North South University

School of Business and Economics,

Department of MIB

Fall 2020

International Business

Topic: Case Study-2 :HSBC’s Farewell to Japanese Retail Banking

Group Color: Yellow

Name ID Sec Roll

Name ID Sec Roll

Fahim Hasan Ashrafi 1722009030 14 1

Istiak Hasan 1821638630 14 4

Arpon Barua 1821897630 14 5

Wasif Mohammad Khan 1831566630 14 10

Tasnim ISlam 1911293630 14 14

Japan is an enormous market that cannot be ignored. As one of the world’s largest banks that
calls itself the “world local bank”, Hong Kong and Shanghai Banking Corporation Limited
(HSBC) has only been briefly involved in Japanese banking business in past years. In
September 2007, HSBC announced its plans for a fullscale penetration into Japan’s retail
banking market by sending a special task force with several financial services experts from
Hong Kong to promote and expand their retail banking business in Japan. However, after four
years of unsuccessful attempts to overcome language and recruitment barriers as well as to
resolve decision making problems and technical incompatibility HSBC decided to leave the
Japanese retail banking market in February 2012.
The first major problem that HSBC task force faces in Japan is language and recruitment
barriers. As a general corporate policy, the official medium of communication within the HSBC
group is English, a language not commonly used in Japan. The bank has to pay a salary of
about 20-40 percent higher than the market rat in order to recruit bilingual local personnel who
are fluent in both English and Japanese. This significantly increases the operating costs of
HSBC’s Japanese branches. While recruiting suitable bilingual local employees is not easy,
firing them is even more challenging. Japan has a long history of “lifetime employment” and it is
very difficult to dismiss employees simply because of their incompetence. Sometimes it takes
months of negotiation to ask an unwanted employee to leave the bank. Slow decision making
process is another complication for members of HSBC task force who need speedy decisions to
produce an impressive amount of profit as soon as possible. Japanese employees spend long
hours listening, discussing and clarifying various issues and problems and arguing their
opinions until they are fully convinced. They attempt to reach a true consensus rather than a
compromise between managers and employees. This makes the process of designing and
implementing aggressive marketing plans for business expansion extremely time
consuming.What makes things worse is the fact that technical incompatibility in ATM and
Internet banking systems renders HSBC’s global standardization plan unworkable in Japan.
HSBC has its own standard ATM system used in its branches all over the world; however, due
to technical restrictions, HSBC is compelled to use the local ATM system, commonly found in
more than 30,000 convenience stores and post offices in Japan. The same happens for internet
banking services; HSBC is not allowed to use its own Internet business model developed for all
its branches in the global market because it does not fully comply with the protocol and
technical standard used by Japanese telecommunication vendors. The local ATM and Internet
banking systems can only partially interface with HSBC’s global system, but the bank has to
adopt reluctantly.As the financial market turmoil dampens, HSBC intends to cut its worldwide
costs by $ 3.5 billion before 2014 and sharpen the bank’s focus by quitting countries where it
lacks sufficient returns. Unfortunately Japan is one of these countries.

Questions

1. What problems do you see in HSBC’s effort to penetrate the Japanese market in 2007?
2. Is HSBC adopting an ethnocentric, polycentric or geocentric attitude toward its business
in Japan?
3. What obvious cultural differences between the HSBC task force and local Japanese
employees do you see in this situation?
4. While HSBC claims that it is the “world local bank”, can it become the local bank in
Japan?
5. What should HSBC have done before they considered a full scale penetration into
Japan’s retail banking market?

Answer to the question no 1

1. Difference in decision making method- HSBS couldn’t cope up with Japan’s decentralized
process in terms of decision making as they follow fast centralized process.
2. Language difference- Speaking in English is not common in Japan.
3. Difference in employment policy. Japan follows ‘Life-time employment’ policy
4. HSBC’s global standardized ATM system is not compatible in japan

Answer to the question no 2

HSBC adopted ethnocentric attitude towards its business in Japan. They also sent staffs from
HONG KONG to take care of issues in Japan. Hence, they followed centralized decision-making
process which indicates their adoption of ethnocentric attitude in business.

Answer to the question no 3

1. Between the HSBC task force and local Japanese employees had severe language barrier.
ENGLISH is not commonly spoken in Japan.
2. The difference in employment policy was also a n important difference between them.
3. Japan follows decentralized process and HSBC follows centralized process. It’s a major
cultural difference between them.

Answer to the question no 4

To become the local bank in Japan, HSBC requires large scale localization. HSBC would need
to consider using local Japanese language in japan corporate communication. HSBC also
needs to employ local Japanese managers and make strategic decisions with their involvement.
So, to become a central Japanese bank, HSBC need to go through changes in their business
strategies.

Answer to the question no 5

A sincere and detailed PEST analysis was needed beforehand. Doing that would allow them to
understand the challenges that they would have to face regarding technology, culture,
communication, politics and economy. As a result it would become easier for them to explore
effective solutions and implement them accordingly to penetrate Japanese market successfully.