China Life Insurance (2628) SWOT Analysis / TOWS Matrix / MBA Resources
Insurance (Life)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for China Life Insurance (Hong Kong)
Based on various researches at Oak Spring University , China Life Insurance is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic , increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies,
digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, 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 Hong Kong
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 -
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.
Cross disciplinary teams
– Horizontal connected teams at the 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.
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.
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.
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.
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.
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.
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.
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.
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.
Innovation driven organization
– China Life Insurance is one of the most innovative firm in Insurance (Life) sector.
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 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.
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.
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.
High bargaining power of channel partners in Insurance (Life) industry
– because of the regulatory requirements in Hong Kong, 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.
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.
Skills based hiring in Insurance (Life) industry
– The stress on hiring functional specialists at China Life Insurance has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
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.
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.
Low market penetration in new markets
– Outside its home market of Hong Kong, China Life Insurance needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
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 -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, China Life Insurance can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help China Life Insurance to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
