progress
against its strategic objectives. Progress is assessed by comparison with the Group’s
strategy, its operating plan targets and its historical performance using both financial
and non financial measures.
As a prerequisite for the vesting of performance shares, the remuneration committee

must satisfy itself that HSBC’s financial performance has shown a sustained
improvement in the period since the award date. In determining this, the remuneration
committee takes into account HSBC’s financial performance with regard to the financial
key performance indicators.
Key Stats & Ratios
Quarterly Annual
(Jun '12) (2011)
Net Profit Margin 65.71% 66.31%
Operating Margin 74.42% 69.33%
EBITD Margin - -
Return on Average Assets 4.09% 4.07%
Return on Average Equity 50.70% 42.86%
For HSBC Egypt record profits, the highest ROE in Egypt and continued improvement
in cost efficiency were fuelled by a 46%rise in customer deposits and a 92% rise in
loans in 2012. HSBC's first Mutual Fund "Estikrar" was 80% over subscribed in
4Q2012.
Trend analysis
2012 2011 2010 2009

% % % %
Revenue Growth 20.8 13.4 12.2
Revenue mix
Net interest income 47.8 52.8 54.4 60.6
Net fee income 27.9 26.3 25.1 25.2
Other income 24.3 20.9 20.5 14.2
Cost efficiency 49.4 51.3 51.2 51.6
Credit performance as measured by risk adjusted margin 6 6.3 6.3 6.8
Return on average invested capital 15.3 14.9 15.9 15
Dividends per share growth 11.1 11 10.6 10
Earnings per ordinary share $ 1.65 1.4 1.36 1.18
Return on average total shareholders' equity 15.9 15.7 16.8 16.3

To support the Group’s strategy and ensure that HSBC’s performance can be monitored,
management utilizes a number of financial KPIs. The table above presents these KPIs
for the period from 2009 to 2012. At a business level, the KPIs are complemented by a
range of benchmarks which are relevant to the planning process and to reviewing
business performance.
HSBC is publishing a number of key targets against which future performance can be
measured. The financial targets have been set as follows:
The return on average shareholders’ equity over the medium term has been set at
15-19 %; the cost efficiency ratio has been set in the range of 48-52%, and the TSR in
the top half of that achieved by peers. The cost efficiency ratio has been set as a range
within which the business is expected to remain in order to accommodate the need for
continued investment in support of future business growth.
- Revenue growth provides an important guide to the Group’s success in generating

business. In 2012, total revenue grew by 20.8 % to US $ 79 billion, 13.5% on an
underlying basis, reflecting HSBC’s expansion into new products and markets,
improved brand recognition and refinements in segmentations to better meet
customer needs.
The trend maintained the strong performance in 2011 when the underlying increase
was 10.5%. Higher revenue was largely driven by balance sheet growth and strong
contributions from faster-growing economies. Fair value gains also helped in
revenue growth. These gains were primarily driven by a widening of credit spreads
on debt issued by HSBC Holdings and its subsidiaries and designated at fair value.
- Revenue mix represents the relative distribution of revenue streams between net
interest income, net fee income and other revenue. It is used to understand how
changing economic factors affect the Group, to highlight dependence on balance
sheet utilization for income generation and to indicate success in cross-selling
services to customers with loan facilities.
- Cost efficiency indicates the consumption of resources in generating revenue.
Management uses this to assess the success of technology utilization and more

generally the productivity of the group’s distribution platforms and sales force. The
cost efficiency ratio for 2012 improved over the previous 2 years.
- Credit performance is an important gauge for assessing whether credit is correctly

