Prudential (2378) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Prudential (Hong Kong)

Based on various researches at Oak Spring University , Prudential is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, wage bills are increasing, geopolitical disruptions, increasing energy prices, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , etc

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Introduction to SWOT Analysis of Prudential

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Prudential can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Prudential, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Prudential 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Prudential can be done for the following purposes –
1. Strategic planning of Prudential
2. Improving business portfolio management of Prudential
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 Prudential

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Strengths of Prudential | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Prudential are -

Ability to lead change in Insurance (Life)

– Prudential is one of the leading players in the Insurance (Life) industry in Hong Kong. Over the years it has not only transformed the business landscape in the Insurance (Life) industry in Hong Kong but also across the existing markets. The ability to lead change has enabled Prudential in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Low bargaining power of suppliers

– Suppliers of Prudential in the Financial sector have low bargaining power. Prudential has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Prudential to manage not only supply disruptions but also source products at highly competitive prices.

High brand equity

– Prudential has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Prudential to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Highly skilled collaborators

– Prudential 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 Prudential have helped the firm to develop new products and bring them quickly to the marketplace.

Analytics focus

– Prudential 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 Hong Kong 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.

Organizational Resilience of Prudential

– The covid-19 pandemic has put organizational resilience at the centre of everthing Prudential does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Ability to recruit top talent

– Prudential is one of the leading players in the Insurance (Life) industry in Hong Kong. It is in a position to attract the best talent available in Hong Kong. The firm has a robust talent identification program that helps in identifying the brightest.

Effective Research and Development (R&D)

– Prudential has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Prudential 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.

Learning organization

- Prudential 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 Prudential is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Prudential emphasize – knowledge, initiative, and innovation.

High switching costs

– The high switching costs that Prudential 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.

Successful track record of launching new products

– Prudential has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Prudential 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.

Strong track record of project management in the Insurance (Life) industry

– Prudential is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

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Weaknesses of Prudential | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Prudential are -

Compensation and incentives

– The revenue per employee of Prudential 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.

No frontier risks strategy

– From the 10K / annual statement of Prudential, 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.

Low market penetration in new markets

– Outside its home market of Hong Kong, Prudential needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Capital Spending Reduction

– Even during the low interest decade, Prudential 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.

Workers concerns about automation

– As automation is fast increasing in the Insurance (Life) industry, Prudential 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.

Slow to strategic competitive environment developments

– As Prudential is one of the leading players in the Insurance (Life) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Insurance (Life) industry in last five years.

Slow decision making process

– As mentioned earlier in the report, Prudential 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. Prudential 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.

Lack of clear differentiation of Prudential products

– To increase the profitability and margins on the products, Prudential needs to provide more differentiated products than what it is currently offering in the marketplace.

Products dominated business model

– Even though Prudential 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. Prudential should strive to include more intangible value offerings along with its core products and services.

Employees’ less understanding of Prudential strategy

– From the outside it seems that the employees of Prudential 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.

Skills based hiring in Insurance (Life) industry

– The stress on hiring functional specialists at Prudential 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.

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Prudential Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Prudential are -

Loyalty marketing

– Prudential 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.

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. Prudential 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. Prudential 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.

Using analytics as competitive advantage

– Prudential 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 Prudential to build a competitive advantage using analytics. The analytics driven competitive advantage can help Prudential to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Developing new processes and practices

– Prudential 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.

Creating value in data economy

– The success of analytics program of Prudential has opened avenues for new revenue streams for the organization in Insurance (Life) industry. This can help Prudential to build a more holistic ecosystem for Prudential products in the Insurance (Life) industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Manufacturing automation

– Prudential 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.

Buying journey improvements

– Prudential 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Prudential 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.

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 Prudential 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.

Building a culture of innovation

– managers at Prudential 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Prudential 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. Prudential can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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 Prudential in the Insurance (Life) industry. Now Prudential can target international markets with far fewer capital restrictions requirements than the existing system.

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Threats Prudential External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Prudential are -

High dependence on third party suppliers

– Prudential 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.

Shortening product life cycle

– it is one of the major threat that Prudential is facing in Insurance (Life) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Technology disruption because of hacks, piracy etc

– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.

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 Prudential business can come under increasing regulations regarding data privacy, data security, etc.

Increasing wage structure of Prudential

– 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 Prudential.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Prudential 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.

Environmental challenges

– Prudential 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. Prudential can take advantage of this fund but it will also bring new competitors in the Insurance (Life) industry.

Technology acceleration in Forth Industrial Revolution

– Prudential has witnessed rapid integration of technology during Covid-19 in the Insurance (Life) industry. As one of the leading players in the industry, Prudential 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.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Prudential 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 Prudential prominent markets.

Stagnating economy with rate increase

– Prudential 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.

Consumer confidence and its impact on Prudential 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.

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 Prudential in the Insurance (Life) sector and impact the bottomline of the organization.

Regulatory challenges

– Prudential 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.

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Weighted SWOT Analysis of Prudential Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Prudential 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 Prudential 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 Prudential 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 Prudential 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 Prudential needs to make to build a sustainable competitive advantage.

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