China Pacific Insurance (2601) SWOT Analysis / TOWS Matrix / MBA Resources
Insurance (Life)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for China Pacific Insurance (Hong Kong)
Based on various researches at Oak Spring University , China Pacific Insurance is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, wage bills are increasing,
geopolitical disruptions, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of China Pacific Insurance
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that China Pacific Insurance can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the China Pacific Insurance, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which China Pacific 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 Pacific Insurance can be done for the following purposes –
1. Strategic planning of China Pacific Insurance
2. Improving business portfolio management of China Pacific 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 Pacific Insurance
Strengths of China Pacific Insurance | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of China Pacific Insurance are -
Operational resilience
– The operational resilience strategy of China Pacific 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.
Training and development
– China Pacific Insurance has one of the best training and development program in Financial industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High switching costs
– The high switching costs that China Pacific 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.
Low bargaining power of suppliers
– Suppliers of China Pacific Insurance in the Financial sector have low bargaining power. China Pacific Insurance has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps China Pacific Insurance to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management in the Insurance (Life) industry
– China Pacific 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.
Successful track record of launching new products
– China Pacific Insurance has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. China Pacific 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.
Sustainable margins compare to other players in Insurance (Life) industry
– China Pacific Insurance has clearly differentiated products in the market place. This has enabled China Pacific Insurance to fetch slight price premium compare to the competitors in the Insurance (Life) industry. The sustainable margins have also helped China Pacific Insurance to invest into research and development (R&D) and innovation.
Ability to lead change in Insurance (Life)
– China Pacific Insurance 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 China Pacific Insurance in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– China Pacific 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 Pacific Insurance have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Insurance (Life) industry
- digital transformation varies from industry to industry. For China Pacific Insurance digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. China Pacific 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.
Innovation driven organization
– China Pacific Insurance is one of the most innovative firm in Insurance (Life) sector.
High brand equity
– China Pacific Insurance has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled China Pacific Insurance to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of China Pacific Insurance | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of China Pacific Insurance are -
Compensation and incentives
– The revenue per employee of China Pacific 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.
Slow decision making process
– As mentioned earlier in the report, China Pacific Insurance has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Insurance (Life) industry over the last five years. China Pacific 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 China Pacific 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 Pacific Insurance should strive to include more intangible value offerings along with its core products and services.
High operating costs
– Compare to the competitors, China Pacific 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 China Pacific Insurance lucrative customers.
Low market penetration in new markets
– Outside its home market of Hong Kong, China Pacific Insurance needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of China Pacific Insurance products
– To increase the profitability and margins on the products, China Pacific Insurance needs to provide more differentiated products than what it is currently offering in the marketplace.
Aligning sales with marketing
– From the outside it seems that China Pacific Insurance needs to have more collaboration between its sales team and marketing team. Sales professionals in the Insurance (Life) industry have deep experience in developing customer relationships. Marketing department at China Pacific Insurance can leverage the sales team experience to cultivate customer relationships as China Pacific Insurance is planning to shift buying processes online.
Need for greater diversity
– China Pacific 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.
Workers concerns about automation
– As automation is fast increasing in the Insurance (Life) industry, China Pacific 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.
Capital Spending Reduction
– Even during the low interest decade, China Pacific 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.
No frontier risks strategy
– From the 10K / annual statement of China Pacific 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.
China Pacific Insurance Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of China Pacific Insurance are -
Learning at scale
– Online learning technologies has now opened space for China Pacific Insurance to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Buying journey improvements
– China Pacific 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.
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 China Pacific 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects China Pacific Insurance can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Insurance (Life) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. China Pacific Insurance can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. China Pacific Insurance can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Better consumer reach
– The expansion of the 5G network will help China Pacific Insurance to increase its market reach. China Pacific 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.
Manufacturing automation
– China Pacific 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.
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 Pacific Insurance in the Insurance (Life) industry. Now China Pacific Insurance can target international markets with far fewer capital restrictions requirements than the existing system.
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. China Pacific Insurance can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for China Pacific 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.
Leveraging digital technologies
– China Pacific 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, China Pacific 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.
Building a culture of innovation
– managers at China Pacific 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.
Threats China Pacific Insurance External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of China Pacific Insurance are -
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. China Pacific Insurance needs to understand the core reasons impacting the Insurance (Life) industry. This will help it in building a better workplace.
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 Pacific Insurance.
Increasing wage structure of China Pacific Insurance
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of China Pacific Insurance.
Technology acceleration in Forth Industrial Revolution
– China Pacific 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 Pacific 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.
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 Pacific Insurance in the Insurance (Life) sector and impact the bottomline 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 China Pacific Insurance business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– China Pacific 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.
High dependence on third party suppliers
– China Pacific 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Insurance (Life) industry are lowering. It can presents China Pacific 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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for China Pacific 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.
Environmental challenges
– China Pacific 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. China Pacific Insurance can take advantage of this fund but it will also bring new competitors in the Insurance (Life) industry.
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. China Pacific Insurance can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of China Pacific Insurance Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at China Pacific 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 Pacific 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 Pacific 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 Pacific 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 Pacific Insurance needs to make to build a sustainable competitive advantage.