priced so that the returns available after recognizing impairment charges meet the
group’s required return parameters. The ratio for 2012 was 6%,showing a decrease of
0.3 % points over 2011. The marginal decrease arose from the significant credit
losses in the US, partly offset by the increase in income mainly generated from the
faster-growing economies.
- Return on average invested capital measures the return on capital investment made
in the business, enabling management to benchmark HSBC against competitors. In
2012, the ratio of 15.3 % was 0.4 % higher than that reported in 2011. This increase
reflected the fact that profitability grew faster than the capital utilized in generating
the profit. The main drivers were the higher income generated, mainly in the faster-
growing economies which were not consumptive of capital, and the fair value
adjustment on the widening credit spreads on debt issued by HSBC holdings and its
subsidiaries.
- Basic earnings per share (EPS) increased by 0.1 % points over 2011. This
demonstrates the benefits of diversified earnings.
- Return on average total shareholders’ equity measures the return on average

shareholders’ investment in business. This enables management to benchmark Group
performance against competitors and its own targets.
In 2012 the ratio was 15.9 % or 0.2 % points higher than in 2011. This is in line with
management’s target of achieving a range of between 15 and 19%.
The fundamentals of HSBC are very strong. The deleveraging of the financial system
clearly plays to HSBC’s strengths, given its conservative balance sheet and international
presence. There can be few banks in the world that are better positioned to withstand
market turbulence and grasp strategic opportunities. HSBC will continue to focus on the
parts of the global economy that promise the best prospects for higher growth over the
long term.

HSBC will continue to invest for profitable growth in line with their strategy, and will
do so while maintaining its financial strength, which is the heart of its success.
Caution is likely to be the watchword in the financial sector until liquidity, transparency
and the proper pricing of risk return to financial markets. HSBC monitors its
performance and manage its risks accordingly.
4. Operations and Logistics
Service Facilities: HSBC offers its services to a wide range of customers through a
network of branches, ATMS, 24/7 call center and online banking service.
For example, customers can make deposits in person at a depository institution’s branch
office, through the mail, at an ATM, or via direct deposit. Customers can make
withdrawals at a branch office, at an ATM, or by using a debit card or check. Customers

also can access credit lines through other retail banking services using the telephone or
the Internet.
But the number of branches is still limited compared to the availability of branches of
other competitors.
HSBC uses the newest and updated technology to ensure efficient customer service as
well as efficient communication between departments.
5. Human resources management
HSBC places great emphasis on its employees, considering them to be a valuable asset
to its wealth. The process of being a part of the firm starts by scrutinous selections of its
employees, where quality is one of main determents of admittance.
Being a member of HSCB is viewed by many of its employees as being a member of an

elite crew. The human recourses department works to ensure the best allocation of
employees in the right place; it invests heavily in training and development of talent to
keep HSBC work pool up to date with the ever-changing business environment. The HR
department makes sure that all employees fully understand their rights and
responsibilities through an effective induction course at the beginning of employment.
Employees at HSBC are required to write their own job descriptions and fulfil its
criteria.
All Group members must establish Human Resource policies and practices which
embody the Group’s Brand values.
The core Human resource values to be adopted in HSBC are as follows:
- To deal with people in a fair and equitable way.

- To maximize the development and training of employees to meet the current and
future needs of the business.
- To employ a workforce who reflect the diverse communities in which the Group
operates.
- To be an equal opportunity employer.
- To create and maintain a safe and healthy working environment.

- To be open and honest with employees.

- To recruit and promote on the basis of merit.
- To recognize and reward individual ability and performance appropriately.
- To create a climate conductive to the realization of the objectives of the business.
- To ensure that people are given every opportunity to achieve their full potential.
- To pursue teamwork and team-spirit.
In order to ensure HSBC’s success management ensures that proper recruitment and
selection processes are utilized. The company utilizes online services for its recruitment
process. The company’s human resource professionals gain access to a larger pool of
online applicants.
The site’s global network and content is displayed in different languages, making it
accessible to almost every potential employee all over the world (The intranet).
Human resources in HSBC are a major contributor and is successful in making HSBC a
Best place to work.
6. Information Systems
IT performance and systems reliability:
HSBC tracks two key measures as indicators of IT performance; namely, the number of
customer transactions processed and the reliability and resilience of systems measured
in terms of service availability targets.
Number of customer transactions processed
The number of customer transactions processed is a reflection of the increasing usage of

