Oxtord Susiness College EDEXCEL BTEC Higher National Diploma QCF level 4: BTEC Higher National Dipioma Unit code: ¥/601/0546 Business Environment 5 BUSINESS ORGANISATIONS’ AIMS, STAKEHOLDERS AND RESPONSIBILITIES edexcel 222 as AA 3.1 PURPOSES AND VALUES Philosopher Tomas Carlyle said: The person without a purpose is like a ship without a rudder. (Source Quotery.com, 2015}. The same can be applied to the organisations. Having a purpose is essential part that drives organisation. Having a values is nowadays even more important as customers are more aware of many aspects such as honesty, fairness, transparency, nature and green issues and other values. In the appendices, purposes and values of HSBC and Stagecoach Bus Company can be found. These are listed below, however they are changed in order to clarify true values and purposes. Next table represents true purposes and values of HSBC and Stagecoach Bus Company: Enabling businesses to thrive ‘© Being dependable Enabling economies to prosper © Resiliency and trustworthy Being where the growth is «Using common sense and empowering others Connecting customers to opportunities « Being open, honest, transparent, learning from Ensuring that employees feels mistakes empowered and act with courageous *_ Helping people fulfil their hopes and dreams integrity = customer service Meet tue,expectations “mre. High-quality service seat, Ambition Investment and innaittigff fr braerts "#4 Honesty and openness out perform competitors + Work environment, respect and teamwork Meeting customers’ needs * Accountability Thoughtfulness and dignity to individuals Short chain of command and no unnecessary bureaucracy Table 1: Purposes and values of HSBC and STAGECOACH Building relationships with stakeholders Ongoing improvements [Sources: hsbc.com, 2015; stagecoach.com, 2015] ez ee - Stagecoach also states that their vision is to deliver greener, smarter travel to their customers, create sustained shareholder value and share their success with their people and their commitments. They want to grow their business in a sustainable way, enhancing local communities. And they believe they have a crucial role to play in meeting the global challenge of climate change. It is true that stagecoach is trying to use innovations in order to be “greener”. It is not that long that they have introduced electric hybrid motors in their buses. Customers perceive these changes and this creates honesty that Stagecoach represents in their statements. Their vision is not just empty words and investment of £7.5 million shows that Stagecoach is a transparent and honest company aiming toward their vision [Source: stagecoach.com, 2015]. (See appendix 3 and 4 for original statements) 23| . f =< ir value is to help people to fulfil their dreams and hopes. This is @ in this field is clear. This can be done e taken as a purpose not a value. On the other hand, HSBC states th value in deed, however considering, how can a bank help people i through mortgages, loans or other services. Therefore it can be purpose may be to increase number of customers using their services. Nevertheless, this service could have a good value for customer's money. HSBC emphasize on customer service, and they want to meet the expectations of society, customers, regulators and investors. 4, 3.2 KEY STAKEHOLDERS OF HSBC Main key stakeholders of HSBC are clients, shareholders and employees. In order to maintain high reputation and competitiveness, stakeholders must be kept happy. Clients- are the most important stakeholder. Services and products are elements that HSBC is gaining revenue from. Therefore keeping clients happy is in the best interest of HSBC. Trying to create long-term relationships, being trustworthy and dependable is just sample of factors which are influencing clients. Investing time and understanding what clients need in order to help them with their ambitions is one of main goals of HSBC. Shareholders- HSBC has around 216 000 shareholders in 127 countries of the world (Source: hsbc.com, 2015]. Shareholders are investing money and therefore it is necessary to have a good reputation. Without shareholders HSBC would lose huge amount of funds that are helping in many fields of this organisation. there is no doubt that employees are fundamental part of HSBC. Keeping them happy and satisfied will contribute to the company growth. HSBC is supporting diversity at workplace which also helps with requirements of customers. Having an open and supportive environment are things that HSBC support. Employees- Next table shows the ways of satisfying these three stakeholders: ne DENCE Ices 774 6 Safety and security of clients’ ¢ Served around 51 million customers 2 accounts © Profit of the company should Glients, Range of products and services indicate if the customers are © Flexibility satisfied with services and products * Good interest rates Se yc] * Accuracy of the services, : Shareholders‘ © Profit or earning per a share © Share price * Growth in profit © Dividends paid per share * Dividends © Work environment “= Number of employees * Guaranteed jobs * Average wages © Sufficient salaries Table 2: Objectives of the HSBC's main stakeholders “employees” ‘The next section will show if HSBC met some of these objectives that are stakeholders expecting, 24ih ah all 321 WHAT STATISTIC SHOWS CLIENTS - As it was presented in the table 2 clients are expecting mainly security, accuracy of the service and other factors that will make HSBC trustworthy in eyes of clients. The figure 1 on the right shows five year profit of HSBC before the tax. Itis apparent that profit had swings every year. In fact, in 2014 the HSBC earned the least in five years. The drop of 17% in its profit indicates that HSBC was doing something wrong in recent years. There are two major reasons if this falls. The money laundering scandal in the Mexico and tax scandals. [Source: bbe.com, 2015] These sandals must have had impact on the clients. TV and media are constantly informing public about HSBC and UK banks. Although customers in Mexico were redressed, the damage in form of lost trust and profit loss will most likely follow HSBC's reputation some time. Therefore HSBC is not the most successful in satisfying its customers these days. SHAREHOLDERS ~ Shareholders are people that invest their money to the company. That means they must have some hope and trust in HSBC. In fact, HSBC is more successful with shareholders than with its clients. The figure on the right shows the level of dividends per ordinary share in five years. This indicates that despite all scandals HSBC put effort to keep shareholders satisfied The current price of HSBC shares i stabilized however the share price were in nearly two and half year minimum in the march 2015. This was result of tax scandals in Switzerland offices in February 2015. Despite this situation, the share price increased by around 8% in three months. Figure three below shows the share price statistic in 5 year overview. The red arrow shows mentioned minimum of share price in two years, [Source: Bowler T, 2015] es (reported bass) US$187bn Figure 13: Five year profit of HSBC [Source ‘hsbc Annual Report. 