This report mainly focuses on an organization’s stakeholders, market conditions and how firms adapt to different business circumstances. An organization needs to identify mission statement, values and key objectives and how these things influence of stakeholders. Environment of business is important to organization. The company should understand their responsibilities and strategies. They should identify the competitive strategies implemented to gain competitive advantage over competitors.

An organization should identify the, what respects are perfect competition and what respect are unlike perfect competition.



HSBC, in 1882, appointed Delmege Reid and Co. – the predecessor of the present Delmege Forsyth and Co. Ltd. as its agency in Colombo. In 1884 the island’s economy suffered a severe setback when coffee plantations throughout the country were almost totally destroyed by disease. As a result of this and the folding up of the once great Orient Bank, HSBC saw an opening for a corporate bank like itself.

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In the early 1920s the bank purchased and began construction on land adjoining the Bank of Madras. HSBC moved into its new home at 24, Sir Baron Jayatilaka Mawatha (which it occupies even today), an impressive landmark in Colombo’s architectural and business landscape.

Through the good times and the bad that followed, HSBC supported Sri Lankan businesses. The ‘Chetty Crisis’ which began in 1927 was so termed because many Chattier business people were forced to default their loans. While the impression was that foreign banks discriminated against Sri Lankans and did not advance monies freely to local businesses, 50 per cent of HSBC’s lending during this time was to Indians and Sri Lankans.

With the stationing of the British Air Force in parts of Sri Lanka during the Second World War, HSBC became a hub of activity. During this time and until 1956, the Government of Ceylon kept a very substantial revenue account with HSBC.

Today, HSBC has become one of the most profitable banks in the country.

Technological Innovations

As an innovative bank, HSBC has led the Sri Lankan banking industry into the electronic age with the installation of the nation’s first online automated teller machine (ATM). HSBC was also the first bank to computerize its operations and to establish an Internet Payment Portal. Furthermore, the introduction of phone banking, personal internet banking and the Group’s global electronic banking platforms, such as Hexagon and HSBC net, has greatly enhanced the service they deliver to their customers.

Listed below are many firsts from HSBC;

Installation of Automated Teller Machines (ATMs) in Sri Lanka in 1986

Computerized banking operations in Sri Lanka

Electronic DC Advising, a quick and easy way for customers to receive their export Documentary Credit and amendments via e-mail or fax.

Introduction of electronic banking via Hexagon in 1994

Introduction of self-service banking through Day and Night Automated Banking Centers in 2004

Launch of state-of-the-art banking, internet based electronic banking platform; HSBC net in 2005

Introduction of Security Tokens for added online protection in 2005

Easy Pay machines to facilitate cash and cheque deposits in 2006

Introduction of toll free telephone banking in 2007

1.1 Mission Statement

We live the brand values to passionately deliver world-class customer experiences through a dynamic, motivated and professional team, which demonstrates mutual respect whilst providing innovative solutions and continuously outperforming the market to the most sought-after financial service provider admired by all.

1.1.1Values and key objectives

To exceed customer expectations in service quality.

To be a pioneer in the implementation of technologies those create distinction for its customers, employees and shareholders.

To keep its reliability at the utmost level with the contribution of its strong capital structure and liquid assets.

To make a positive contribution to the community.

To respect meritocracy during hiring processes, improving knowledge and skills of its employees, creating the mostly preferred work environment.

Through its core business principles, HSBC functions to accomplish it objectives. lists these as outstanding customer service; effective and efficient operations; strong capital and liquidity; prudent lending policy; and strict expense discipline. HSBC also stresses that commitment by employees helps to create long-term customer relationships, a keystone of the bank’s profitability model. states this is accomplished through attention to integrity, ethics and managerial oversight.

The HSBC Group is committed to five Core Business Principles:

• Outstanding customer service

• Effective and efficient operations

• Strong capital and liquidity

• Conservative lending policy

• Strict expense discipline

HSBC’s commitment to its values has allowed the company to accomplish many of its goals for expansion and profitability, as well as commitment to local investment and excellent customer service. HSBC is designed to be both global and local. Bankers Almanac ranked HSBC as the 14th largest bank in the world, in terms of assets, in 2009. In addition, HSBC is carrying its objectives forward into the Information Age: Global Finance Magazine rated HSBC as one of the world’s best Internet banks for 2009 (Anonymous, 2010)

1.1.2 Products

1.2.0 Stakeholders Analysis

Stakeholder analysis is needed for the company to identify its most important stakeholder and understand about group around the organization. It will also tell the company which group has the greatest impact to the company.

