Q1: The Hong Kong and Shanghai Banking Corporation Limited (HSBC), was founded to finance the emergent

trade between Europe, India and China in the year 1865. In March 1865, HSBC has ventured into Hong Kong and subsequently opened the first bank in Shanghai, China a month later, on April 1865. HSBCs strategy in the early years has focused on building up presence in China and the other Asia- Pacific region, as there is a huge potential in those unexploited markets. In 1876, the bank handled chinas first pubic loan. Hong Kong bank had become leading financial institution in Asia by the close of the 19th century. Traditionally HSBCs culture has embraced caution, discipline and risk avoidance. The bank looked long-term survival and considered markets in 50 years views.in 2005; incoming chairman Stephen green has main intention to protect the banks reputation into consumer finance. Before the Chinas WTO accession negotiations, Chinas banking industry operated as a cog in Chinas centrally planned economy. Chinas gained accession to World Trade Organization (WTO) in December 11, 2001 has then opened up greater market opportunity for HSBC to leverage their global strategy to grow their presence in China. When China allowed up to 25 percent on foreign ownership of Chinese banks, and foreign investors are capped to own no more than 20 percent, HSBC saw this opportunity to adapt one of their global strategies of penetrating into China through acquisitions and alliances with the local partners and being the first-mover. HSBC invested $1.8 billion for a 19.9 percent stake in BoCOM in June 2004.trough this acquision , HSBC saw a potential credit card sales market which is allowed to proposed joint ventures which will be named Bank of communications and HSBC pacific credit card company. Which allows HSBC to provide technical and management support to the Pacific Credit Card unit under BoCOM . In April 2007, HSBC (China) Company Limited also started their first wholly foreign-owned bank, which set a strong global presence and connectivity in China. Throughout the years, HSBC has expended rapidly in China to over 100 branches, and if given regulatory authorization, HSBC aimed to increase the stake of 19.9 percent in BoCOM or to increase the outlets in China to over 800 branches. These strategies are in line with the new CEOs direction, which went into aggressive expansion that was different from the tradition core value of HSBC culture of thrift, discipline and risk avoidance. HSBCs strategy is also set to be Chinas largest and the most geographically widespread network among the banks. They focus on expanding rural financial services in China, which is deemed to have a vast market potential to expand their presence in China. This have been in the right timing for HSBC, as in the year 2010 in China, after extending huge amounts of credit in the past few years, more capital is needed by the Chinese banks to sustain potential growth in the future . Hence, HSBCs position of being capable to bring greater reliability to the Chinese financial system and right of entry to global markets has brought them to be favorable in the Chinese market. This in time will enable HSBC to expand further in the rural financial services sector in China.

Q2:

As HSBCs strategy of Managing for Growth, this strategy builds on HSBCs global, international scope and seeks to grow by focusing on the key customer groups of personal financial services, managing its international networks and business development in the emerging markets, one of the strategy that HSBC has adopted is to constantly surveying on the emerging markets that they are planning to expand into, and kept close connection with the customers and the regulators in the countries that they are interested in .

In viewing of HSBCs success in entering and operating in the emerging markets, in the year 2008, HSBC has successfully obtained approval from the Vietnamese government to establish a locally incorporated subsidiary in Vietnam. The reason to this success is due to the opening of Vietnams banking sector to foreign companies whereby new laws were introduced, and is included in the WTO. Moreover, as Vietnam is one of the worlds second-largest exporters on rice and agricultural products, Vietnam government sees a potential growth of having international foreign banks to facilitate the transaction of capital funds around the world ; hence, they changed the legal rules in Vietnam to enable HSBC to set up more branches across the country . In the same year in 2008, HSBC also successfully acquired a major stake of 89.99 percent in Indonesias Bank Ekonomi . Bank Ekonomi is set to be in line with the strategy set, which is to increase HSBCs presence in Indonesia to 207 branches in 26 cities .

However, there is also setbacks in HSBCs strategy while entering and operating in the emerging markets. For instance, due to weak Vietnam dong, HSBCs economists showed that Vietnam dong faced strong depreciation pressure when real interest rates is negative or declining, as well as the return of high inflation . When entering into Vietnam, HSBC could not anticipate that Vietnam dong have weak credit growth, as it may due to the tightening policy and low demand . Moreover, as quoted:

Long term, emerging markets should make up any portfolio, but they have to be balanced with risks, including regulatory uncertainty, corruption which detracts from the bottom line, lack of transparency and other institutional problems, said Usha Haley, professor of international business at Massey University in Auckland, New Zealand and an emerging markets expert .

Hence, it is hard for HSBC to oversee all these setbacks that emerging markets might pose in the future. It is a risk to take by HSBC in tandem with their global strategy of expanding their business and penetrating into emerging markets. Hence, in order to capture the emerging market, HSBC had implemented Managing for Growth strategy, and the pros and cons will be discussed in the following section.

References: 1. HSBC in China Case Study: F. Luthans & J.P. Doh. International management: Culture, strategy, and behavior (8th
ed.). McGraw-Hill.

2. HSBC, revised 2012, http://www.hsbc.com/1/2/about/history/history, viewed 11th May, 2013. 3. http://www.hsbc.co.za/Downloads/090927_brief_history.pdf, viewed 13 May, 2013.