2015) or ioary shace (ir respect of year? US$0.50 Figure 14 Fre yeor profit of HSBC source: Hide Annuo) Report, 2015]Figure 15: Share price of HSBC in five years (Source: h.co.uk, 2015} EMPLOYEES: are running entire business and keeping them happy and satisfied is necessary. Figure 4 shows how many employees HSBC had each year since 2010. As graph shows, there was reduction of around 41 000 employees in 5 years. HSBC also sold some of its businesses. Staff reduction is part of chief executive Stuart Gulliver's strategy in order to cut the costs. Although he is successful with cutting the costs and | = saving billions, this does not have positive impact on the employees. Gulliver’s plan is to | reduce number of employees |? == to 240 000 ~ 250 000 by 2016. This means that people canbe | * worried about their chair inthe | company even nowadays. Feeling insecure is not what es = employees wants to feel. On the other hand, the total Figure 16 Number of employees in HSBC sine 2010 [Source: statsta.com 2015) amount spent on wages and salaries was did not moved so radically. The chart on the next page represents average wages in the HSBC contrasted with total amount of employees. The average wage in HSBC in five years is £63,000 which is positive aspect. Reduction of the staff therefore did not affected average wage and employees could feel secured from financial side. However, the wages varies from sector to sector, employees can have some kind of satisfaction in their salaries. 26Figure 17: Total employees/average salaries chart CONCLUSION: Next table represents the share price of HSBC and scandals that affected it {[Source: Arnold M, Binham C, 2025} acces un 3013 eo 92008 may 2016 20208 Figure 18: HSBC share price and scandols All of these informations indicates that HSBC is not on the best way of satisfying its stakeholders. However shareholders may be happy, the overall situation past S years was not the most satisfying from client and employees point of view.i th cece, uh —_- 3.3. RANGE OF HSBC’S RESPONSIBILITIES esis Doing a business requires some kind of responsibility. HSBC has its objectives that were mentioned in table 2 in chapter 2. However, HSBC has also responsibility towards all stakeholders motioned above. The difference is that having an objective does not necessarily means it will become reality. It is crucial that HSBC will take care of its stakeholders in appropriate way. Next subsections will show some situations and responsibilities to the HSBC’S stakeholders and how could HSBC avoid them. 33.1 CLIENTS The worst scenario for clients of HSBC would be definitely abusing the money of clients as well as loss of sensitive data. These could cause a huge damage to the clients and also HSBC reputation. Clients could even bankrupt because of these practises. The worst would be if HSBC's servers and backup data would be lost. If this information system would fail and HSBC would not have any kind of backup, they could lose huge amounts of sensitive informations. Clients could lose access to their accounts and even lose all of their savings. In order to prevent abusing or stealing of the money, constant controls of the offices and statistics would have to take a place. However, losing all the data and failing of IT system without any kind of backup or security is not acceptable in any case. There must be backup servers and system that works in order to save all of this sensitive data. In 2008 a huge data theft happened in Switzerland by former employee of the HSBC. This has affected 24 000 accounts and majority of them were closed. The share price was dramatically affected by this scandal and HSBC had to invest £62m in order to increase security of its IT and data system. [Source BBC.co.uk, 2010} 3.3.2 SHAREHOLDERS Devastating drop of share and any kind of activities that would negatively affect the price would be one of the bad things that could happened for shareholders. Scandals were around HSBC in the past years quite often. HSBC must increase controls or inspections that would reveal any kind of these practices. Constant monthly inspections performed by some kind of inspection team would help in order to keep company out of this kind of scandals. . Making a statement that would apologise for loses and promise and further actions proving that this will not happen, would also be beneficial. In fact, money laundering was subject of investigation in 2011. HSBC was under huge criticism because of laundering scandal in Mexico. HSBC was fined $27m by Mexican authorities. Tax scandals in Switzerland were another element of why group chairman Douglas Flint said: “we deeply regret and apologise for the conduct and compliance failures which were in contravention of our own policies as well as expectations of us.” [Source: HSBC Annual report, 2014] Price of the shares were highly affected by these scandals.th ne = 3.3.3. EMPLOYEES The worst scenario for employee would be a death at workplace by negligence of employer. Not paying wages to the employees or fire them without the proper reason would be also not the best solution. In order to prevent death at the workplace, health and safety regulations must take a place. These could be inspected and signed every month. It is required by law that employer should take responsibility for certain procedures in order to keep workplace safe. This is supported by Health and Safety Act 1974. If HSBC decide to fire the people it should be done by the lawful way. It is required by law that if employer want to dismiss employee he has to show: 1. Avalid reason that can be justified 2. They have acted reasonably in the circumstances [Source: gov.co.uk, 2015] CONCLUSION One of the main force that drives company is their missions and objectives. These is the ‘rudder’ and it will set the direction which the organisation will go. Although objectives are important, values of the organisation cannot be put aside. Values creates the organisations image and enhance its purposes. HSBC value are to help people in their ambitions however, this can happen only through mortgages and other services which is again just a business.