HSBC Sri Lanka has stakeholders such as Customers, shareholders and employees. All stakeholders are very important to the HSBC.

Stakeholders of the organization and their Objectives




To retain control.

To direct major decision making.


Good working environment.

Motivation and satisfaction.

To secure their jobs.


To receive good customer service.

To obtain good value for money from the goods and services.


To receive dividends.

To share the profitability of the business.

To share the share price.


To continue to sell profitably to the business.

To be paid fully for goods supplied.


To compete by all lawful means.

To differentiate products from other businesses.

Government/Legal Institutions

To receive tax revenue from profitable firms.

To assist the business in accordance with the local and national policy.

1.2.1 Extent to which HSBC achieves the objectives of its stakeholders.

HSBC is a fair trading company and is very concerned about the interests of the stakeholders. The objectives and the targets of the company are set in order to satisfy the stakeholders. HSBC listens to the opinions and expectations of the stakeholders including government, shareholders, and customers into business decision making processes. For example, in 2001, based on concerns around marketing to children and existing science on the age when children identify and understand advertising motives, they prevented from advertising to children under eight years of age where they are the majority of the audience. Cadbury plc has given higher concern to the following stakeholders.

Strategies or Ways Implemented to achieve Responsibilities and Stakeholder Objectives

An organization is responsible to its stakeholders and is responsible to achieve their objectives. Organizational responsibilities and stakeholder objectives is a combined relationship. Achieving the objectives will make the company successful in fulfilling their responsibilities.

Responsibilities of Organizations





To be safe

Right to choose


To keep informed

Right to access information


HSBC recruit the best people not considering of age, gender, disability or ethnicity. They aim to attract employees who will be committed to a long-term career with the Group, offering a competitive reward package and career development opportunities within a strong organization with values.

HSBC encourages employees to take part in local volunteering programs. HSBC key community investment initiatives incorporate opportunities for employees to get involved by giving their time and sharing their expertise.

HSBC annual Global People Survey acts as a measurement for employee engagement and satisfaction. With a 91% response rate in 2009, their employees take the survey seriously. In 2009, 77% of employees said they felt confident that HSBC is moving in the right direction and 83% said that they were proud to work for HSBC.


Shareholders are the people who invested money in the company. HSBC is a public limited company and can issue shares in the stock exchange.

HSBC engage with their shareholders on an ongoing basis, holding regular meetings with fund managers. In 2009 HSBC ran a program of over 900 meetings with institutional investors, including those with a special interest in the Sustainable and Responsible Investment (SRI) sector.


HSBC aims to offer customers around the world a consistently high quality service and experience using the benefits of their scale, geograp0hic reach and strong brand.

HSBC aim is always to treat their customers fairly and with respect and they manage their deposits responsibly. Their lending criteria are strict, taking into consideration their customer’s views they carry out market surveys and communicate directly with their customers on a regular basis.

When customers have difficulties making loan or mortgage repayments, they try to do their best to help them. Sometimes this means restructuring or refinancing their debts, and offering counseling on an individual basis.

When access to credit became restricted for commercial customers in 2008. HSBC created a new US$ 5billion global working capital fund for small and medium-sized businesses. This was over and above what HSBC would normally expect to lend.

1.4 Competitive strategies implemented to gain competitive advantage over competitors.


First to introduce ATM in Sri Lanka

Self service paying machine

Internet Banking

Telephone Banking

Customer Convenience


Global research teams/new systems- cost effective

Strong global presence

Best practices shared and implemented in other areas


Global presence

Products unique- global features/accepted world wide

1.5 Role of the Competition Commission and regulatory bodies.

Competition Commission

The Competition Commission is a public body which rule on competition issues referred to it by the secretary of state and the Director General. The Competition Commission replaces the MMC, which was dissolved by the Competition Act 1998 and whose functions were transferred to the CC. The Director General may require the CC to investigate and report on whether the actions of a telecommunications operator licensed under the T Act operate, or may be expected to operate, against the public interest and, if so, whether this could be remedied or prevented by modifications of the conditions of its license. The CC would also be responsible for considering any competition concerns arising from mergers and acquisitions of or by winners of WT Act Licenses, if the Secretary of state, acting on the advice of the Director General of Fair Trading refers that merger or acquisition to the CC for investigation.

