Consumer Influences and Behaviour: UK Banking

Consumer Influences and Behaviour UK BankingChapter 1 (Intro) 1.1 IntroductionTo become the leading worldwide bank HSBC has combined the uphill grocerys by means of international connectivity and scale yet maintaining the outline unchanged. To comply with the recent scotch turmoil HSBCs schema is app bently most appropriate one as the projected the return of total sh atomic number 18holders equity remains achievable oer full argument cycle. Reinvestment of the capital allowed the company to maintain flexibility of direction in accordance with financial and regulatory environment. This back end help the company to make the long term decisions supporting the brand respects and the customer relationship and the crop to be consistent with the strategy.The Managing for growth a diverse evolutionary strategy ranging from 2003 to 2008 for HSBCs growth and explicatement across the globe addressing the areas where desirable and attainable improvement flock be made was an ultimate success. Unlike competitors, the consistent set about to grow within the emerging grocery stores HSBC did not shoot to dispose any stakes in strategical investments to generate capitals. Depending on the customer demand and maintaining the strategic line while reviewing the emerging new opportunities, HSBC has successfully survived in the period of uncertainty. The company has increase the number of HSBC Premier Customers to 2.9 million, and the customer volume is increasing highly in the emerging merchandise. During financial crisis and economic recession the global financial markets buzz off suffered a serious impact. Very few banks abide escaped unharmed by ad saveing to shifts in the global financial and economic environment.Market entry timing decisions are inherently difficult. A unshakables managers hold to consider the influence of so many factors both internal and external to the sign in deciding when to enter a market with a new harvest-time (Lieberman and Montg omery, 1991). Firms face a sorticularly difficult decision of planning when it is best to enter a market with a new production in response to a market introduction of a pioneering new product by a major competitor. Given that pioneering is no longer an re kickoff, is it better for the firm to enter the market quickly with a warlike new product or is it better for the firm to delay market entry for strategic reasons.When the emulous stakes are high, it is diely in a firms best interest for its management to plan carefully such a market entry timing decision by giving careful consideration to a broad array of schooling including information on the competitor, the competitors product offering, the market, and the firms internal resources and product offerings. Considerable academic research has been conducted that suggests the desirability of certain market entry timing strategies for a wide array of conditions in the competitive environment (cf. Bowman and Gatignon, 1995 Brown and Lattin, 1994 Green et al., 1995).The business world composed of organization and work fitting much(prenominal) demanding and wild. Facing organizations are now approach so many challenges. Among them globalization, customer awareness, high revenue with minimizing the operational cost, strengthening the organizational capacity, renovation and change, technological implementation, maintaining diverse human capital, and confirming essential and ceaseless change. Fortunately the degree of competition among perseverance rivals has significantly increased. Now most of the organizations can easily duplicate engineering, industrial methods, production, and even strategy. To gain the competitive favor in the long run, business houses pauperism to establish their own organizational capability (Burke Cooper 2004).1.2 Background of The StudyHSBC is a prominent name in the global banking diligence. This bank has been operating successfully all around the world as a local bank with its efficiency and effectiveness. The corporate strategy of HSBC and on time decision made it becoming a threat for other long lived bank in the industry. The strategy the bank had followed make it to cope up with all sorts of cultural barriers and to be along within the society and create the better brand harbor compare to the other rivals in the banking industry. The reason privy the on-going prospect of this bank is out-of-pocket to a reason which made is to gain the competitive improvement in the global money and investment market. Lately the economic crisis hit the global money market and retail banking industry injuring the performance of all the major players in the industry as the confidence and the trust of the customers were gone.1.3 rationaleThis study is a requirement for the course I am enrolled in. This study pull up stakes help me to utilize the acquired knowledge/theories and relate them to the applied business. The title was chosen as banking industry is one of the diverse industries and UK is one of the most competitive markets where the industry rivals constantly changing their strategies to adopt with the change and HSBC is one of the best performing banks in it. With the establishment of the purpose given, this study may be of importance to the purpose that have