Competitive Environment and Business Level Strategy for SGIC Insurance - Example

Competitive Environment and Business Level Strategy for SGIC Insurance University Student Id Course Date Introduction This paper is exploring the business level strategy and competitive environment for SGIC Insurance. SGIC is an insurance company of the Australian Group which trades in the southern part of Australia. Formerly, the SGIC provided third party insurance which was compulsory for all the motor vehicles. The SGIC Insurance was initially opened for its business operations in the year 1972, whereby the insurance company had 24 staff members (Huat, 2016). However, when the bill for establishing the insurance company was presented before the South Australian Parliament, the role of the SGIC was declared as assisting the maintenance of the premiums at reasonable levels and also providing funds for the investment in the semi-governmental loans. 1) Business Unit Research a. Business Unit Identification. The strategic business unit is usually a profit center that mainly focuses on the offering of a product and also on market segment. Also, the strategic business unit always has a marketing plan, marketing campaign and also a competition analysis, although they may be found in the business entities which are larger. Also, the strategic business unit may still be found in a big corporation or even as a business by itself. Also, corporations may comprise of multiple strategic business units, both of them responsible for their profitability (Hitt, Ireland and Hoskisson, 2012). SGIC Insurance experienced wonderful growth in the industry where the initial premium income for the insurance company was obtained from insuring a fleet of cars for the government of South Australia which was worth 155,026 Australian dollars. Also, in the year 1981, the SGIC Insurance moved further to new premises such as the Adelaide and the Victoria Square. Besides, in the year 1971, the insurance company grew and eventually became the largest insurance company in South Australia, whereby in the year 1992 it started insuring health, life, motor vehicles and also commercial in various parts of the state through its 19 branches. Also, by the end of the year 1992, the SGIC Insurance Company provided job opportunities for more than one thousand South Australians. However, in the year 1998, the state Government made a decision to sell out the SGIC Insurance to the NRMA who then later changed to the Insurance Australia Group (Kumar and Logie, 2013). The main aim of this Insurance Group was to provide assistance to the South Australia when hit by various natural disasters such as the hailstorms, floods, cyclones and also the Victorian bushfires among the others. b. Identification of Product and Service Lines. A product line is usually a group comprising of related products of a similar brand which is sold out by the same firm. However, sometimes companies may sell double product lines under different brands. Also, the majority of the companies in most cases expand their offerings to the already product lines which exist, since customers have the tendency of purchasing products from the brands which they are familiar to (Keneley and McKenzie, 2008). On the other hand, a service line is usually a group of services that are related to a single specific division of the business. SGIC Insurance has diverse products that it offers in the insurance market, which can be categorized into three components which are the health insurance, general insurance, and the life insurance. Moreover, these insurance markets are fairly different whereby the majority of the larger insurers usually focus on a single type, even though in the current times the insurance companies have widened their scope thus getting involved in the general financial services. However, the insurance markets are always faced with stiff competition from the banks and other foreign financial institutions (Noussia, 2007). Also, as a result of the insurance company providing services such as the funeral insurance, income protection and also the disability insurance, the insurance markets is filling in a large gap. 2) External Environment Analysis Operational environment entails the external factors that affect the operations of an organization. The management of an organization has no control over the operational environment. Political factors These are the factors which involve the government intervention towards the economy. Particularly, some of the political factors include; trade tariffs, environmental law, trade restrictions, tax policy and also the labor law among the other factor (Noussia, 2007). Also, the political factors may still comprise of the services that the Insurance Australia Group intends to provide. Moreover, the government has a great effect on the infrastructure, education and also on the general activities of the insurance company. Economic factors Some of the economic factors are; the inflation rate, exchange rates, economic growth and also the interest rate among the other factors. Moreover, the economic factors have a great impact on the operations of businesses and also decision making of the insurance company (Gepp, et al., 2012). For instance, the interest rates have an impact on the cost of capital of the Insurance Australia Group hence affecting its growth and expansion. Social factors Some of the social factors are; the age distribution, population growth rate, career attitudes, cultural aspects and also the health consciousness among the others. However, these social factors have great impacts on the services provided by the Insurance Australia Group. Therefore, the insurance company can change its management strategies