The U.S. Life Insurance Industry SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Innovation & Entrepreneurship
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of The U.S. Life Insurance Industry
This note provides a background on the US life insurance regimes for the life insurance industry, including descriptions of different types of insurance, annuities, and regulation.
Swot Analysis of "The U.S. Life Insurance Industry" written by Robert C. Pozen, McCall Merchant includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Insurance Life facing as an external strategic factors. Some of the topics covered in The U.S. Life Insurance Industry case study are - Strategic Management Strategies, and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the The U.S. Life Insurance Industry casestudy better are - – increasing commodity prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%,
talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of The U.S. Life Insurance Industry
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in The U.S. Life Insurance Industry case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Insurance Life, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Insurance Life 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 The U.S. Life Insurance Industry can be done for the following purposes –
1. Strategic planning using facts provided in The U.S. Life Insurance Industry case study
2. Improving business portfolio management of Insurance Life
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Insurance Life
Strengths The U.S. Life Insurance Industry | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Insurance Life in The U.S. Life Insurance Industry Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Insurance Life in the sector have low bargaining power. The U.S. Life Insurance Industry has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Insurance Life to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Insurance Life 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 The U.S. Life Insurance Industry HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Innovation & Entrepreneurship field
– Insurance Life 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 Insurance Life in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Insurance Life digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Insurance Life 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.
High switching costs
– The high switching costs that Insurance Life 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.
Strong track record of project management
– Insurance Life 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)
– Insurance Life 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 The U.S. Life Insurance Industry - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Insurance Life is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Insurance Life is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in The U.S. Life Insurance Industry Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– The U.S. Life Insurance Industry firm has clearly differentiated products in the market place. This has enabled Insurance Life to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Insurance Life to invest into research and development (R&D) and innovation.
High brand equity
– Insurance Life has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Insurance Life to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Insurance Life
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Insurance Life does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Insurance Life is present in almost all the verticals within the industry. This has provided firm in The U.S. Life Insurance Industry 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.
Weaknesses The U.S. Life Insurance Industry | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of The U.S. Life Insurance Industry are -
High cash cycle compare to competitors
Insurance Life 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.
Skills based hiring
– The stress on hiring functional specialists at Insurance Life 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.
No frontier risks strategy
– After analyzing the HBR case study The U.S. Life Insurance Industry, it seems that company is thinking about the frontier risks that can impact Innovation & Entrepreneurship 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, Insurance Life 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study The U.S. Life Insurance Industry, in the dynamic environment Insurance Life has struggled to respond to the nimble upstart competition. Insurance Life has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Insurance Life is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study The U.S. Life Insurance Industry can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Interest costs
– Compare to the competition, Insurance Life has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Lack of clear differentiation of Insurance Life products
– To increase the profitability and margins on the products, Insurance Life needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the The U.S. Life Insurance Industry HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Insurance Life has relatively successful track record of launching new products.
Slow decision making process
– As mentioned earlier in the report, Insurance Life 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. Insurance Life 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.
Slow to strategic competitive environment developments
– As The U.S. Life Insurance Industry HBR case study mentions - Insurance Life 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 The U.S. Life Insurance Industry | 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 The U.S. Life Insurance Industry are -
Building a culture of innovation
– managers at Insurance Life 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 Innovation & Entrepreneurship segment.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Insurance Life in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, and it will provide faster access to the consumers.
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 Insurance Life 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.
Buying journey improvements
– Insurance Life can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. The U.S. Life Insurance Industry 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.
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 Insurance Life in the consumer business. Now Insurance Life can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Insurance Life to increase its market reach. Insurance Life 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.
Using analytics as competitive advantage
– Insurance Life 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 The U.S. Life Insurance Industry - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Insurance Life to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Insurance Life 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 Insurance Life to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Insurance Life can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Creating value in data economy
– The success of analytics program of Insurance Life has opened avenues for new revenue streams for the organization in the industry. This can help Insurance Life to build a more holistic ecosystem as suggested in the The U.S. Life Insurance Industry case study. Insurance Life can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Insurance Life is facing challenges because of the dominance of functional experts in the organization. The U.S. Life Insurance Industry 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.
Loyalty marketing
– Insurance Life 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.
Leveraging digital technologies
– Insurance Life 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.
Threats The U.S. Life Insurance Industry External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study The U.S. Life Insurance Industry are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Insurance Life with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Shortening product life cycle
– it is one of the major threat that Insurance Life is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Insurance Life has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Insurance Life needs to keep up with the evolution of technology in the Innovation & Entrepreneurship 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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study The U.S. Life Insurance Industry, Insurance Life may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Innovation & Entrepreneurship .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Insurance Life 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 The U.S. Life Insurance Industry .
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. Insurance Life 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.
High dependence on third party suppliers
– Insurance Life 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.
Increasing wage structure of Insurance Life
– 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 Insurance Life.
Stagnating economy with rate increase
– Insurance Life 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.
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. Insurance Life needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
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 Insurance Life in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
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 Insurance Life.
Weighted SWOT Analysis of The U.S. Life Insurance Industry 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 The U.S. Life Insurance Industry 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 The U.S. Life Insurance Industry 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 The U.S. Life Insurance Industry 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 The U.S. Life Insurance Industry 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 Insurance Life needs to make to build a sustainable competitive advantage.