IT in each of the delivery channels used to service customers. Its aim is to manage the
rate of increase in customer transaction costs effectively and ensure that customer
growth is enabled in the appropriate channels. The transition of customer transactions
from labor intensive (branch, call centre and others) to automated (credit card, internet,
self-service and other e-channels) is occurring.
Percentage of IT services meeting or exceeding targets

HSBC’s IT function establishes with its end-users agreed service levels for systems
performance, such as systems running 99.9 per cent of the time and credit card
authorizations within two seconds, and monitors the achievement of each of these
commitments.
IT is vital to the HSBC online banking operation, but the company added that the
development of its second-generation internet banking platforms forced up technology
costs.
HSBC concentrated its investment on technology promoting straight-through processing

and simplifying account opening online, it said, allowing customers to purchase
products online.
HSBC sees the Internet as one of several exciting new media, to be incorporated as an
integral part of its working. The bank has concluded that e-commerce will change the
fabric of the financial services sector and sees it as a way of finding new customers all
over the world and improving its services to existing customers. It intends to use e-
commerce to reorganize the business so as to provide higher-quality customer services
more efficiently.
"This will improve processing time and reduce errors caused by human intervention,”
use of technology increasingly dictates how the customers interact with the bank. HSBC
increasingly employ technology to create better products which we can deliver globally
at lower cost.
Customer relationship management software had been vital to the launch of new
products. "Delivering the right products and services for particular target markets is a
fundamental requirement in any service business, and market research and customer
analysis is essential to developing an in-depth understanding of significant customer
segments and their needs.
HSBC is working to develop the synergies that can be achieved by commonality of

technology and process through ‘One HSBC’, particularly as it relates to reducing its
cost base in developed markets. A slowing of the Group's cost growth is evident in its
results for this half year.

One HSBC is a program to re-engineer the company so that wherever possible they use
global systems which provide leading customer experience and also drive down the cost
of production. For example, One HSBC Call Centre is reducing call times for its
customers’ most frequent transactions.
One HSBC Collections improves the service and contact capabilities through holistic
customer level views versus individual account views. About three-quarter of the
Group’s global credit card base is now on the One HSBC Cards platform.
Standardizing the service proposition under the One HSBC program has cut HSBC’s
service interruptions in half.
Migration to the standard One HSBC will play a major part in creating value for
customers and shareholders in the coming years.
Gold suite, the new system that HSBC is operating on, is more flexible, user friendly
and faster.
B.Corporate Value Chain
5% 20
30 20 25
5% 30 20% 15
30
5% 25 30 35% 5%
5%
40%
20%
15% 20%

As we can see from the value chain, HSBC's primary activities are derived from a
variety of activities which all contribute to its profit margin.
The External factors include Funding and capital structure, regulatory agencies clearing
partners and alliance partners. These contributors contribute to 5% of the profit margin
as they are considered as initial setup requirements for the bank to operate, while using
5% procurement, 5% technology and 5% HRM.
Moving on to the Operation aspect of the value chain, we can see that it includes
processes that enable the bank to perform it daily activities efficiently. These activities
contribute to 15% of the profit margin since they ensure the continuity of the banks day
to day functions. These activities use 25% procurement, 30% technology and 20%
HRM
Delivery channels are responsible for providing the bank services to the public, it can be
considered as the bank outlet. They include branch networks, ATMs, Call centers and
internet banking. Delivery channels contribute 20% to the Profit margin while using
30% of allocated resources of procurement, technology and HRM.
Marketing and sales ensures brand recognition, customer loyalty and awareness it is the
largest contributor to of the value chain, submitting 40% to the profit margin. It is not
unusual that it requires 35% of the resources allocated for procurement and 20% of
technological and HRM resources in order to achieve this contribution.
The last aspect of the primary activities is the front-end and post sales services, which
ensure an ongoing relationship with the banks clients. This process contributes to 20%
of the profit margin while using 5% procurement, 15% technology and 25% of
resources allocated to HRM.
As a global bank, HSBC continues to invest heavily in ensuring it remains customer

driven and able to service customer requirements better. A significant proportion of the
more than $2.5bn the group invested in technology was invested in customer
relationship management systems and electronic delivery channels, such as the internet
and telephone banking. HSBC Egypt has benefited from the scale of the investments
that are necessary and made possible by being part of an international banking group.

