Fanhua (FANH) SWOT Analysis / TOWS Matrix / MBA Resources
Insurance (Miscellaneous)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Fanhua (United States)
Based on various researches at Oak Spring University , Fanhua is operating in a macro-environment that has been destablized by – geopolitical disruptions, increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion,
cloud computing is disrupting traditional business models, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Fanhua can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Fanhua, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Fanhua 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 Fanhua can be done for the following purposes –
1. Strategic planning of Fanhua
2. Improving business portfolio management of Fanhua
3. Assessing feasibility of the new initiative in United States
4. Making a Insurance (Miscellaneous) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Fanhua
Strengths of Fanhua | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Fanhua are -
Strong track record of project management in the Insurance (Miscellaneous) industry
– Fanhua is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Fanhua 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 Insurance (Miscellaneous) industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Digital Transformation in Insurance (Miscellaneous) industry
- digital transformation varies from industry to industry. For Fanhua digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Fanhua 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.
Training and development
– Fanhua 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.
Highly skilled collaborators
– Fanhua has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Insurance (Miscellaneous) industry. Secondly the value chain collaborators of Fanhua have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Fanhua is one of the most innovative firm in Insurance (Miscellaneous) sector.
High switching costs
– The high switching costs that Fanhua 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.
Cross disciplinary teams
– Horizontal connected teams at the Fanhua 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.
Operational resilience
– The operational resilience strategy of Fanhua comprises – understanding the underlying the factors in the Insurance (Miscellaneous) 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.
Superior customer experience
– The customer experience strategy of Fanhua in Insurance (Miscellaneous) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– Fanhua is one of the leading players in the Insurance (Miscellaneous) industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Low bargaining power of suppliers
– Suppliers of Fanhua in the Financial sector have low bargaining power. Fanhua has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Fanhua to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses of Fanhua | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Fanhua are -
Need for greater diversity
– Fanhua 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.
Capital Spending Reduction
– Even during the low interest decade, Fanhua 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 Insurance (Miscellaneous) industry using digital technology.
High dependence on Fanhua ‘s star products
– The top 2 products and services of Fanhua still accounts for major business revenue. This dependence on star products in Insurance (Miscellaneous) industry has resulted into insufficient focus on developing new products, even though Fanhua has relatively successful track record of launching new products.
Increasing silos among functional specialists
– The organizational structure of Fanhua is dominated by functional specialists. It is not different from other players in the Insurance (Miscellaneous) industry, but Fanhua needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Fanhua to focus more on services in the Insurance (Miscellaneous) industry rather than just following the product oriented approach.
High bargaining power of channel partners in Insurance (Miscellaneous) industry
– because of the regulatory requirements in United States, Fanhua 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 (Miscellaneous) industry.
Low market penetration in new markets
– Outside its home market of United States, Fanhua needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ less understanding of Fanhua strategy
– From the outside it seems that the employees of Fanhua don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Ability to respond to the competition
– As the decision making is very deliberative at Fanhua, in the dynamic environment of Insurance (Miscellaneous) industry it has struggled to respond to the nimble upstart competition. Fanhua has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the Insurance (Miscellaneous) industry, Fanhua needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Lack of clear differentiation of Fanhua products
– To increase the profitability and margins on the products, Fanhua needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring in Insurance (Miscellaneous) industry
– The stress on hiring functional specialists at Fanhua 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.
Fanhua Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Fanhua are -
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 Fanhua 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Insurance (Miscellaneous) industry, but it has also influenced the consumer preferences. Fanhua can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Fanhua 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 Fanhua to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Fanhua can use these opportunities to build new business models that can help the communities that Fanhua operates in. Secondly it can use opportunities from government spending in Insurance (Miscellaneous) sector.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Insurance (Miscellaneous) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Fanhua 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. Fanhua 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 Fanhua 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 (Miscellaneous) industry, and it will provide faster access to the consumers.
Buying journey improvements
– Fanhua can improve the customer journey of consumers in the Insurance (Miscellaneous) 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.
Developing new processes and practices
– Fanhua can develop new processes and procedures in Insurance (Miscellaneous) 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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Fanhua can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Fanhua has opened avenues for new revenue streams for the organization in Insurance (Miscellaneous) industry. This can help Fanhua to build a more holistic ecosystem for Fanhua products in the Insurance (Miscellaneous) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Fanhua to increase its market reach. Fanhua 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Fanhua 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.
Building a culture of innovation
– managers at Fanhua 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 Insurance (Miscellaneous) industry.
Threats Fanhua External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Fanhua are -
Environmental challenges
– Fanhua 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. Fanhua can take advantage of this fund but it will also bring new competitors in the Insurance (Miscellaneous) industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Fanhua in Insurance (Miscellaneous) industry. The Insurance (Miscellaneous) 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Fanhua may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Insurance (Miscellaneous) sector.
Consumer confidence and its impact on Fanhua 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 Insurance (Miscellaneous) industry and other sectors.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Fanhua 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 Fanhua prominent markets.
Shortening product life cycle
– it is one of the major threat that Fanhua is facing in Insurance (Miscellaneous) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Fanhua has witnessed rapid integration of technology during Covid-19 in the Insurance (Miscellaneous) industry. As one of the leading players in the industry, Fanhua needs to keep up with the evolution of technology in the Insurance (Miscellaneous) 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Insurance (Miscellaneous) industry are lowering. It can presents Fanhua with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Insurance (Miscellaneous) sector.
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.
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 Fanhua business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Fanhua 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 (Miscellaneous) industry regulations.
Increasing wage structure of Fanhua
– 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 Fanhua.
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 Fanhua.
Weighted SWOT Analysis of Fanhua Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Fanhua 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 Fanhua 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 Fanhua 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 Fanhua 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 Fanhua needs to make to build a sustainable competitive advantage.