Report Essay Example | Topics and Well Written Essays - 1500 words

Report - Essay Example This project discusses the bank’s reasons for establishing itself in the Peruvian economy and the appropriateness of its strategies to do the same. HSBC started operating in Peru as a Greenfield project. The reason to choose Peru for starting the project was that it would be free of any constraints arising from prior activities. It had not operated in this place before. There were also very few other financial service providers. Thus there would be fewer possibilities of restrictions and constraints. The organisation has also undertaken a number of successful Greenfield infrastructure projects since 1997, making investments of more than $15 billion (HSBC-g, 2010, p.2). The strategy was implemented beginning with the opening of Commercial and Global Banking services. In the next year it was followed by opening of the â€Å"Personal Financial Services† (HSBC-b, 2009). The market entry strategy began with the opening of the retail branch network in Peru. The most common st rategies confronting the organisation would be establishing start-ups or joint ventures. However the strategy chosen by HSBC was establishing a start-up retail branch in Peru. This is because the region has very few financial service providers. This method is also preferred because it would allow the organisation to keep control over its foreign venture. On the contrary the company’s major step undertaken in China was in the form of joint ventures. This is because it has operated in the Chinese economy for a long time. This strategy is not recommended for HSBC in Peru because it has minimum expertise with local knowledge which would allow it create maximum benefits for its customers (HSBC-f, 2010). Its strategy is to contribute to the economy and bring tangible benefits in the market in which it operates. The revenue generated would be used to pay dividends to shareholders, make payments to the global suppliers (INCR, 2008, p.5). The following table gives the pre-tax profit g ained by HSBC in 2008 and other geographical regions. Figure 1: Pre-tax profit by HSBC in Latin America and in other geographical region (Source: INCR, 2008, p.5) An important strategic step taken by HSBC in alignment with its objective was to increase the number of customer accounts in Latin America. This was primarily meant to maintain high liquidity levels in the organisation. The amount of loans and advances made to the customers has been presented in the following diagram (HSBC-e, 2010, p.13). Peru has also represented as one of the most liberalized regions for attracting foreign investments. This was the reason for HSBC to establish banking operations in the region. In Peru the MNCs are also protected against discrimination and are provided easy access to every sector in the economy. Moreover, MNCs are also free to remit profits and capital. The banking sector is also regulated and supervised by â€Å"Banking and Insurance Superintendency operating in the retail sector under the category of universal banking† (Yi, n.d., p.8). This provided insurance for opening new establishments in a foreign nation as a step towards global expansion. HSBC decided to establish a retail branch network as an attempt to further expand its franchisees in Latin America. It has also received approval for the same. It has been authorised by â€Å"the superintendent of banking and insurance in Peru† to establish 10 retail branches in Lima. The first step towards