Prudential Insurance Co. attempted to diversify into financial services by building an investment banking franchise. Prudential's initial foray into the industry was its acquisition of The Bache Group in 1982. In 2000, the company decided to exit investment banking. The firm adopted various strategic positions and human resource management strategies during the 18 years it struggled to compete successfully against prestigious incumbents. Although Prudential's efforts to establish a top-tier investment bank ultimately failed, other firms did succeed in this endeavor.
Authors :: Paul M. Healy, Boris Groysberg, Amanda Cowen
Swot Analysis of "Prudential Securities" written by Paul M. Healy, Boris Groysberg, Amanda Cowen includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Prudential's Prudential facing as an external strategic factors. Some of the topics covered in Prudential Securities case study are - Strategic Management Strategies, Human resource management, Marketing, Risk management and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Prudential Securities casestudy better are - – increasing energy prices, increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, wage bills are increasing, supply chains are disrupted by pandemic , technology disruption, increasing transportation and logistics costs,
competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Prudential Securities
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Prudential Securities case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Prudential's Prudential, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Prudential's Prudential operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Prudential Securities can be done for the following purposes –
1. Strategic planning using facts provided in Prudential Securities case study
2. Improving business portfolio management of Prudential's Prudential
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Prudential's Prudential
Strengths Prudential Securities | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Prudential's Prudential in Prudential Securities Harvard Business Review case study are -
Ability to recruit top talent
– Prudential's Prudential is one of the leading recruiters in the industry. Managers in the Prudential Securities are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Low bargaining power of suppliers
– Suppliers of Prudential's Prudential in the sector have low bargaining power. Prudential Securities has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Prudential's Prudential to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Prudential's Prudential is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Prudential's Prudential has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Prudential Securities - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Prudential's Prudential is present in almost all the verticals within the industry. This has provided firm in Prudential Securities case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Sustainable margins compare to other players in Strategy & Execution industry
– Prudential Securities firm has clearly differentiated products in the market place. This has enabled Prudential's Prudential to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Prudential's Prudential to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Prudential's Prudential has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Superior customer experience
– The customer experience strategy of Prudential's Prudential in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Prudential's Prudential has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Prudential's Prudential has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Analytics focus
– Prudential's Prudential is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Paul M. Healy, Boris Groysberg, Amanda Cowen can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High brand equity
– Prudential's Prudential has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Prudential's Prudential to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Prudential's Prudential
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Prudential's Prudential does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Prudential Securities | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Prudential Securities are -
Lack of clear differentiation of Prudential's Prudential products
– To increase the profitability and margins on the products, Prudential's Prudential needs to provide more differentiated products than what it is currently offering in the marketplace.
Need for greater diversity
– Prudential's Prudential has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Skills based hiring
– The stress on hiring functional specialists at Prudential's Prudential has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Increasing silos among functional specialists
– The organizational structure of Prudential's Prudential is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Prudential's Prudential needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Prudential's Prudential to focus more on services rather than just following the product oriented approach.
Aligning sales with marketing
– It come across in the case study Prudential Securities that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Prudential Securities can leverage the sales team experience to cultivate customer relationships as Prudential's Prudential is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, Prudential's Prudential has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Prudential's Prudential even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High cash cycle compare to competitors
Prudential's Prudential has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to strategic competitive environment developments
– As Prudential Securities HBR case study mentions - Prudential's Prudential takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Low market penetration in new markets
– Outside its home market of Prudential's Prudential, firm in the HBR case study Prudential Securities needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Prudential's Prudential supply chain. Even after few cautionary changes mentioned in the HBR case study - Prudential Securities, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Prudential's Prudential vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Prudential Securities, is just above the industry average. Prudential's Prudential needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Opportunities Prudential Securities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Prudential Securities are -
Manufacturing automation
– Prudential's Prudential can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Buying journey improvements
– Prudential's Prudential can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Prudential Securities suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Prudential's Prudential to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Prudential's Prudential to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Prudential's Prudential in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Prudential's Prudential can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Prudential Securities, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for Prudential's Prudential to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Prudential's Prudential can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– Prudential's Prudential has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Prudential Securities - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Prudential's Prudential to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Prudential's Prudential can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Better consumer reach
– The expansion of the 5G network will help Prudential's Prudential to increase its market reach. Prudential's Prudential will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Prudential's Prudential in the consumer business. Now Prudential's Prudential can target international markets with far fewer capital restrictions requirements than the existing system.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Prudential's Prudential is facing challenges because of the dominance of functional experts in the organization. Prudential Securities case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Building a culture of innovation
– managers at Prudential's Prudential can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Threats Prudential Securities External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Prudential Securities are -
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Prudential's Prudential.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Prudential's Prudential will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Technology acceleration in Forth Industrial Revolution
– Prudential's Prudential has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Prudential's Prudential needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Prudential's Prudential business can come under increasing regulations regarding data privacy, data security, etc.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Environmental challenges
– Prudential's Prudential needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Prudential's Prudential can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Regulatory challenges
– Prudential's Prudential needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
High dependence on third party suppliers
– Prudential's Prudential high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Prudential's Prudential needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Stagnating economy with rate increase
– Prudential's Prudential can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Increasing wage structure of Prudential's Prudential
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Prudential's Prudential.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Prudential's Prudential can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Prudential Securities .
Weighted SWOT Analysis of Prudential Securities Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Prudential Securities needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Prudential Securities is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Prudential Securities is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Prudential Securities is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Prudential's Prudential needs to make to build a sustainable competitive advantage.
