Direct Line Insurance (DLGD) SWOT Analysis / TOWS Matrix / MBA Resources
Insurance (Prop. & Casualty)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Direct Line Insurance (United Kingdom)
Based on various researches at Oak Spring University , Direct Line Insurance is operating in a macro-environment that has been destablized by – increasing commodity prices, there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies,
central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Direct Line Insurance
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Direct Line Insurance can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Direct Line Insurance, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Direct Line Insurance 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 Direct Line Insurance can be done for the following purposes –
1. Strategic planning of Direct Line Insurance
2. Improving business portfolio management of Direct Line Insurance
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Insurance (Prop. & Casualty) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Direct Line Insurance
Strengths of Direct Line Insurance | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Direct Line Insurance are -
Organizational Resilience of Direct Line Insurance
– The covid-19 pandemic has put organizational resilience at the centre of everthing Direct Line Insurance does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Direct Line Insurance 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.
Ability to lead change in Insurance (Prop. & Casualty)
– Direct Line Insurance is one of the leading players in the Insurance (Prop. & Casualty) industry in United Kingdom. Over the years it has not only transformed the business landscape in the Insurance (Prop. & Casualty) industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Direct Line Insurance in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Insurance (Prop. & Casualty) industry
- digital transformation varies from industry to industry. For Direct Line Insurance digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Direct Line Insurance 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.
Effective Research and Development (R&D)
– Direct Line Insurance has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Direct Line Insurance staying ahead in the Insurance (Prop. & Casualty) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Direct Line Insurance has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Direct Line Insurance 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.
Diverse revenue streams
– Direct Line Insurance is present in almost all the verticals within the Insurance (Prop. & Casualty) industry. This has provided Direct Line Insurance 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.
Training and development
– Direct Line Insurance has one of the best training and development program in Financial industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Low bargaining power of suppliers
– Suppliers of Direct Line Insurance in the Financial sector have low bargaining power. Direct Line Insurance has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Direct Line Insurance to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy of Direct Line Insurance comprises – understanding the underlying the factors in the Insurance (Prop. & Casualty) industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
High brand equity
– Direct Line Insurance has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Direct Line Insurance to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Direct Line Insurance is one of the leading players in the Insurance (Prop. & Casualty) industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses of Direct Line Insurance | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Direct Line Insurance are -
Interest costs
– Compare to the competition, Direct Line Insurance 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.
Need for greater diversity
– Direct Line Insurance 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.
High operating costs
– Compare to the competitors, Direct Line Insurance has high operating costs in the Insurance (Prop. & Casualty) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Direct Line Insurance lucrative customers.
Ability to respond to the competition
– As the decision making is very deliberative at Direct Line Insurance, in the dynamic environment of Insurance (Prop. & Casualty) industry it has struggled to respond to the nimble upstart competition. Direct Line Insurance has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As Direct Line Insurance is one of the leading players in the Insurance (Prop. & Casualty) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Insurance (Prop. & Casualty) industry in last five years.
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 Direct Line Insurance supply chain. Even after few cautionary changes, Direct Line Insurance is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Direct Line Insurance vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners in Insurance (Prop. & Casualty) industry
– because of the regulatory requirements in United Kingdom, Direct Line Insurance is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Insurance (Prop. & Casualty) industry.
High dependence on Direct Line Insurance ‘s star products
– The top 2 products and services of Direct Line Insurance still accounts for major business revenue. This dependence on star products in Insurance (Prop. & Casualty) industry has resulted into insufficient focus on developing new products, even though Direct Line Insurance has relatively successful track record of launching new products.
Lack of clear differentiation of Direct Line Insurance products
– To increase the profitability and margins on the products, Direct Line Insurance needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Direct Line Insurance has a high cash cycle compare to other players in the Insurance (Prop. & Casualty) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Increasing silos among functional specialists
– The organizational structure of Direct Line Insurance is dominated by functional specialists. It is not different from other players in the Insurance (Prop. & Casualty) industry, but Direct Line Insurance needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Direct Line Insurance to focus more on services in the Insurance (Prop. & Casualty) industry rather than just following the product oriented approach.
Direct Line Insurance Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Direct Line Insurance are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Direct Line Insurance 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 Direct Line Insurance to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Insurance (Prop. & Casualty) industry, but it has also influenced the consumer preferences. Direct Line Insurance can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Direct Line Insurance is facing challenges because of the dominance of functional experts in the organization. Direct Line Insurance can utilize new technology in the field of Insurance (Prop. & Casualty) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Buying journey improvements
– Direct Line Insurance can improve the customer journey of consumers in the Insurance (Prop. & Casualty) industry by using analytics and artificial intelligence. It 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Insurance (Prop. & Casualty) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Direct Line Insurance 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. Direct Line Insurance 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Direct Line Insurance in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Insurance (Prop. & Casualty) industry, and it will provide faster access to the consumers.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Direct Line Insurance can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Direct Line Insurance 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 Direct Line Insurance 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, Direct Line Insurance 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.
Developing new processes and practices
– Direct Line Insurance can develop new processes and procedures in Insurance (Prop. & Casualty) 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.
Using analytics as competitive advantage
– Direct Line Insurance has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Insurance (Prop. & Casualty) sector. This continuous investment in analytics has enabled Direct Line Insurance to build a competitive advantage using analytics. The analytics driven competitive advantage can help Direct Line Insurance to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Loyalty marketing
– Direct Line Insurance 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.
Manufacturing automation
– Direct Line Insurance can use the latest technology developments to improve its manufacturing and designing process in Insurance (Prop. & Casualty) sector. 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.
Threats Direct Line Insurance External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Direct Line Insurance are -
Shortening product life cycle
– it is one of the major threat that Direct Line Insurance is facing in Insurance (Prop. & Casualty) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Direct Line Insurance.
Increasing wage structure of Direct Line Insurance
– 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 Direct Line Insurance.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Insurance (Prop. & Casualty) industry are lowering. It can presents Direct Line Insurance with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Insurance (Prop. & Casualty) sector.
Environmental challenges
– Direct Line Insurance 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. Direct Line Insurance can take advantage of this fund but it will also bring new competitors in the Insurance (Prop. & Casualty) industry.
High dependence on third party suppliers
– Direct Line Insurance 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Direct Line Insurance in Insurance (Prop. & Casualty) industry. The Insurance (Prop. & Casualty) industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
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. Direct Line Insurance needs to understand the core reasons impacting the Insurance (Prop. & Casualty) industry. This will help it in building a better workplace.
Easy access to finance
– Easy access to finance in Insurance (Prop. & Casualty) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Direct Line Insurance can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Direct Line Insurance 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 Insurance (Prop. & Casualty) industry regulations.
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 Direct Line Insurance business can come under increasing regulations regarding data privacy, data security, etc.
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. Direct Line Insurance 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 Direct Line Insurance in the Insurance (Prop. & Casualty) sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Direct Line Insurance Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Direct Line Insurance 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 Direct Line Insurance 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 Direct Line Insurance 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 Direct Line Insurance 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 Direct Line Insurance needs to make to build a sustainable competitive advantage.