Regulatory Bodies

The Department of Trade and Industry (DTI)

The Department of Trade Industry is the Government Department responsible for the development of telecommunication policy and the promotion of the telecommunications industry. The Communication and Information Industries directorate of the Department of Trade and Industry deals with national and international policy and regulatory issues, including those affecting the mobile telecommunications market. The department of trade and Industry is responsible for licensing operators to run telecommunication system under the T Act.

The Rediocommications Agency (RA)

The Rediocommunications Agency is an Executive Agency of the Department of Trade and Industry with responsibility for management of the radio spectrum throughout the UK. The main functions of the Radio communications Agency are formulating policy on the planning and management of the radio spectrum within the UK, co-ordination of UK views and participation in international negotiations on the use of radio, authorizing use of radio by licensing or exemption, formulating technical and operating standards for radio, enforference. The RA is responsible for issuing licenses to use the radio spectrum under the wireless Telegraphy Acts and for monitoring compliance with those licenses and taking enforcement action where necessary.

The Office of Telecommunications(OFTEL)

The Office of Telecommunications was established by the T Act to support the Director General of Telecommunications in the performance of his duties. The Director General and the Secretary of state have a joint duty to exercise their respective functions under the T Act to secure the provision of telecommunication services throughout the UK and, subject to this, to promote the interests of telecommunications users in respect of the prices charged for, the quality and variety of telecommunication services provided and telecommunication apparatus supplied and to maintain and promote effective competition in the telecommunications market. The Director General has a duty to give the Secretary of state advice and information with respect to licensing of telecommunication systems, at the request of the Secretary of State or where the Director General considers it expedient.

OFTEL performs the function of the UK’s regulatory authority in telecommunications, monitors compliance with licenses issued under the T Act and takes enforcement action where necessary. The Director General has extensive powers under the T Act, particularly when enforcing or modifying license conditions. If a condition is breached, he can require the license holder to comply by making an order. This is enforceable by third parties or the Director General through civil action. He can also make determinations – for example to set out the terms for interconnection between networks where the two operators cannot agree between themselves. The Director General can also require operators or other parties to supply the information needed in order to come to a decision.

Task 2


2.0 Competition

The effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms. There are two main methods in which firms compete.

Price Competition.

Non-price Competition.

2.1 Competitive Advantage and Competitive Strategies

A competitive advantage is an advantage above competitors gained by offering consumers larger price, each by income of lower prices or by providing larger benefits and service that justifies higher prices.

There are two types of competitive advantages found by Michael porter.

Cost Advantage

Competitive Advantage

Similar Product

Lower cost

Differentiation Advantage

Higher Price

For unique Product

2.2 Strategies to Gain Competitive Advantage

Gaining a competitive advantage can provide a business with a distinct advantage over its competitors. There are two basic approaches to gaining a competitive advantage. These are cost leadership and differentiation.

These are the strategies that I feel, should be implemented to gain the competitive advantage.

Porter’s five forces

Resources based view

Generic Strategy

Porters Five Forces

The model of porters’ five forces is used to analyze the value of an industry structure. It identifies five primary competitive forces and enables organizations to adapt the business to take advantage of the opportunities and overcome threats and gain a competitive advantage. (12-manage, 2010)

These five forces should be analyzed by the company and develop its market on the forces which are weak. For example if the producer is a low cost producer it will choose powerful buyers and sell them only products that are not vulnerable from substitutes.

Also a company is able to achieve a competitive advantage by altering theses forces. For example HSBC can put barriers to new entrants by using unique and capital intensive resources that competitors cannot easily copy and also use resources such as patents and trademarks.

Competitive Rivalry

Threats of New entry

Buyer power

Threats of Subsitiution

Supplier power

Competitive Rivelry

Strenght of Competition.

Similar size competitors.

Financial capability of competition.

Growth of the Industry.

Treat of new entry

Economic of scale.

Government Policy.

Capital Requirement.

Treat of Substitution

Number of similar products.

Substitut availability of the market.

Buyer Power

Financial strenght og buyer.

Number of competitors.

Purchasing volume.

Supplier Power

Number of suppliers.

Number of substitute.

By using this model the company can see the position of it self in the market. This analysis can be used to adopt a suitable strategy to gain the competitive advantage.

