New China Life Insurance (601336) SWOT Analysis / TOWS Matrix / MBA Resources
Insurance (Life)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for New China Life Insurance (China)
Based on various researches at Oak Spring University , New China Life Insurance is operating in a macro-environment that has been destablized by – increasing energy prices, there is increasing trade war between United States & China, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, technology disruption, there is backlash against globalization, increasing transportation and logistics costs,
increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of New China Life Insurance
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that New China Life Insurance can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the New China Life Insurance, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which New 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 New China Life Insurance can be done for the following purposes –
1. Strategic planning of New China Life Insurance
2. Improving business portfolio management of New 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 New China Life Insurance
Strengths of New China Life Insurance | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of New China Life Insurance are -
Sustainable margins compare to other players in Insurance (Life) industry
– New China Life Insurance has clearly differentiated products in the market place. This has enabled New China Life Insurance to fetch slight price premium compare to the competitors in the Insurance (Life) industry. The sustainable margins have also helped New China Life Insurance to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– New 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.
Successful track record of launching new products
– New China Life Insurance has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. New 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.
Ability to lead change in Insurance (Life)
– New 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 New China Life Insurance in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– New 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 – New 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.
Operational resilience
– The operational resilience strategy of New 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.
Strong track record of project management in the Insurance (Life) industry
– New 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.
Analytics focus
– New China Life Insurance 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 (Life) industry. The technology infrastructure of China 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.
High switching costs
– The high switching costs that New 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.
Highly skilled collaborators
– New 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 New China Life Insurance have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– New China Life Insurance has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled New China Life Insurance to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Insurance (Life) industry
- digital transformation varies from industry to industry. For New China Life Insurance digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. New 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.
Weaknesses of New China Life Insurance | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of New China Life Insurance are -
High operating costs
– Compare to the competitors, New 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 New China Life Insurance lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, New 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.
Lack of clear differentiation of New China Life Insurance products
– To increase the profitability and margins on the products, New China Life Insurance needs to provide more differentiated products than what it is currently offering in the marketplace.
Low market penetration in new markets
– Outside its home market of China, New China Life Insurance needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Workers concerns about automation
– As automation is fast increasing in the Insurance (Life) industry, New China Life Insurance 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.
Increasing silos among functional specialists
– The organizational structure of New China Life Insurance is dominated by functional specialists. It is not different from other players in the Insurance (Life) industry, but New 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 New China Life Insurance to focus more on services in the Insurance (Life) industry rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, New 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. New 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.
Products dominated business model
– Even though New 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. New China Life Insurance should strive to include more intangible value offerings along with its core products and services.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, New China Life Insurance is slow explore the new channels of communication. These new channels of communication can help New China Life Insurance to provide better information regarding Insurance (Life) products and services. It can also build an online community to further reach out to potential customers.
Employees’ less understanding of New China Life Insurance strategy
– From the outside it seems that the employees of New 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.
Interest costs
– Compare to the competition, New 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.
New China Life Insurance Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of New China Life Insurance are -
Developing new processes and practices
– New 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.
Using analytics as competitive advantage
– New 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 New China Life Insurance to build a competitive advantage using analytics. The analytics driven competitive advantage can help New China Life Insurance to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– New 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, New 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.
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 New China Life Insurance in the Insurance (Life) industry. Now New China Life Insurance can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at New 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for New 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects New 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.
Manufacturing automation
– New China Life Insurance can use the latest technology developments to improve its manufacturing and designing process in Insurance (Life) 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.
Leveraging digital technologies
– New 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, New China Life Insurance can use these opportunities to build new business models that can help the communities that New China Life Insurance operates in. Secondly it can use opportunities from government spending in Insurance (Life) sector.
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. New 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for New China Life 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 New China Life Insurance to hire the very best people irrespective of their geographical location.
Threats New China Life Insurance External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of New China Life Insurance are -
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. New 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, New 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.
Easy access to finance
– Easy access to finance in Insurance (Life) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. New China Life Insurance can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for New 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.
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 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. New China Life Insurance needs to understand the core reasons impacting the Insurance (Life) industry. This will help it in building a better workplace.
Environmental challenges
– New 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. New China Life Insurance can take advantage of this fund but it will also bring new competitors in the Insurance (Life) industry.
High dependence on third party suppliers
– New 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.
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 New China Life Insurance business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, New 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 New China Life Insurance prominent markets.
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 New China Life Insurance.
Consumer confidence and its impact on New 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.
Shortening product life cycle
– it is one of the major threat that New 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.
Weighted SWOT Analysis of New 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 New 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 New 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 New 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 New 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 New China Life Insurance needs to make to build a sustainable competitive advantage.