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 – competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, technology disruption, increasing energy prices, challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels,
there is backlash against globalization, wage bills are increasing, 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 -
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.
Low bargaining power of suppliers
– Suppliers of China Life Insurance in the Financial sector have low bargaining power. China Life Insurance has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps China Life Insurance to manage not only supply disruptions but also source products at highly competitive prices.
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.
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.
Innovation driven organization
– China Life Insurance is one of the most innovative firm in Insurance (Life) sector.
Ability to lead change in Insurance (Life)
– China Life Insurance is one of the leading players in the Insurance (Life) industry in China. Over the years it has not only transformed the business landscape in the Insurance (Life) industry in China but also across the existing markets. The ability to lead change has enabled China Life Insurance in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Insurance (Life) industry
– China Life Insurance has clearly differentiated products in the market place. This has enabled China Life Insurance to fetch slight price premium compare to the competitors in the Insurance (Life) industry. The sustainable margins have also helped China Life Insurance to invest into research and development (R&D) and innovation.
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.
Superior customer experience
– The customer experience strategy of China Life Insurance in Insurance (Life) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– China Life Insurance has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled China Life Insurance to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management in the Insurance (Life) industry
– China Life Insurance is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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 -
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.
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.
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.
High dependence on China Life Insurance ‘s star products
– The top 2 products and services of China Life Insurance still accounts for major business revenue. This dependence on star products in Insurance (Life) industry has resulted into insufficient focus on developing new products, even though China Life Insurance has relatively successful track record of launching new products.
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 China Life Insurance supply chain. Even after few cautionary changes, China Life Insurance is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left China Life Insurance vulnerable to further global disruptions in South East Asia.
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.
Lack of clear differentiation of China Life Insurance products
– To increase the profitability and margins on the products, China Life Insurance needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, China Life Insurance has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Insurance (Life) industry over the last five years. China Life Insurance 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.
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.
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.
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 -
Using analytics as competitive advantage
– China Life Insurance has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Insurance (Life) sector. This continuous investment in analytics has enabled China Life Insurance to build a competitive advantage using analytics. The analytics driven competitive advantage can help China Life Insurance to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Better consumer reach
– The expansion of the 5G network will help China Life Insurance to increase its market reach. China Life Insurance will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Creating value in data economy
– The success of analytics program of China Life Insurance has opened avenues for new revenue streams for the organization in Insurance (Life) industry. This can help China Life Insurance to build a more holistic ecosystem for China Life Insurance products in the Insurance (Life) industry by providing – data insight services, data privacy related products, data based consulting services, 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.
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.
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.
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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for China Life Insurance to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
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.
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 -
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.
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.
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. China Life 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for China Life Insurance in Insurance (Life) industry. The Insurance (Life) 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.
Stagnating economy with rate increase
– China Life Insurance 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 Insurance (Life) industry.
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.
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.
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.
Regulatory challenges
– China Life 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 (Life) industry regulations.
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 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.
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.
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.
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.