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 – central banks are concerned over increasing inflation, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic , there is increasing trade war between United States & China,
digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, 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 -
Diverse revenue streams
– New China Life Insurance is present in almost all the verticals within the Insurance (Life) industry. This has provided New 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
– 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.
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.
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.
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.
Superior customer experience
– The customer experience strategy of New China Life Insurance in Insurance (Life) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– New China Life Insurance is one of the most innovative firm in Insurance (Life) sector.
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.
Organizational Resilience of New China Life Insurance
– The covid-19 pandemic has put organizational resilience at the centre of everthing New China Life 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 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.
Cross disciplinary teams
– Horizontal connected teams at the New China Life Insurance 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.
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.
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 -
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.
Need for greater diversity
– New China Life 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 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 New China Life Insurance supply chain. Even after few cautionary changes, New 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 New China Life Insurance vulnerable to further global disruptions in South East Asia.
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.
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.
Compensation and incentives
– The revenue per employee of New 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.
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.
Ability to respond to the competition
– As the decision making is very deliberative at New China Life Insurance, in the dynamic environment of Insurance (Life) industry it has struggled to respond to the nimble upstart competition. New China Life Insurance has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
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.
High bargaining power of channel partners in Insurance (Life) industry
– because of the regulatory requirements in China, New China Life 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 (Life) industry.
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 -
Redefining models of collaboration and team work
– As explained in the weaknesses section, New China Life Insurance is facing challenges because of the dominance of functional experts in the organization. New China Life Insurance can utilize new technology in the field of Insurance (Life) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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.
Better consumer reach
– The expansion of the 5G network will help New China Life Insurance to increase its market reach. New 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.
Learning at scale
– Online learning technologies has now opened space for New 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.
Creating value in data economy
– The success of analytics program of New China Life Insurance has opened avenues for new revenue streams for the organization in Insurance (Life) industry. This can help New China Life Insurance to build a more holistic ecosystem for New China Life Insurance products in the Insurance (Life) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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.
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.
Loyalty marketing
– New 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.
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.
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.
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 New China Life Insurance 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.
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.
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 -
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.
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.
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.
Regulatory challenges
– New 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.
Technology acceleration in Forth Industrial Revolution
– New 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, New 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.
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.
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 New China Life Insurance in the Insurance (Life) sector and impact the bottomline of the organization.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Insurance (Life) industry are lowering. It can presents New 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.
Increasing wage structure of New 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 New China Life Insurance.
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.
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.
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.