been discussed by fulfilling the objectives, the study will be helpful for researchers concentrate on different strategies and innovative techniques with regards to the method of gathering the information. The findings of the research will be helpful for researchers in creating their own involves of conducting their study. The significance of this study is the option that it may contribute the findings for the other studies that wish to examine factors for the success or failure of a study. Another importance of the report is to serve as a director for researches that emphasis on defining the effects of an integrated marketing strategy which made HSBC successful in the UK banking industry as well as globally.1.4 Aim and Objective of the StudyThe aim of the research to find the answer to the research questionHow can HSBC Continue to Maintain Its Competitive marketing service in the UK market?The objective of this study is to expose the reason behind the success of HSBC and the challenges the company may face in future and the potential strategy the company may follow so that it can maintain its leading position in the UK retail banking industry. So, the prime objectives of the study are as followsTo identify how HSBC operates and what made it unique besides othersTo identify the attitudes of the UK customers towards HSBC.To identify the attitudes of the company staffs towards existing marketing strategy.To identify the shortcomings (if existed) of the Strategy being adopted by HSBCTo identify the most effective strategy appropriate for HSBC in response to the current financial crisis in UK.1.5 The Organization of the paperUnlike the conventional a pproach this paper is fitted out(p) with the industry analysis focusing on the UK banking industry in term of its performance, effective factors leading HSBC to become more successful, the changing switching tendencies of the customers, role of the SMEs in the industry and an overview on the investment criteria in the money market.The study will initially gather information that will serve as introductory part of the study. The study will then gather related literature to prove the need for conducting the study. The literature review can help in determining what are the studies already done, what study necessarily to be corrected. The study will then determine the methods and means for info to be gathered and analyzed. In this part the information is being readied to be gathered and analyzed but the method to gather it will first be determined. The next part of the study is gathering, presenting and interpreting the data. In this part the validity of the hypothesis and ideas abo ut the study will be proven. The last part of the study will be the part where conclusions and recommendations will be stated. In this part final statement about the study will be done. The study will be organized in accordance with the hobby orderChapter 2(Literature Review)According to Porter (1985) it is the value chain through which a company can create and offer value to its customers by efficiently utilizing cost and in effect offering the product or services through a lower cost or a higher differentiation. Again Rajnandan (2007) said value chain not only seeks to do away with the activities that do not add value, but establishes the importance of other support activities, including infrastructure, technology, and so on, that play a vital role in providing the foundation for competitive advantage. The value chain to a fault is useful in outsourcing decisions. Understanding the linkages between activities can lead to more optimal make-or-buy decisions that can result in eithe r a cost advantage or a differentiation advantage. (Graeme J. Buckley, 2006) After defining the discrete activities marketers need to identify the linkages between activities. The relationship survives if the performance or cost of one activity affects that of another. Competitive advantage may be obtained by optimizing and coordinating link activities. (Porter, 1985)The developed opponents expected strategy, where it participates in the marketplace, how it competes, and what it tries to achieve, should be distinct from any strategy pursued by any rival. Those executives charged with visualizing the developed rivals strategy should similarly be encouraged to go beyond the likely strategies of announced. It is necessary to communicate the competitive variables to the target market as that will force the buyers to prefer the products. Where marketing communications carries the meaning of the companys product attributes, aiding customers reach their goals and moving the company close r to its own goals. (Lancaster, 2002)Marketing efficiency depends on communications effectiveness. The market is activated through information flows. The way a potential buyer perceives the sellers market offering is heavily influenced by the amount and kind of information he or she has about the product offering, and the reaction to that information. Marketing, therefore, relies heavily upon information flows between the seller and the prospective buyer. (Thomas A. Staudt, Donald Arthur Taylor, 1976)The firms value chain links to the value chains of upstream suppliers and downstream buyers. The result is a larger stream of