Case Study Description of Ping An's Overseas Expansion: Financial Uncertainties and Risk Management
By 2007, China's Ping An Insurance Co. ("Ping An") had grown into the second-largest life insurer in China. Its goal was to become a universal financial services provider by expanding into asset management and banking. These three businesses were the foundation of Ping An's "three-pillar strategy". It had already made two domestic banking acquisitions, but none in asset management. In November 2007, Ping An acquired a 4.2% stake in Fortis, the Belgo-Dutch financial conglomerate, and planned to buy half of Fortis's asset management business, which would be a big step towards reaching its goal. Yet this ambitious overseas expansion plan was crushed by the adverse effects of the US subprime problem and the global financial crisis. The company needs to address important lessons, re-evaluate its overseas investment strategy and learn how to implement risk management in the future.
Authors :: Andrew S. Li, Gerald Yong Gao, Hung Gay Fung
Swot Analysis of "Ping An's Overseas Expansion: Financial Uncertainties and Risk Management" written by Andrew S. Li, Gerald Yong Gao, Hung Gay Fung includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ping An's facing as an external strategic factors. Some of the topics covered in Ping An's Overseas Expansion: Financial Uncertainties and Risk Management case study are - Strategic Management Strategies, Financial management, Growth strategy, Recession, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Ping An's Overseas Expansion: Financial Uncertainties and Risk Management casestudy better are - – increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, there is increasing trade war between United States & China,
cloud computing is disrupting traditional business models, there is backlash against globalization, etc
Introduction to SWOT Analysis of Ping An's Overseas Expansion: Financial Uncertainties and Risk Management
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Ping An's Overseas Expansion: Financial Uncertainties and Risk Management case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ping An's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ping An's 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 Ping An's Overseas Expansion: Financial Uncertainties and Risk Management can be done for the following purposes –
1. Strategic planning using facts provided in Ping An's Overseas Expansion: Financial Uncertainties and Risk Management case study
2. Improving business portfolio management of Ping An's
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Ping An's
Strengths Ping An's Overseas Expansion: Financial Uncertainties and Risk Management | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ping An's in Ping An's Overseas Expansion: Financial Uncertainties and Risk Management Harvard Business Review case study are -
Successful track record of launching new products
– Ping An's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Ping An's 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.
Cross disciplinary teams
– Horizontal connected teams at the Ping An's are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
High brand equity
– Ping An's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ping An's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that Ping An's 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.
Highly skilled collaborators
– Ping An's has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Ping An's Overseas Expansion: Financial Uncertainties and Risk Management HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Finance & Accounting field
– Ping An's is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Ping An's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Ping An's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Ping An's has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Analytics focus
– Ping An's 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 Andrew S. Li, Gerald Yong Gao, Hung Gay Fung 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.
Training and development
– Ping An's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Ping An's Overseas Expansion: Financial Uncertainties and Risk Management Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Effective Research and Development (R&D)
– Ping An's 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 Ping An's Overseas Expansion: Financial Uncertainties and Risk Management - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Ping An's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Ping An's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Finance & Accounting industry
– Ping An's Overseas Expansion: Financial Uncertainties and Risk Management firm has clearly differentiated products in the market place. This has enabled Ping An's to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Ping An's to invest into research and development (R&D) and innovation.
Weaknesses Ping An's Overseas Expansion: Financial Uncertainties and Risk Management | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Ping An's Overseas Expansion: Financial Uncertainties and Risk Management are -
Increasing silos among functional specialists
– The organizational structure of Ping An's is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Ping An's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Ping An's to focus more on services rather than just following the product oriented approach.
Need for greater diversity
– Ping An's 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Ping An's Overseas Expansion: Financial Uncertainties and Risk Management, in the dynamic environment Ping An's has struggled to respond to the nimble upstart competition. Ping An's has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though Ping An's has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Ping An's Overseas Expansion: Financial Uncertainties and Risk Management should strive to include more intangible value offerings along with its core products and services.
No frontier risks strategy
– After analyzing the HBR case study Ping An's Overseas Expansion: Financial Uncertainties and Risk Management, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Capital Spending Reduction
– Even during the low interest decade, Ping An's has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Aligning sales with marketing
– It come across in the case study Ping An's Overseas Expansion: Financial Uncertainties and Risk Management 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 Ping An's Overseas Expansion: Financial Uncertainties and Risk Management can leverage the sales team experience to cultivate customer relationships as Ping An's is planning to shift buying processes online.
High cash cycle compare to competitors
Ping An's 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.
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 Ping An's supply chain. Even after few cautionary changes mentioned in the HBR case study - Ping An's Overseas Expansion: Financial Uncertainties and Risk Management, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Ping An's vulnerable to further global disruptions in South East Asia.
Skills based hiring
– The stress on hiring functional specialists at Ping An's 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.
Slow to strategic competitive environment developments
– As Ping An's Overseas Expansion: Financial Uncertainties and Risk Management HBR case study mentions - Ping An's 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.
Opportunities Ping An's Overseas Expansion: Financial Uncertainties and Risk Management | 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 Ping An's Overseas Expansion: Financial Uncertainties and Risk Management are -
Using analytics as competitive advantage
– Ping An's 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 Ping An's Overseas Expansion: Financial Uncertainties and Risk Management - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Ping An's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Ping An's 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Ping An's can use these opportunities to build new business models that can help the communities that Ping An's operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Better consumer reach
– The expansion of the 5G network will help Ping An's to increase its market reach. Ping An's 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.
Creating value in data economy
– The success of analytics program of Ping An's has opened avenues for new revenue streams for the organization in the industry. This can help Ping An's to build a more holistic ecosystem as suggested in the Ping An's Overseas Expansion: Financial Uncertainties and Risk Management case study. Ping An's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Ping An's can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Ping An's can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Loyalty marketing
– Ping An's has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Ping An's is facing challenges because of the dominance of functional experts in the organization. Ping An's Overseas Expansion: Financial Uncertainties and Risk Management 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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Ping An's to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Developing new processes and practices
– Ping An's can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Ping An's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Ping An's 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 Ping An's to hire the very best people irrespective of their geographical location.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Ping An's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Ping An's Overseas Expansion: Financial Uncertainties and Risk Management External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Ping An's Overseas Expansion: Financial Uncertainties and Risk Management 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 Ping An's.
Increasing wage structure of Ping An's
– 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 Ping An's.
Consumer confidence and its impact on Ping An's demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
High dependence on third party suppliers
– Ping An's 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.
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.
Technology acceleration in Forth Industrial Revolution
– Ping An's has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Ping An's needs to keep up with the evolution of technology in the Finance & Accounting 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.
Environmental challenges
– Ping An's 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. Ping An's can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Ping An's Overseas Expansion: Financial Uncertainties and Risk Management, Ping An's may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
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 Ping An's business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Ping An's 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.
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. Ping An's 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.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Ping An's in the Finance & Accounting sector and impact the bottomline of the organization.
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.
Weighted SWOT Analysis of Ping An's Overseas Expansion: Financial Uncertainties and Risk Management 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 Ping An's Overseas Expansion: Financial Uncertainties and Risk Management 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 Ping An's Overseas Expansion: Financial Uncertainties and Risk Management 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 Ping An's Overseas Expansion: Financial Uncertainties and Risk Management 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 Ping An's Overseas Expansion: Financial Uncertainties and Risk Management 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 Ping An's needs to make to build a sustainable competitive advantage.