Straight after a new CEO was assigned, Hong Kong and Shanghai Banking Corporation (HSBC) announced its exit from a number of markets including those that were considered to be high growth markets. The paper attempts to identify the key factors, which influence the exit decisions that are taken by multinational banks. The research is based on the analysis of HSBC’s publicly available financial documents, strategy releases and other world economic databases. The results of the study reveal two main factors that forced HSBC’s exit from Kazakh market. These findings can potentially be generalized to overall banking industry.
Table of Contents
1. Introduction
2. Theoretical background
3. Conceptual framework
4. Methodology
5. Results
5.1 Situation in 2011
5.2 Strategic vision
5.3 Market selection criteria
6. Discussion, limitations and directions for further research
7. Conclusion
Research Objectives and Focus
The primary objective of this research is to identify the key factors that drive multinational banks, such as HSBC, to exit specific markets, specifically investigating whether these decisions are triggered by internal strategic changes, poor financial performance, or external macroeconomic pressures.
- Analysis of HSBC's strategic shift following the appointment of a new CEO in 2010.
- Evaluation of the conceptual framework of market exit (trigger, response, consequence).
- Empirical assessment of the Kazakh banking market performance (ROE, cost efficiency, market share).
- Comparison of Kazakhstan's economic indicators against other global emerging markets.
- Identification of specific criteria for market commitment versus divestment in the banking industry.
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1. Introduction
The fall of international trade barriers between economies, especially during the last half of the 20th century, has led to an extraordinary growth of international business operations among large corporations. In pursuit of their global strategy, companies in different industries have been discovering new markets where they could increase their profit and benefit from the local economic environment at the same time minimizing risks through geographic diversification.
The internationalization of banking industry has played an important role in facilitating international operations of other industries. The reason for this is obvious – global banking has created a universal pool of finance and made it more accessible worldwide. While international banking has a positive spillover effect on other industries, divestment in banking industry, on the other hand, can have serious socioeconomic consequences such as, for example, job cuts.
In 2011, “The world´s local bank”, The Hong Kong and Shanghai Banking Corporation (HSBC), announced its exit from around 20 countries, including Kazakhstan in Central Asia, cutting jobs of approximately 30 000 of its employees worldwide. Obviously, there should be a clear reason for such a decision on the bank´s corporate strategy level. However, it is still not clear whether such decisions are driven internally, meaning change in strategy or poor performance, or triggered externally as a response to a negative macroeconomic development and increase in competition within the markets they operate in. Therefore, the aim of this paper is to analyze the key factors that make multinational banks such as HSBC exit certain markets. In order to be more precise in the objective of the research, the following research question was set: “What are the key factors that make multinational banks exit markets?”
Summary of Chapters
1. Introduction: This chapter outlines the global trend of internationalization in the banking sector and introduces the specific case study of HSBC's divestment from Kazakhstan.
2. Theoretical background: This section reviews existing literature on divestment, market exit, and de-internationalization to provide a foundation for the study.
3. Conceptual framework: This chapter proposes a model defining the de-internationalization process through three stages: trigger, response, and consequence.
4. Methodology: This section details the datasets and research tools, including content analysis of the CEO's speech and financial statement analysis of 22 Kazakh banks.
5. Results: This chapter presents the analysis of HSBC’s strategy and evaluates the performance of the Kazakh subsidiary against group-defined criteria.
6. Discussion, limitations and directions for further research: This section interprets the findings and acknowledges the study's scope, including its focus on economic rather than political factors.
7. Conclusion: The final chapter summarizes the primary findings regarding the factors influencing HSBC's exit and answers the research question.
Keywords
Market exit, de-internationalization, divestment, exit decision factors, divestiture, banking industry, HSBC, Kazakhstan, financial performance, Return on Equity, cost efficiency, market connectivity, strategic vision, macroeconomic trends, global trade.
Frequently Asked Questions
What is the core focus of this research?
The research examines the drivers behind the decision of multinational banks to exit foreign markets, using HSBC's departure from Kazakhstan as a primary case study.
What are the central themes discussed in the paper?
The study centers on international business strategy, the concept of de-internationalization, the financial performance of banking subsidiaries, and the role of market connectivity in global banking operations.
What is the primary research question?
The research aims to answer: "What are the key factors that make multinational banks exit markets?"
Which methodology is applied in the study?
The author uses a dual approach: a content analysis of the HSBC Group strategy presentation from 2011 and a quantitative analysis of financial statements from 22 banks operating in Kazakhstan.
What does the main body cover?
The main body moves from theoretical definitions of divestment to the development of a conceptual framework, the practical methodology, and finally, the application of this framework to the data gathered on HSBC Kazakhstan.
Which keywords characterize this paper?
The work is characterized by terms such as market exit, de-internationalization, divestment, financial performance, and banking industry strategy.
Did the Kazakh subsidiary's low profitability drive the exit?
The analysis indicates that while the subsidiary experienced fluctuations, its ROE often remained within the group's target range, suggesting that profitability alone was not the sole trigger for the exit.
What role did cost efficiency play?
High operating costs and a failure to meet the group’s cost efficiency ratio of 48-52% were identified as significant internal factors contributing to the decision to exit.
How does market connectivity influence the exit decision?
The study concludes that a lack of strategic connectivity, combined with declining trade volumes after Kazakhstan's entry into the Common Economic Space, made the market less relevant to HSBC's global network.
- Citation du texte
- Darkhan Shildebayev (Auteur), 2014, Exit Decision of Multinationational Banks. The Case of HSBC Kazakhstan, Munich, GRIN Verlag, https://www.grin.com/document/301406