activities known as the value system. The development of a competitive advantage depends not only on the firm-specific value chain, but also on the value system of which the firm is a part. (Kiichiro Fukasaku, 2007) Dramatic changes due to globalization, deregulation, and technology have redefined the nature of business by increasing competition. Significant incr eases in the speed of competitive response and the number of competitive actions and price cuts have also resulted. Those indicators highlight the intensity of competition. (Gr, Cu, Le, Hu, Ken G, 2005)Unlike the classical apprehensions, the marketing concept states that the nature of the marketing orientated organisation, whether product or service based, profit or non profit based, is the identification and genuine satisfaction of customers needs and wants, more effectively and efficiently than the competition. The marketing concept has been defined as the key to achieving organisational goals and the marketing concept rests on market focus, customer orientation, co-ordinated marketing and profitability. (Le, Ru, Lancaster, 2002). Marketing Research is a systematic problem analysis, pretending-building and fact-finding for the purpose of improved decision-making and maintain in the marketing of goods and services (Kotler, 1999)Strategic capabilities that companies can use to su pport the strategy they have chosen to pursue. A strategic capability offers a company a sustained competitive advantage when substantial time and effort is required for competitors to develop the same capability. (Susman, 1992)Game theory more specifically, non-cooperative game theory can be a useful tool for investigating a comprehensive pretense of competitive advantage in that it demonstrates the linkages between resources, competitive moves and responses, and advantage. (Gr, Cu, Le, Hu, Ken G, 2005)The ability and speed with which a company can learn from experience is another strategic capability. The ability to learn is dependent, in part, on how the company captures and accesses information. Companies can simplify this process by minimizing the amount and complexity of information they have to process. (Susman, 1992)Only by gaining a deep and comprehensive understanding of buyer behaviour can marketings goals be realised. Such an understanding of buyer behaviour works to th e mutual advantage of the consumer and marketer, allowing the marketer to become better equipped to satisfy the consumers needs efficiently and establish a loyal group of customers with positive attitudes towards the companys products. (Lancaster, 2002)Competitive advantage is a way of firms gained advantage over its rivals. Competitive Advantage introduces a whole new way of understanding what a firm does. Competitive Advantage takes strategy from broad vision to an internally consistent configuration of activities. Its powerful framework provides the tools to understand the drivers of cost and a companys relative cost position. Competitive Advantage also provides for the first time the tools to strategically segment an industry and rigorously assess the competitive logic of diversification. (Porter, 1998)The design stage determines the way in which a firm intends to differentiate its good or service from rivals. In this stage a firm makes choices to gain a competitive advantage ov er rivals. (William, 2004) For a occult product or narrow group of products, a firms competitive strategy refers to the weighted mix of price, product qualities and features, and service that differentiates its product from those of rivals. (William, 2004)The Competitive Advantage model of Porter learns that competitive strategy is about taking offensive or defensive action to create a defendable position in an industry, in order to cope successfully with competitive forces and generate a superior return on investment. According to Michael Porter, the land of above-average performance within an industry is sustainable competitive advantage. There are 2 basics types of CA Cost Leadership (low cost) and Differentiation.The Delta Model contains the following elements Strategic Triangle used for defining strategic positions that reflect fundamentally new sources of profitability (three strategic options best product, customer solutions, and system lock-in), Aligning these strategic o ptions with a firms activities and provides congruency between strategic direction and public presentation (three fundamental processes are always present and are the repository of key strategic tasks operational effectiveness, customer targeting, and innovation), and Adaptive processes core processes of the company must be aligned to the chosen strategy in order to make progress against the strategic agenda and avoid a commodity-like outcome.2.1 The Trends (Customer Focused)E-trading and online customer services are becoming the key differentiators in every industry. The banking industry in the midst of a shift assisted and backed by the quick technological advancement, internet and globalization. The renewal is not an incremental one through which organizations, processes, and technologies evolve in linear fashion into more advanced, but still familiar models which is distinct from the earlier industry change. Industry observers anticipate