Resource-Based View

This strategy emphasizes that in order to gain a competitive advantage; a firm should possess two main features. That is firms should have superior resources and capabilities exceeding its competitors. If not the competitors can easily copy what the firm was doing and the company would lose all the benefits. (QuickMBA, 2007)

Generic Strategies

Michael porter has found three generic strategies into which business operations can be categorized. They are cost leadership, differentiation and focus. Porter emphasizes that high profits or competitive advantage is a result of two features. He states that firm strengths will fall into one of the two headings which are differentiation and cost advantage and the extent these strengths are applied will result in the generic strategies. (QuickMBA, 2007)

Generic Strategy Framework


Cost leadership Differentiation

Strategy Strategy




Low cost Differentiation

(Quick MBA, 2007)

Cost Leadership Strategy

This generic strategy calls for being the low cost producer in an industry for a given level of quality. By producing the products cheaply than the competitors at a given level of quality the firm can sustain a competitive advantage on cost. This would be very advantageous as when an industry matures and prices decline, firms that can produce cheaply will remain profitable for a longer period. (QuickMBA, 2007)

Each generic strategy has its risks, including low cost strategy.

Differentiation Strategy

This strategy calls for the development of goods that offers unique attributes that are valued by customers and that customers perceive to be better than or different from products of the competition. This strategy is producing products which contain unique features and attributes that consumer prefer to have and which are better and can be distinguished from the competitors products. The value added by uniqueness of the product may allow the firm to charge a finest price for it. (QuickMBA, 2007)

Focus Strategy

This strategy is concentrates on a narrow market or a segment. The firm can target the cost leadership and differentiation strategy on a particular market segment, this will create a focus cost strategy or a focus differentiation strategy. (QuickMBA, 2007)

The advantage of a focus strategy is that the firm is able to meet the needs of customers effectively than if a broad market and for that reason customer loyalty increases.

3.0 Market Structures

Market structure is the organizational and other characteristics of a market. We focus on those characteristics which affect the nature of competition and pricing but it is important not to place too much emphasis simply on the market share of the existing firms in an industry.

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Market structures allow us to analyze how much competition there is among firms making a particular product in an industry. There are four main types of market structures with different characteristics in each of them.

Perfect Competition




Perfect competition

Perfect competition is a market structure in which an individual firm cannot affect the price of the product it produces. Each firm in the industry is very small relative to the market as a whole, all the firms sell a homogeneous product and firms are free to enter and exit the industry. Competition policy has the objectives of increasing competition in the economy, or of encouraging firms that are not competitive to behave as if they were, in its role as consumer advocate, the competition authority is often responsible for implementing policy directed at outlawing unethical behavior by business. Perfect competitive market has seven distinguishing characteristics.

Large number of buyers and sellers

A homogeneous product

Perfect knowledge

Perfect mobility

Freedom of entry and exit

Absence of non-price competition

The firm is a price taker

Example of a perfect competitive market

In the Maharagama Market there are many characteristics of a perfectly competitive market. All type of vegetables, fruits and other ‘small goods’ are sold in this market. There are many customers coming to this market to buy goods for cheaper price.

In the Maharagama market, many stalls that have the same prices for many vegetables and fruits of the same quality. It is not because they have fixed the prices together before trading. In this type of market consumers will compare the prices of different stalls and purchase from the cheaper stalls for a given quality.

In perfect competitive market has no barrier to enter to the market.

Monopoly Competition

Monopoly is a single seller supplying the entire output of an industry. The demand curve that it faces is the entire industry demand curve for the good or services it sells. The monopolist sells unique products, and extremely high barriers to entry protect it from competition. A natural monopoly arises because of the existences of economies of scale in which the LRAC curve falls indefinitely as production increases. Without government restrictions, economies of scale allow a single firm to produce at a lower cost than any firm producing a smaller output. Smaller firms leave the industry, new firms fear competing with the monopolist, and the result is that a monopoly emerges naturally.

Major elements

One seller

One product


Barriers to entry

Minimal advertising expenditure

Example of Monopoly Competition

In Sri Lanka monopoly (sole) producer is government. The electricity and water is provided from the government.

There are high barriers to entry in to the market. Barriers such as,

Limited resources.

Cost of production.


Therefore any others cannot enter this market. The government sets the price and there are no other producers to manipulate this. They have full control over the market, they are price makers.