C.Internal Factor Analysis Summary (IFAS)

Weighted
Internal Factors Weight Rating Comments
Score
Strength
Strong financial position globally and
0.15 4.5 0.675
Financial Position locally (high ROA and ROE)
Commitment to consistent service
Brand recognition 0.06 4 0.24
standard in every location
High internal audit Frequent auditing ensures abiding to
0.04 4 0.16
control procedures
Proper selection ensures employees
Qualified staff 0.10 3 0.3 fit into HSBC culture (continuous
training)
Global network (IT Ability to take adv. of global network
0.15 4 0.6
Infrastructure) while respecting local culture
Weaknesses
Increase in Turnover 0.05 3 0.15 Difficult to climb career ladder
Uncompetitive retail Competitors offer more attractive
0.2 2.5 0.5
products packages
Availability of Slow to open new branches and ATM
0.15 2.6 0.39
branches outlets
Complicated
0.1 2 0.2 High bureaucracy
procedures
Total Scores 1 3.215
V) Strategy Formulation: Situation Analysis and

Business Strategy
A.Strategic Factor Analysis Summary (SFAS)
Weighted
Strategic Factors Weight Rating Comments
Score
Strong financial position globally
Financial Position 0.13 4.5 0.585
and locally (high ROA and ROE)
Proper selection ensures
Qualified Staff 0.09 3 0.27 employees fit into HSBC culture
(continuous training)
Global Network 0.10 4 0.40 Ability to take adv. of global

network while respecting local

culture
Uncompetitive Retail Competitors offer more attractive
0.09 2.5 0.225
Products packages
Availability of Slow to open new branches and
0.05 2.6 0.13
Branches ATM outlets
Increase in consumer saving
Booming Economy
0.10 2.5 0.25 ability doesn’t exploit full
(increase GDP)
potential.
Capitalizing on brand name with
Increase FDI 0.13 3.5 0.455
multinational firms
Technological
Offering various technological
Advances and 0.08 3 0.24
business solutions
Financial Innovation
Conservative and strong crisis
US Financial Crisis 0.13 3 0.39
management strategy
Aggressive
0.10 4 0.40 Well positioned
Competition
Total Scores 1 3.345
Review of Mission and objectives
From the previous analysis we conclude that we would keep the mission as well as the
strategic objectives. But we will add one strategic objective:
- Become leader in new product introduction
(Expand sales from existing customers by 20% by the end of 2013)
B.Strategy Matching Phase

1. TOWS Matrix

2. Space Matrix
Financial Strengths:
Bank able to reduce its cost/income ratio down to 40.4%from 41.8% 3

Capital increase 40.6% (From EGP 1,072,500,072 to EGP 1,508,500,056) 4
Geographic profit contribution in the Middle East +0.6% 2
Return on Equity increased from 15.7% to 15.9% 5
Profit before tax increased from $72,000,000 to $115,000,000 a 59.72% increase 5
19
Industry Strengths
Privatization provides geographic and product freedom 3

Availability of qualified staff 3
Increased competition in banking industry 4

High entry barrier 4
Infrastructure development in Egypt 4
18
Environmental Stability
Inflation is relatively high -4

Global Financial Crisis -4
Political environment is stable -2
Tight CBE regulations -2
High Economic growth and trade flows -3
-15
Competitive Advantage
International presence -2
Strong corporate team in the Egyptian market -1
Technological leadership -2
Community development -3
Customer loyalty -4
-12
Average
Financial Strength: 19 / 5 = 3.8

Industry Strength: 18 / 5 = 3.6
Environmental Stability -15 / 5 = -3
Competitive Advantage -12 / 5 = -2.4
Total X-axis score 3.6 - 2.4 = 1.2
Total Y-axis score 3.8 - 3 = 0.8
Thus, the SPACE matrix clearly points towards an aggressive strategy, since HSBC has
a strong financial position as well as operating in a strong industry.