that this transition will be much more radical and constitute a complete metamorphosis of bankings entire business model, realigning everything from its strategic business orientation to its technology architecture to its value proposition to its customers. (Balthasar, 2010)2009 is a significant year forcing many offstage banking experts to remember. Privet finances failed to generate revenue as nodes withdrew assets from private banks. The global financial crisis has fundamentally changed the investment pattern of the High Net Worth Investors and their wealth management business itself.Growing Market some new money acquire their wealth through IPO. Brazil and China accounted for two-thirds of global capital raised in Q2 2009 (Ernst Young, 2009) showing that there is a development demand for private banking and wealth management service in the region as the economy is rapidly growing.Chinas growth will outstrip US which is a good news for private banks who have a strong APAC presence, wealth management professionals should understand that the Chinese market is not easy to penetrate.First of all, client advisors need to be fluent in Mandarin and have local connections.Secondly, guanxi (relationships) still plays an extremely important role in the modern Chinese business community, private bankers without access to key relationship brokers as fibres will find it very difficult to convince Chinese HNWIs to open accounts. Private banks that hire locals will have a definite advantage over expats trying to cover Chinese clients. (Warren Buffet, 2009)Responsible bringAffordability assessment approaches vary across the industry. Responsible lending decisions require checks to be made concerning income and outgoings (typically using a combination of income multiples and affordability models) when assessing ability to repay now and into the future. Also the type of lending undertaken and the type of borrower (for example, applicants with impaired or low credit ratings) may require more detailed assessm ents to be carried out.Other (unregulated) lending Mortgage lending is only part of the affordability picture. Under the aegis of Treating Customers Fairly (TCF), affordability assessments are equally relevant to other borrowing, including personal loans and credit cards, and a number of lenders are looking at how their affordability assessment processes may need to be strengthened for these types of credit.In an effort to strengthen existing rules, new Banking compute guidance concerning assessing affordability in relation to unsecured loans (overdrafts and other borrowing) was issued by the Banking Code Standards Board in April 2006. Any assessment should now include at least two of the followingIncome and financial commitmentsRepayment historyCredit reference agency information and past repayment historyCredit scoring.It is also worth noting that the Office of Fair Tradings recent guidance (the OFT Guidance) reinforces the need for firms to have regard to its earlier guidance on non-status lending and confirms its intention to consider further specific guidance with regard to irresponsible lending and what this may mean in different market sectors and circumstances.Responding to the concernsThe FSA has indicated that as part of its retail agenda it will continue to focus on quality of advice processes in the mortgage market. In responding to these concerns, firms will wish to consider how the results of the FSAs findings impact each of their lending businessesHow extensive is the affordability process does the advice process include an assessment of income and identifiable expenditure anticipated changes in personal circumstances (income/expenditure composition) impact of interest rate changes and possible future increases in interest rates?How can the consumer deal with mortgages extending into retirement?What step are taken to ensure that underwriting processes (including income multiples and affordability models) reflect the different characteristics and risk profiles of customers in different market sectors (for example, sub-prime non-conforming)?Is the recent assessment carried out to identify the affordability (including affordability decisioning models) to meet the regulatory as well as commercial drivers impacting the business?What steps are taken concerning the assessment of the customers ability to repay where enhanced income multiples are used (and where the firm may have insufficient, or outdated, data to measure the potential impact/risks of default)?What MI does the consumer have to facilitate the identification of affordability issues on a timely basis (for example, the performance of loans where enhanced multiples have been applied at the end of any discount period the level of arrears and repossessions lending introduced by intermediaries)?Even for long-established product offerings, it is clear that nothing stays still. Aside from regulation by the FSA, the market still needs to respond to the challenges of compe tition investigation into the PPI market.Household LeverageIn the old age leading up to the crisis, a combination of factors, including low interest rates, lax lending standards, a proliferation of exotic mortgage products, and the growth of a global market for securitized loans