Monopolistic Competition

A market structure in which several or many sellers each produce similar, but slightly differentiated products. Each producer can set its price and quantity without affecting the marketplace as a whole. Monopolistic competition has characteristics of both competition and monopoly. Similar to competition, it has many firms, and free exit and entry.

Example of Monopolistic Competition

Consider the Soap industry as an example. There are few large producers of soap in Sri Lanka such as Sunlight, Rani, Zinal, Lifebuoy, and Lux etc. There is competition as in perfect competition but products are not the same. These companies have monopoly in the production of its particular product for the reason that no other firm can produce soap carrying the same name.


An oligopoly is a market condition in which the production of identical or similar products is concentrated in a few large firms. Oligopolies have characteristics similar to a monopoly.

Example of Oligopoly

Consider the cell phones industry as an example. The Cell Phones industry is dominated by a few large firms such as Apple, Nokia, LG, Samsung, and Motorola etc.

In the Gas production of Sri Lanka there are only two large known producers that is the Shell Gas Company and the Laugfs Gas Company. These two companies have the highest share of the market and there is a low level of competition.

Less Market Control More

Many Number of competitors One

Perfect Competition




Market Continuum

This is Market Continuum. This diagram shows how the structure of the market changes according to the level of the market control and the number of competitors.

4.0 Market forces

Forces of demand and supply representing the aggregate influence of self-interested buyers and sellers on price and quantity of the goods and services offered in a market. In general, excess-demand causes prices and quantity of supply to rise, and excess supply causes them to fall.

Supply Increase

Price increase

Demand Increase

Demand falls

Price falls

Supply falls

Demand and Supply

Demand is the amount of a particular economic good or service that a consumer or group of consumers will want to purchase at a given price. The demand curve is usually downward sloping, since consumers will want to buy more as price decreases. Demand for a good or service is determined by many different factors other than price, such as the price of substitute goods and complementary goods. In extreme cases, demand may be completely unrelated to price, or nearly infinite at a given price. Along with supply, demand is one of the two key determinants of the market price.

Supply is the availability of a product or a service in a market. The law of supply states when prices increase the firms would want to supply more. This is because they want to increase their revenues.

Movement along the Curve

Changes in price will result in a movement along the curve with the fact that other factors remain unchanged due to the changes in quantity demanded or supply. A fall in the price will result in an extension of demand, quantity demanded will increase.

Contraction of Demand is where an increase in price causes demand to fall.

For an example an increase in the price of Donuts, while other factors remain unchanged will cause an increase in the quantity supplied. Sellers will move from one point to another point in the same curve. When price increased from P1 to P2, quantity supplied will

Price Supply

P(2) B

P(1) A

QS(1) QS(2) Quantity

Shift of the Curve

The curve shifts to the right or left as a result of changes in any other non-price determinants due to a change in supply or price.

The demand curve shifts to the right as a result of an increase in demand while price remains unchanged. The curve shifts to the left as a result of a decrease in demand with price remaining unchanged.

For an example demand for cool drinks might fall in the winter season therefore demand decreases due to a non price determinant which causes a shift in the demand curve to left from D to D1 while the price remains unchanged.





Non- Price Determinants for Demand

Changes in consumer incomes.

Changes in tastes for consumer goods.

Changes in expectations of future prices.

Changes in price of Substitutes.

Non- Price Determinants for Supply

Changes in production technology.

Changes in cost of resources.

Changes in number of sellers in the market.

Changes in expectation of future prices.

4.1 Influences on Firms of Market Forces

Demand and Supply influences to a great extent on price. When demand increases suppliers will supply more and as a result the suppliers will increase the prices in order to obtain higher revenue, however when price keeps increasing demand will start falling.

Market forces helps firms to determine the market price where the quantity demanded equals to the quantity supplied. This is known as the equilibrium price.

Supply and Demand model

The point where the supply curve and demand curve meets is the equilibrium price. If the suppliers sell below the equilibrium price then buyers will demand above the supply which creates a shortage in supply. The opposite could also happen where the suppliers sell at a price higher than the equilibrium price which will lead to a surplus of goods.

For an example demand and supply of Rice in Sri Lanka. Rice producers created a shortage in the supply of rice with the purpose of increasing the prices. This was an illegal practice this shortage in supply of rice, lead to an increase in demand to a great extent as this was also an essential product. It affected consumers a lot and the consumers were prepared to buy rice at any level of price. This shows that demand and supply can have both negative and positive influences on firms.

Changes in quantity demanded a

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