HSBC's strategy is to continue to grow its business across the region, to expand its
footprint and deepen its penetration, serve its customers better.
The strategy here is completely aligned with the global strategy, HSBC is emerging
markets focused and financing led. Given the strength of its franchise, do have a well-
established platform here, and that's evidenced through the awards that HSBC received
from a number of publications across a number of different categories.
VI) Strategy Selection

A.The Grand Strategy Matrix for HSBC:
Growth strategy
Competitive strategy: Differentiation
By all means, HSBC has a very strong competitive position in the banking industry. As
the competitor mapping table as well as the competitive advantage (CA) field in the
SPACE matrix have already shown, HSBC clearly has the best competitive position by
a variety of measures, which locates the firm on the far right side of the Grand Strategy
matrix. The market growth dimension is not as clear. While international markets are
growing rapidly, the national market for commercial banking is pretty saturated. Thus,
HSBC, which does have internationalization and globalization opportunities and an
international wholesale strength, is overall located slightly in the upper market growth
half in the Grand Strategy Matrix. HSBC has a strong competitive advantage through its
qualified and experienced staff, use of Technology, high brand management and
recognition. But the banking industry is saturated especially the retail industry.
Customers view the banking products as similar. HSBC needs to focus in differentiating
itself from its competitors. Product development strategy is recommended. For example
Islamic banking is critical in order to retain customers and compete in today’s financial
services environment. Since Islamic banking trend is an opportunity, HSBC should use
its strong financial position (strength) to invest in introducing Islamic banking.
Product Development-Technological and Customer Oriented Strategies
HSBC can utilize product development to improve its competitive position by

improving and modifying its existing products and services. Because of the commercial
banking industry's highly competitive nature, HSBC needs to constantly offer new
products and services as well as modify and improve existing ones. In addition, due to
rapid technological changes and rapid growth in the industry, HSBC needs to keep up
with and exceed competitors in the market with technological innovations and creative

implementation using this technology in order to maintain a competitive advantage. The

Corporation needs to continue its innovative approach to serving customer needs, for
example its new CRM system with Gold suite. HSBC offers electronic banking and
commerce services. In addition, HSBC OnLine Services, a PC-based, customer-focused
banking service that allows customers the ability to control the choice of using the
Internet or a private network for access. Customers are able to retrieve information on
their deposit and loan accounts, transfer money between accounts, pay bills
electronically, and make recurring payments. Other technological, yet customer friendly
services should continually be sought out by the bank.
It should by now be clear that HSBC's primary focus is the customer. One of the major
guiding principles HSBC is driven by is the customer. HSBC is focused and committed
to improving the customer experience. HSBC has established a leadership position in its
markets through its presence in Banking Centers, advertising, and major event
marketing and sponsorship. A strong brand is a powerful asset; it is the brand that is
enduring and builds brand-loyal customers. HSBC should continue to sponsor major
events and communicate to its potential customers that the bank is now a bank, with
many product offerings. As the industry continues to consolidate, customers are
becoming concerned about the possibility of having totally impersonal service. HSBC
needs to position itself as a unique bank, because of its customer focus, and should
stress that HSBC is truly a personal bank and plans to remain that way.
These two strengths, technological abilities and superior customer orientation are a great
combination. These allow the bank to create and apply new technologically advanced,
yet customer friendly services that are custom-tailored to client's specific needs.
Market Development-Geographic Penetration
In conjunction with product development, HSBC can also use market development and
expand geographic penetration by merging with and acquiring other banks or financial
companies .Because of the rapid growth and consolidation of the industry, in order to