fueled a rapid increase in household borrowing. (Shedlock, 2010)The recent financial crisis contributed to the longest and most severe economic contraction since the Great Depression. The rapid expansion in the use of borrowed money, or leverage, by households in recent years, is one factor that may help account for the virulence of the downturn. (Shedlock, 2010)The common patterns spy across countries suggest that, the unwinding of excess household leverage via increased saving or increased default rates could be a significant track on consumption and bank lending going forward, possibly muting the vigor of the economic recovery. (Shedlock, 2010)2.2 Changing Nature of Consumer Behaviour (Higher Expectati on)Customers take control. Customers will be smart, intercommunicate and savvy users of financial services. They will only be interested in service providers that can meet their very specific individual needs. (CMA Management, 2006)Global banking leader for the Institute for Business Value, each bank must decide on a strategy that fits its customers needs. Banks will need special strategies to cater to a outlying(prenominal) more discerningand controllingcustomer. Innovative approaches to business design, customer service, workforce management and IT will be critical to banks future success. (Sunny Banerjea, 2009)Banking customers will demand more advocacy, personal certification and control in their banking relationships Banks will source products and services from many specialized and best-in-class service providers, including independents and other banks providing white-label products and services. Innovation in products, processes, relationships and business models will be t he ancient path to sustainable growth.Furthermore, the modern banking industry has brought greater business diversification. Some banks in the industrialized world are entering into investments, underwriting of securities, portfolio management and the insurance businesses. taken together, these changes have made banks an even more important entity in the global business community.2.3 Globalization (Intense Competition)By 2015, we will live in an intensely customer-centric market that is dominated by global mega banks and densely populated by specialist financial services providers. Fierce competition, global regulation and technology will reshape bank and non-bank structures. (Rusty Wiley, 2009)Banking is moving incrementally but unmistakably away from a model based on products, transactions, touch points, and internal departments toward one based on customers, processes, integrated experiences, and the enterprise-wide value of information. The new strategic centre is not an inst itutions asset size, market share, revenue growth, or operating efficiency, but the customer experience the institution provides to consumers. Whether a seismic departure in focus or simply a more pronounced emphasis on an existing strategy, many banks have persistent this is their destination.Many countries are now more alert after so many scams including The Bernard Madoff $65 billion Ponzi scheme exposed in 2009. To minimise and control the false trading activities and tax evasions, governments worldwide demand more oversight of banking operations influencing not only the investment banking business but also the private banking side. The account opening process, KYC and offshore banking activities are under tighter scrutiny than ever before. As a direct result, banks have to spend more money on compliance and risk management. (Investment Research, 2010)Banks no longer think in terms of selling products and making transactions, but rather in terms of acquiring, satisfying, and re taining customers. They are realigning their system architectures to recognize, integrate, and monitor business processes that span departmental boundaries and consider customers from a company-wide perspective. The resulting systems provide customers with tools to conduct their own banking business on their own terms, in their own time, and through whatever channel they happen to access. (Balthasar, 2010)This shift in strategic focus has already had a profound impact on the way that bankings role and value to its customers have evolved, leading to the second feature of the industrys transformation, which is that banking is no longer seen as purely a financial transaction, but rather in a broader and more significant way as a financial information business.This distinction may sound like splitting hairs, but the eventual effect on the banking industry will be nothing short of transformative. To better adapt and accommodate this shift successfully, banks will have to recon and upgrad e their entire IT infrastructures.The excellent international reputation and the $300 billion private banking assets the region currently manages, the Singaporean government is aggressive in making the country more attractive to private banks and HNWIs worldwide. Singapore officials are planning to amend the Income Tax Act, which is likely to help the country to make Organisation for Economic Cooperation and Developments white list, further establishing itself as Asias private banking stronghold. (Wall Street Arrow Market Insights, 2009)The competitive pressures that have squeezed the banking