to adapt to the prevailing social trends (Kumar and Logie, 2013). Technological factors Some of the technological aspects include; the technological change rate, technology incentives and also automation among the other factors. However, these technological factors would affect the productivity level of the Insurance Australia Group and also its outsourcing decisions (Huat, 2016). Also, any technological shift would result in negative effect on the cost and quality of the insurance services. Legal factors Some of the legal factors are; the safety law, health law, employment law, discrimination law, antitrust law and also consumer law among other factors (Gepp, et al., 2012). These legal factors have a great impact on the operations of the Insurance Australia Group as well as the demand for its services. Environmental factors The environmental factors include; the climate change, weather and also environmental changes which affect the insurance services provided by the Insurance Australia Group. The climate changes have been affecting the demand in the insurance industry (Jinks, 2007). 3) Source of Sustainable Competitive Advantage The Insurance Australia Group has its origin from the company of the general insurance group which operated in Thailand, New Zealand and also Australia. Moreover, the businesses of this insurance company experience 10 billion Australian dollars of the gross premiums in every year. However, the insurance is usually sold under various leading brands such as the NRMA, SGIC, CGU and also the SGIO Insurance of Australia and the AAA Assurance brand that is found in Vietnam. Besides, the Insurance Australia Group has still got interests in the general insurance joint ventures found in China, India and Malaysia (Insurance, Insured and Hambleton, 2011). Moreover, the strategy which is employed by the insurance company is to improve its value through management of a portfolio which is of high performance and also focused on the diverse operations of the customers. Also, the Insurance Australia Group still provides general insurance in a manner which delivers high performance to the employees, customers and also shareholders. Business landscape of SGIC Insurance The insurance company has established itself in the industry where it has established relationship with the people. As a result, it has increased its coverage in the industry leading to its success (Walstad, et al, 2017). SGIC Insurance meets diverse needs of the customers in the market with aim of extending its landscape. The strategic priorities of the Insurance Australia Group include; boosting the profitable growth of Australia, maintaining the top position of the New Zealand, recognizing the capability of the Asian platform and also leveraging the cultural strengths of the insurance company. In the year 2013, the Insurance Australia Group made an announcement that it had made an agreement to buy the insurance businesses of Wesfarmers Company for 1.845 billion dollars (Llewellyn, 2015). This transaction is expected to be completed by the end of the year 2014. Importantly, the purchase would greatly strengthen the position of the insurance company in its traditional markets. Social trends The ongoing and also the current social trends will result in interference on the business patterns of the insurance industry, thus leading to rising in the consumer power. Also, due to the high expectations of the customers, there is an increase in demand for the simplicity, speed and also transparency in the business transactions such as the insurance agents and the insurance advisers. Moreover, the rise in mobile and also online technology is further facilitating change in the expectations of the customer (Hitt, Ireland and Hoskisson, 2012). According to the survey which was conducted about consumers, revealed that more than 50% of the customers aged between 18years and 25 years in most of the cases prefer working directly with the insurance carriers. Therefore, this direct interaction is expected to proceed on in the personal lines and also in the individual life of the insurance sectors. Moreover, the online world is rapidly becoming much mobile since the usage of smartphones as well as the tablets has increased the demand for the localized information at any time and any place. Consequently, these changes will result in great effect on the insurance sector. However, this fundamental shift will make the insurers and also the insurance agents to re-examine the various roles which they play in the value chain of the insurance thus becoming more relevant to the consumers. Also, the expectations of the customers in both transparency and simplicity will boost the delivery of the insurance services (Noussia, 2007). Therefore, the leading insurers will have the chance to target customers and also customize the attributes of the insurance services to meet particular needs of the customers. Also, the aspect of mobility, as well as the speed of services which is demanded by the customers, forces the insurance company to invest in the interactive technologies across the digital platforms. Technological advancements Due to the improvement in both software and the hardware, the advancement has resulted in the transformation of big data into actionable insight. Moreover, since the insurance industry accrues a lot of productive gains from the current wave of the automation, hence the new technologies are greatly improving the experience of customers. Some of the significant current technological improvements in the insurance industry include; the introduction of tablets and smartphones, the explosion of the computing storage and also the growth of active devices which create internet connectivity (Jinks, 2007). Therefore, the insurers who can make use of the technology for better pricing, loss control and also underwriting are more likely to have a competitive advantage over the others. Moreover, the global investment on the analytical techniques is increasing so as to improve the capabilities of processing unstructured data as well as the multimedia data. Besides, the advancement in the artificial intelligence techniques which include machine learning and also the intelligent decision-making which create room for the insurers to improve their transaction processes through the use of the technology (Insurance, Insured and Hambleton, 2011). By the end of the year 2020, the usage of the unstructured data which include the social media and the audio devices will be expected to complement the structured data, to allow the insurers make strategic decisions. Also, according to the reactive business model, the majority of the commercial insurers are making use of the connected devices in the development of management for both risks and loss and also improving their productivity. Increase in catastrophic events The frequency of the occurrence of the catastrophic events either natural or man-made has been increasing rapidly for the past 20 years. For instance, between the year 1990 and the year 2009, both tropical storms and the hurricanes which occurred during this period accounted 45.2% of the total catastrophic loss. However, the intensity of these tropical storms usually increases with changes in the global climate. Moreover, pertaining the catastrophic events the insurance companies usually put into consideration the degradation of the man-made activities on the environment. Besides, the increase in consumption of the energy and also atmospheric pollution results into a direct effect on the exposure of a certain risk (Gepp, et al., 2012). As a result of the increased usage of the fossil fuel, the issue of pollution has remained to be a great health issue which usually threatens the well-being of the people in both developing nations and also in developed countries. Therefore, both health and life insurance companies are required to monitor closely the prevailing trends of the atmospheric pollution so as to assess accurately the risks in various regions. Furthermore, the environmental measures will, therefore, assist in the mitigation in the mitigation of the most of the serious consequences. For instance, the renewable sources of energy are being projected to produce electricity instead of making use of the fuel fossils. Therefore, due to rise in consumer investment on the sustainable solutions to the environmental issues, the insurance companies will establish new models for pricing various risks. However, the management of these kinds of risks usually requires the insurance company to be much careful in their risk modeling and also very innovative in the process of structuring the deals for risk transfer (Jones, 2010). Consequently, those insurance companies which fail to get updated about the environmental changes taking place may be forced to exit the insurance markets in the coverage of various areas. Favorable economic factors As a result of the rise of the emerging markets which are more attractive, the regulatory guidelines which are very strict will force the insurers to re-evaluate the strategic goals which they have already established (Kumar and Logie, 2013). Moreover, there are usually various factors which facilitate the ongoing shift from the world which is dominated by the already developed markets to the world whereby a lot of growth is occurring in the emerging markets. 4) Strategic Direction In the future, SGIC Insurance should invest in the social network as a marketing strategy. The drastic adoption, as well as the fast evolution of the social networks, will proceed on empowering transparency in the communication process of the insurance company and the customers. However, the major aim of the social networks is actually to improve the purchasing power of the communities. Moreover, the social networking is taking place at a very faster rate hence it will assist in shifting the balance of power to the consumers. Also, through the social network, people can exchange personal information and also establish networks with friends and family members (Hitt, Ireland and Hoskisson, 2012). Also, the social networks in most cases harness a lot of purchasing power thus making the insurance groups accrue benefits from the online intermediaries. Therefore, the social networks tend to be the pooling mechanisms of the self-insurance, hence changing the role played by the insurers from being the product manufacturers to the providers of the administrative service. Conclusion SGIC Insurance is mostly dominated by the intermediaries who play the role of understanding about the consumer needs, and after that matching the insurance products with the solutions to those needs. However, various aspects such as the internet, social networking and also mobility have completely changed this, and therefore have established a new generation of the consumers who always require convenient, simple and also speed insurance services through their interactions. Moreover, the commercial insurers are always more concerned with the management of various risks as well as controlling losses, even though this trend will expand into several lines of insurance. References Gepp, A., Wilson, J.H., Kumar, K. and Bhattacharya, S., 2012. A comparative analysis of decision trees vis-à-vis other computational data mining techniques in automotive insurance fraud detection. Journal of data science, 10(3), pp.537-561. 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