maintain a competitive advantage, HSBC needs to expand its operations. Through

further mergers and acquisitions, HSBC can further increase its national presence.
Currently, HSBC Business Banking line of business focuses on small businesses. HSBC
also focuses on retaining and growing deposits of small businesses and offers programs
such as a major introduction of cash management products customized for small
businesses. The HSBC Business Solutions call center is dedicated to small business
customers, offering customers automated information on their accounts as well as a
wide range of services and advice. HSBC OnLine Banking is also greatly appealing to
small business customers. HSBC is effectively and efficiently offering great products
and services to its large business customers, and can further increase its business by
expanding and reaching out to SME’s.
Strategy decision and recommendation
A quantitative strategic planning matrix (QSMP) can be used to quantitatively assess

several strategy alternatives, by weighing and rating the alternatives in terms of how
they benefit from strengths and opportunities and deal with weaknesses and threats.
We will choose between two strategies:
Strategy 1: Increase number of branches to capitalize on strong financial position and

enabling market penetration.(Market expansion)
Strategy 2: Introduce new product and services (Islamic banking) and revise retail prices
and rates to overcome perceived similarity in retail.(Product development)
B.The Quantitative Strategic Planning Matrix (QSPM)

Key Factors Weight Strategy 1 Strategy 2

Total Rated Total Rated

Rate Rate
Score Score
Opportunities
Booming economy
0.09 4.5 0.405 4.5 0.405
( increase in GDP)
Increase in FDI 0.09 3 0.27 3 0.27
Technological advances and
0.07 4 0.28 4 0.28
Financial Innovation
Islamic banking trend 0.04 1 0.04 5 0.20
Threats
Aggressive competition 0.07 4.5 0.315 3.5 0.245
Product similarity 0.06 4 0.24 4.5 0.27
Bargaining power of
0.03 1 0.03 1 0.03
customer
US financial crisis 0.05 2.5 0.125 2 0.10
Strengths
Strong Financial position 0.09 4.5 0.405 4.5 0.405
Brand recognition 0.09 4 0.36 3.5 0.315
Global network 0.08 4 0.32 3.5 0.28
Qualified Staff 0.05 4 0.20 4.5 0.225
Weaknesses
Availability of Branches 0.06 5 0.30 3 0.18
Complicated procedures 0.03 3 0.09 3 0.09
Increase in turnover 0.04 3 0.12 2 0.08
Uncompetitive retail
0.06 2.5 0.15 5 0.30
products
Total score 1 3.65 3.675
Based on the above Quantitative Strategic Planning Matrix (QSPM), HSBC should
focus on strategy 2 which involves introducing new products and services in order to
gain more market share in its retail division.
It is evident that both strategies have almost the same weight, however based on new
market trends HSBC should embrace a proactive approach in order to take advantage of
the emerging potential of the retail market. Its products should be tailored to match the
culture and beliefs of a majority of the Egyptian population.
VII) Strategy Implementation

Looking over the collected data, we can see that in order to start implementing this
strategy, a modification should occur in HSBC’s organization structure. It is evident that
the bank’s head quarters are located in Cairo, and in order to effectively introduce new
products within the Egyptian retail market, a thorough market study should be
performed.
The Bank should advocate and support introduction of new products and sectors (such
as Islamic Banking) that build capacity.
Establishing a marketing department in different regions would ensure proximity to the

market and would reduce the time needed to perform the market study.
The Bank’s approach in providing new products will consist of a combination of multi-
sectoral approaches. Among these approaches are activities that raise awareness on the
benefits of these new products
At first, a HSBC may only want to probe the potential of this market, and thus may be
interested in launching a pilot project. The bank can take advantage of its existing
branch network to open so-called Islamic windows, through which to reach the potential
new clientele.
HSBC Egypt has the financial resources to implement the introduction of new products
due to its superior financial strengths. Outstanding revenues and operating earnings
have allowed for the building of significant reserves. HSBC has successfully launched
its SME division and proved to be a sustainable profit center to the bank. It can
capitalize on its SME experience when introducing new retail products.
But innovation is not easy in banking. The industry has to contend with a tangle of
regulations acting as “speed bumps” that can slowdown product and marketing
innovation. Before introducing new products and sometimes even new marketing
programs, HSBC has to consider such factors as privacy laws, debt security guidelines,
and fair lending practices. Internal structural problems also inhibit marketing and
product innovation. Product-focused companies typically have research and
development departments, not so in banks, where IT tends to drive R&D. Furthermore,
departments within HSBC organization are usually highly segregated from one another;
the people who know what kind of technical innovations are needed are often

