China Life Insurance (601628) SWOT Analysis / TOWS Matrix / MBA Resources
Insurance (Life)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for China Life Insurance (China)
Based on various researches at Oak Spring University , China Life Insurance is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings,
supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of China Life Insurance
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that China Life Insurance can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the China Life Insurance, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which China Life 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 China Life Insurance can be done for the following purposes –
1. Strategic planning of China Life Insurance
2. Improving business portfolio management of China Life Insurance
3. Assessing feasibility of the new initiative in China
4. Making a Insurance (Life) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of China Life Insurance
Strengths of China Life Insurance | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of China Life Insurance are -
Innovation driven organization
– China Life Insurance is one of the most innovative firm in Insurance (Life) sector.
Diverse revenue streams
– China Life Insurance is present in almost all the verticals within the Insurance (Life) industry. This has provided China Life 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.
Highly skilled collaborators
– China Life Insurance has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Insurance (Life) industry. Secondly the value chain collaborators of China Life Insurance have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– China Life Insurance has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – China Life Insurance staying ahead in the Insurance (Life) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– China Life 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.
Learning organization
- China Life Insurance 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 China Life Insurance is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at China Life Insurance emphasize – knowledge, initiative, and innovation.
Digital Transformation in Insurance (Life) industry
- digital transformation varies from industry to industry. For China Life Insurance digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. China Life 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.
Operational resilience
– The operational resilience strategy of China Life Insurance comprises – understanding the underlying the factors in the Insurance (Life) 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.
Organizational Resilience of China Life Insurance
– The covid-19 pandemic has put organizational resilience at the centre of everthing China Life Insurance does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Successful track record of launching new products
– China Life Insurance has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. China Life 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.
High switching costs
– The high switching costs that China Life 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 recruit top talent
– China Life Insurance is one of the leading players in the Insurance (Life) industry in China. It is in a position to attract the best talent available in China. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses of China Life Insurance | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of China Life Insurance are -
High operating costs
– Compare to the competitors, China Life Insurance has high operating costs in the Insurance (Life) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract China Life Insurance lucrative customers.
Aligning sales with marketing
– From the outside it seems that China Life Insurance needs to have more collaboration between its sales team and marketing team. Sales professionals in the Insurance (Life) industry have deep experience in developing customer relationships. Marketing department at China Life Insurance can leverage the sales team experience to cultivate customer relationships as China Life Insurance is planning to shift buying processes online.
Employees’ less understanding of China Life Insurance strategy
– From the outside it seems that the employees of China Life Insurance 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.
No frontier risks strategy
– From the 10K / annual statement of China Life Insurance, it seems that company is thinking out the frontier risks that can impact Insurance (Life) industry. 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.
High cash cycle compare to competitors
China Life Insurance has a high cash cycle compare to other players in the Insurance (Life) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Capital Spending Reduction
– Even during the low interest decade, China Life Insurance 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 (Life) industry using digital technology.
Interest costs
– Compare to the competition, China Life 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.
Products dominated business model
– Even though China Life Insurance has some of the most successful models in the Insurance (Life) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. China Life Insurance should strive to include more intangible value offerings along with its core products and services.
Ability to respond to the competition
– As the decision making is very deliberative at China Life Insurance, in the dynamic environment of Insurance (Life) industry it has struggled to respond to the nimble upstart competition. China Life Insurance has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of China Life Insurance is dominated by functional specialists. It is not different from other players in the Insurance (Life) industry, but China Life Insurance needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help China Life Insurance to focus more on services in the Insurance (Life) industry rather than just following the product oriented approach.
Compensation and incentives
– The revenue per employee of China Life Insurance is just above the Insurance (Life) industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
China Life Insurance Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of China Life Insurance are -
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. China Life Insurance can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– China Life Insurance 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.
Loyalty marketing
– China Life 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects China Life Insurance can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at China Life Insurance 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 (Life) industry.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, China Life Insurance can use these opportunities to build new business models that can help the communities that China Life Insurance operates in. Secondly it can use opportunities from government spending in Insurance (Life) sector.
Buying journey improvements
– China Life Insurance can improve the customer journey of consumers in the Insurance (Life) 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, China Life 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Insurance (Life) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. China Life 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. China Life 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Insurance (Life) industry, but it has also influenced the consumer preferences. China Life Insurance can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Use of Bitcoin and other crypto currencies for transactions in Insurance (Life) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for China Life Insurance in the Insurance (Life) industry. Now China Life Insurance can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for China Life 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 (Life) industry, and it will provide faster access to the consumers.
Developing new processes and practices
– China Life Insurance can develop new processes and procedures in Insurance (Life) 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.
Threats China Life Insurance External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of China Life Insurance are -
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. China Life Insurance needs to understand the core reasons impacting the Insurance (Life) industry. This will help it in building a better workplace.
High dependence on third party suppliers
– China Life 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, China Life Insurance 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 China Life Insurance prominent markets.
Increasing wage structure of China Life 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 China Life Insurance.
Shortening product life cycle
– it is one of the major threat that China Life Insurance is facing in Insurance (Life) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on China Life Insurance 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 (Life) industry and other sectors.
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 China Life Insurance business can come under increasing regulations regarding data privacy, data security, etc.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Insurance (Life) industry are lowering. It can presents China Life Insurance with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Insurance (Life) sector.
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 China Life Insurance in the Insurance (Life) sector and impact the bottomline of the organization.
Environmental challenges
– China Life 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. China Life Insurance can take advantage of this fund but it will also bring new competitors in the Insurance (Life) industry.
Technology acceleration in Forth Industrial Revolution
– China Life Insurance has witnessed rapid integration of technology during Covid-19 in the Insurance (Life) industry. As one of the leading players in the industry, China Life Insurance needs to keep up with the evolution of technology in the Insurance (Life) 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, China Life Insurance 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 (Life) sector.
Weighted SWOT Analysis of China Life Insurance Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at China Life 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 China Life 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 China Life 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 China Life 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 China Life Insurance needs to make to build a sustainable competitive advantage.