industry for the past decade show no sign of letting up, principally due to the banking industrys continuing consolidation. (Balthasar, 2009)Many industry analysts are expecting another round of large bank merger announcements, with the additional element of international banks involved in cross-border mergers. We have seen the beginnings of that trend already in Europe, with the acquisition of Abbey National (U.K.) by Santander (Spain) and the protracted dispute between Dutch bank ABN AMRO and another Spanish bank over two Italian banks. One important ramification of the continued growth of leading banks will be their ability, based on their sheer size and higher efficiencies, to invest in world-class data storage, management, and analytical capabilities, thereby extending their dominance by the development of innovative revenue-generating products and services. The transition to banks as primarily an information source has helped lower the barriers to entry in the financial services industry, opening the banking arena to a host of new, non-bank players. The current alarm among banks and their regulators about Wal-Marts efforts to obtain an industrial loan company (ILC) license in Utah is the most visible manifestation of that trend.2.4 Technology (Customised Service)Sharply focused technology. The enabler of all this change will be technology that supports rapid, accura te decision making and greater operational flexibility and efficiency. The successful specialists will be those who can track and analyze specific customer needs and speedily meet them with profitable, reliable products. (CMA Management, 2006)The global trend of deregulation has opened up many new businesses to the banking industry. Coupling that with technological developments like internet banking and ATMs, the banking industry is obviously trying its hardest to shed its lackluster image. (Investopedia, 2010)The major force driving banking transformation stems from the increasing commoditization of financial transactions. Banks can no longer distinguish themselves on the basis of product set functionality or operational excellence. Commercially available systems have perfected virtually all the important functions in basic transactions, including payments, deposits, funds transfers, and account reporting. The maturity of technology in these areas has made both functionality and pr icing nearly uniform among leading vendors.The sheer volume and scope of regulatory requirements has oblige on banks an unprecedented need to develop transparent systems and processes, along with more effective and reliable means for collecting, storing, and manipulating information. Going forward, banks will need to develop an approach to their IT infrastructure that places a premium on flexibility, adaptability to rapidly changing market circumstances, and the ability to integrate information from multiple sources currently isolated from each other.The competitive landscape has also shrunk considerably. In June 2008, there were 46 lenders offering unsecured personal loans, down from 58 in June 2007, however, by June 2009 this number had dropped further to just 37.The real value proposition that banks offer now is in the information they can provide about financial services and transactions, from a perspective of accessibility, speed, convenience, granularity, analysis, and so for th. In other words, the important question to ask banks now is how quickly, accurately, deeply, efficiently, transparently, and finitely can they capture, parse, store, identify, access, feel, sort, match, analyze, aggregate, present, share, distribute, and protect data? Therefore, leading banks are basing new technology strategies on transforming and enhancing their involve of information. Although they already sit atop vast amounts of data about their customers, banks in many respects are unable to identify and/or retrieve it with any degree of precision. With bankings future growth and profitability dependent on the ability to aggregate information across systems and reorient it by customer kinda of product, technology spending decisions will henceforth be guided by how well a proposed solution furthers a banks command of information. (Balthasar, 2009)Data managementThe command of information should be incorporated it into technology development by the vendors allowing them to capture (automatically as much as possible) descriptive and associative information about customers, transactions, and work flow circumstances as distinct data fields to identify, access, associate, aggregate, sort, and display data from disparate sources to exchange, transfer, compound, and deconstruct data freely across system boundaries to normalize, integrate, and analyze that data for a specific purpose and for a specifically designated market segment to drill down and parse data into ever more discrete units that can be segregated and analyzed and to manage all of the above in near-real time through centralized database management and automated business processes with rules-based workflow and exclusion management.Initiatives and architectures not built on a sophisticated data management core will provide only limited benefit, since sooner or by and by they will be unable to integrate fully into