completely isolated from those in a position to deliver the innovations. Cross-

departmental teamwork is generally not encouraged.
Two other forces — risk aversion and inertia — can tamp down the urge to innovate.
HSBC must be exceptionally careful not to overcomplicate its offerings because product
confusion can undermine the confidence the consumer must have in the bank to trust it
with their money. And, although many bank consumers might not be happy, they are
usually not quite unhappy enough to leave.
Putting Customers First
When banks do come up with new products, the products often fail because they don’t
focus enough on the consumer. Internal structural changes can improve the chances of
success. Breaking down the wall between sales and customer services and clearer
organizational processes can help make it possible for innovations to develop on a
regular schedule. HSBC does not have a clear process for gaining approvals of new
product innovations. Without a process, innovations occur more slowly and painfully.
There is a window of opportunity for HSBC to lay the groundwork for more effective
cross-selling of new products and retention by emphasizing investment of capital and
human resources at the beginning of a customer relationship rather than primarily on the
mature customer base. A significant portion of retention and cross-selling efforts is
focused on the onset of new customer relationships based on simple products that fit
customer needs and on a disciplined alignment of staff incentives and training with sales
and retention goals.
In order to implement this strategy, it must be considered with a strong marketing

campaign which focuses on customer awareness
In offering new products and services, financial institutions face a number of risks that
must be addressed. Many banks have found that engaging in new, expanded, or
modified bank products or services has enabled them to expand their customer base.
However, the bank’s ability to effectively measure, monitor, and control the risks
inherent in such products or services may be compromised if it is overly focused on
expected returns, does not have a good understanding of the inherent risks, or has
insufficient governance practices. CBE supervisory guidance advises banks seeking to

offer new products and services to oversee them through an effective risk management
process that includes performing adequate due diligence prior to introducing the
product, developing and implementing controls to ensure risks are properly measured
and controlled, and developing and implementing appropriate performance monitoring
and review systems. The guidance also advises bank management to have a realistic
understanding of the risks and rewards of the product, and to clearly understand the
rationale for offering the product.
VIII) Evaluation and control

Clearly stated and communicated objectives are critical to success in all types of firms,
including HSBC. One way of clearly communicating firms' objectives is by establishing
annual objectives. These annual objectives should be consistent with long term
objectives and serve as guidelines for action, directing and channeling efforts and
activities of organization members. They also serve as standards of performance and are
an important source of employee motivation. In addition, they provide incentives to
managers and employees to perform.
Since HSBC consists of many different divisions, such as the Commercial Banking
Group, Retail Group, Finance Group, and Capital Holdings Group, each division should
develop its own annual objectives. Also, each functional area should have an annual
objective. HSBC invested on a new performance management system allowing all
employees from low levels to top, in developing their objectives and targets.
Financial (25 points) To increase profitability
1- Increase in shareholders wealth (9)

2- Increase in number of retail accounts (7)
3- Increase in net income before tax (9)
Customer (25 points) To increase market share through attracting a large client base
1- Increase customer retention ratio (10)

2- Maintain customer satisfaction (10)
3- Simplify complicated procedures (5)

Internal Business Process (25 points) - Use our scale and technology to deliver better
and more efficient services to customers. - Become leader in new product introduction
1- Introducing new products (8)

2- Updating IT systems (8)
3- Product sustainability (6)
4- Internal audit score (3)
Learning and Growth (25 points) Attract, retain and reward top performers
1- Employee retention (9)

2- Employee Engagement (10)
3- Job rotation (6)
Performance objectives for all roles are set around a balanced scorecard framework with
four objective elements.
Below is an example of balanced scorecard for HSBC Egypt

