Hong Kong & Shanghai Banking Corporation (HSBC)

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Hong Kong & Shanghai Banking Corporation (HSBC)

1. The HSBC Group

- The HSBC Group is named after its founding member, The Hong Kong and Shanghai Banking Corporation Limited, which was established in 1865 to finance the growing trade between Europe, India and China.

- Is based in Hong Kong, where the bank’s business has been physically conducted, and with a large network of branches in Asia, a very large London branch office, and several US branches, plus a subsidiary bank in California and a representative office in New York.

- HSBC carries its business in Hong Kong dollars, US dollars, European currencies and Japanese yen.

- Some of HSBC activities: receives deposits from local (Chinese) individuals and companies; loaned the money to both local borrowers and international banks in the Eurocurrency market; finances exports and imports with firms in the countries of the British Commonwealth (Great Britain and its former colonies)

- HSBC has been operating in the United States since 1875 when it first opened an agency in San Francisco.

- In the 1960s HSBC acquired the Republic Bank of California (with 11 branches in the state).

- A second agency was opened in New York in 1880 which converted into a branch in the 1970s as a result of a change in NY’s banking laws.

- By the 1970s the bank had firmly developed a policy of expansion by acquisition or formation of subsidiaries with their own identities and expertise.

- Other branches were established in Chicago, Seattle, and Portland and another subsidiary in was set up in Houston.

- During the 1980s HSBC concentrated on moving into those markets where it was not yet fully represented.

1.2. Brief description of the case.

Type of case:

 Foreign Market entry

S...

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...d-long term view, that would lead to full ownership of that bank. The reason why Joint Venture seems more adequate instead of a fully owned subsidiary it’s due primarily to costs on initial investments, despite of all the experience, network management, market, competition, and local culture know how that this existing American financial institution already has, and this option would also offer more alternatives for expansion, which is the basic objective of HSBC’s top management in Hong Kong. A joint venture alternative is ideal to enlarge its market power or to expand into this foreign market with which it has relative familiarity. A local bank (joint venture partner) that is well-established in the area or region, knowledgeable in the local business customs, and equally at risk, may provide the most satisfactory mechanism for establishing a viable foreign presence.

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