IX) APPENDIX
APPENDIX I

X) References

- Central Bank of Egypt, Economic Bulletin, different issues, Egypt: The Central Bank
- HSBC in the Middle East - 21 April 2008 Report
- Competition, Product Differentiation and Quality Provision: An Empirical

Equilibrium Analysis of Bank Branching Decisions
- http://publications.worldbank.org
- Incentive-Based Regulations and Bank Restructuring in Egypt- Alaa El-Shazly Cairo

University
- Strategic Management and Business Policy 11th ed. - Thomas L. Wheelen and J.
David Hunger
- www.businesstoday.com
- www.theeconomist.com
- http://Egypt.HSBC.com.egyptbook-sustainablegrowth.EMEAresearch.march2007
- www.globalinsights.com
- World Bank (1994). Private Sector Development in Egypt, The Status and The
Challenges. Washington D.C.: The World Bank.
- World Bank (1998). World Development Indicators. Washington D.C.: The World
Bank.
- Adams, R., K. Brevoort and E. Kiser (2004), “Who Competes with Whom? The
Case of Depository Institutions,” working paper.
- Cohen, A. and M. Mazzeo (2004), “Market Structure and Competition Among Retail
Depository Institutions,” Finance and Economics Discussion Series 2004-4.
- Washington: Board of Governors of the Federal Reserve System, 2004. Berger, A., S.

- Bonime, L. Goldberg, and L. White, “The Dynamics of Market Entry: Effects of

Mergers and Acquisitions on Entry in the Banking Industry,” The Journal of
Business.

HSBC Final

Uploaded by

Copyright:

Available Formats

You might also like

HSBC Final

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

HSBC Final

Uploaded by

Copyright:

Available Formats

Strategic Management Project HSBC Strategic Plan

Strategic Management Project

HSBC Strategic Plan Page 1

II) Corporate Governance

C. Issues Priority Matrix 30

F. External Factors Analysis Summary (EFAS) 38

IV) Internal Scanning: Organizational Analysis 40

B. Corporate Value Chain 59

C. Internal Factor Analysis Summary (IFAS) 60

V) Strategy Formulation: Situation Analysis and Business Strategy

B. Strategy Matching Phase 62

HSBC Strategic Plan Page 2

VI) Strategy Selection

B. The Quantitative Strategic Planning Matrix (QSPM) 68

VII) Strategy Implementation 69

HSBC Strategic Plan Page 3

Mission & Strategies

- Leading in our chosen markets

- Achieving a superior, ethically based, long-term return for our shareholders

- Building highly motivated, high-performance teams

- Creating a challenging, rewarding and fun work environment

- increase market share through attracting a large client base

HSBC Strategic Plan Page 4

- Establish legitimate and credible competitive positioning

- Leverage Group advantages with focus on international requirements of customers

- Align business initiatives to our Global Pillars

- To be the leading international business bank

- Grow our referral system

- Align presence with global trends

- Focus developed markets businesses on international connectivity

- Maintain financial strength

- More focus on commercial banking

- People - Attract, retain and reward top performers

- Customer-Centered - Always provide exceptional customer service

- Efficiency - Lower our costs and use resources wisely

- Profitable Growth - Grow sales and increase our revenues

- Ownership - Own our performance and our results

HSBC Strategic Plan Page 5

The HSBC Group is committed to five Core Business Principles:

1. Outstanding customer service.

3. Strong capital and liquidity.

4. Prudent lending policy.

5. Strict expense discipline.

HSBC also operates according to certain key Business values:

- The highest personal standards of integrity at all levels.

- Hands-on management at all levels.

- Openly esteemed commitment to quality and competence.

- Fast decisions and implementation.

- Putting the team’s interests ahead of the individual’s.

- The appropriate delegation of authority with accountability.

- Fair and objective employer.

- A diverse team underpinned by a meritocratic approach to

- The exercise of corporate social responsibility through detailed assessments of

HSBC Strategic Plan Page 6

and sustainable development, and commitment to the welfare and development of

Mr. Jacques Emmanuel Blanchet Chief Executive Officer

Mr. Robert Gray Director