Sabre Insurance: Market Segment and Porter's Generic Strategy

This article analyzes the market segment of Sabre Insurance and identifies the appropriate Porter's generic strategy for the segment. It also evaluates the effectiveness of the strategy.

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Brief Context:
The company which has been chosen for the purpose of the research is the Sabre
Insurance. The Sabre insurance can be stated to be one of the most popular insurance
companies as present in the United Kingdom and is specializing in the car insurance market.
The firm is also listed on the London Stock Exchange and is also a constituent of the FTSE
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250 Index (Sabre.co.uk ,2019). The company was found by two passionate people Angus
Ball and Keith Morris back in 1982. Later on in 1996 it was acquired by General Accident
and became a part of the CGU in 1998 and also of Aviva in 2000 before it was held subject
for a management buyout in the year 2002. As the attempts to revive the company were
largely unsuccessful, the company launched a public offering in the year December 2017.
The brand majorly deals in unpopular parts of the car insurance market with various brands
like GoGirl, Insure2Drive and Drive Smart. The company reported a net income of £49.6
million in the year 2018.
Introduction
In order to ensure long term success with the overall operations of the firm, any
business would be required to ensure that they are successfully able to meet with the needs
of the different customers and that they are able to ensure that, they are being able to meet
with the competition which exists in the market as well (Hitt & Duane Ireland, 2017). In line of
this, it can be understood that, the given section of the report will be analyzing the overall
market segment of the chosen insurance company named Sabre Insurance and then identify
the porters generic strategy which will be appropriate for this segment. A critical analysis on
the overall appropriateness of the strategy shall also be undertaken as it will assist in
understanding the effectiveness of the generic strategy being used and ensure
effectiveness.
Marker segment
One of the brands of the Sabre life insurance named GoGirl tends to make use of the
gender based segmentation and targets the girls and women drivers specifically. Hence, the
specific market segment which has been selected is the Female group of drivers. According
to Sabre.co.uk (2019), it often becomes very difficult to find cheap premiums of car
insurance for women. This is because since the ruling of the European Union, the insurance
companies are not being able to automatically reward the female drivers with cheaper
premium. Hence, in response of this, the GoGirl brand offers the customers with a great
valued car insurance offering. With various pricing schemes available, the brand ensures
that it is successfully able to cover the insurance of the car or the bag. Various incidents
often take place with female drivers whereby their handbags get stolen, or the personal
possession are stolen or sometimes damaged during an accident (Sabre.co.uk ,2019).
However, in line of this, GoGirl aims to ensure that it is successfully able to cover for the
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overall loss to the driver and provides a comprehensive coverage up to £200 if the bag gets
stolen and also provides legal coverage. Moreover, the firm also pays the different
customers with additional £100 so as to replace the child seat at the time of an accident.
Hence, to this particular segment, the firm provides a car insurance which is useful and
valuable for the women.
Analysis
Porter’s generic strategy
Every firm in the business environment requires a certain strategy based on which
the firm will be able attain success in the long run. There are various frameworks of these
different strategies which are available in the business environment and for the firm, it is
suggested that, the use of Porter`s generic strategy might be understood to be the best kind
of strategy which might be adopted by them. Hence, this section, will elaborate on the
Porters Generic strategy and its application to the insurance firm.
The relative position of a firm acts as a determiner of whether the firm has been
performing well or not. With respect to this, it needs to be understood that, the kind of
strategy which the firm aims to follow may determine the overall positioning of the firm and
the overall operational strategy which may be adopted by the organization. More than
attaining profitability in the long run, it can be considered to be even more important for a
firm to attain a sustained competitive advantage. According to Hitt and Duane Ireland
(2017), the two basic types of competitive advantage which a firm can attain is either low
cost advantage of the differentiation advantage. Once a firm plans accordingly and
undertakes steps to attain this advantage, it gets combined in their scope of activities and
had thereby led to basic three generic strategies which will go a long way in assisting the
firm to achieve their overall competitive positioning in the long run. These three basic
strategies which are present can be stated to be the cost leadership strategy, differentiation
strategy or the focus strategy. The third strategy which is the focus strategy tends to have
another two variants named the cost focus and the differentiation focus strategy.
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Figure 1: The Generic Grid
(Source: Meyer et al., 2017).
1. Cost Leadership
The cost leadership strategy can be understood to be a strategy whereby the firm
aims to become the low cost producer in the industry and aims to ensure that they are able
to incur the minimum cost (Meyer et al., 2017). However, the source of the cost advantage
may arise from varied sources depending on the type of industry, the firm is catering to.
Many companies often try to engage in the proprietary technology, economies of scale,
preferential access to a particular raw material or other related factors in order to ensure that
they are able to produce at the minimum cost and that, they can benefit from it by selling at a
considerable low cost (Frynas & Mellahi, 2015). Once they are able to do so, they will then
be able to ensure that, as compared to the different competitors of the firm, the firm is
offering the lowest price possible and thereby ensure that the firm is able to exploit the
different sources of cost advantage. Hence, even though the quality of the particular
company may not be up to the mark, if they attain a sustainable cost leadership then, they
will easily be able to command prices.
2. Differentiation
The second primary generic strategy which may be adopted by an organization may
be stated to be the differentiation strategy. In this type of a strategy, the firm is required to be
unique in its approach and tends to offer a dimension which will be highly valued by the
different buyers. Every buyer is generally attracted towards the organization due to a specific
offering or a particular quality which will ensure that, their needs are met with (Lasserre,
2017). Hence, in line of this, it becomes particularly easier for the firm to identify the offering
which needs to be made and position itself to meet these needs from the side of the
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consumers. The main point of differentiation which is present in this is that, the price of the
products in this kind of differentiation can be kept at a premium rate. This means that, the
firm can charge a unique pricing for this offering.
3. Focus
The third generic strategy which is generally followed by the different companies can
be stated to be the Focus strategy with respect to which the firm chooses to focus on a
narrow competitive scope within a competitive industry. The focuser either tends to select a
particular group of segments in the industry or tailor a strategy which will assist it in serving
all the different segments simultaneously.
.
The focus strategy has two variants.
In the first strategy, which is the cost focus , the firm aims to gain an overall cost
advantage in the target segment while in the second type of the strategy, which is the
differentiation strategy, the firm aims to provide differentiated services to its targeted
segment (Rothaermel, 2015). Both of these focuses aim to underlie and work upon the
differences between the target segment and the other segments as present in the industry
(Morden, 2016). However, it is important to understand that, the target segment which is
targeted by the customers must have a different need and this is the need which needs to be
targeted by the firm. On one hand, the cost focus exploits the differences in cost behavior in
certain segments whereas the differentiation focuses on the special needs of certain group
of customers.
Hence, after attaining the understanding of the overall strategies of generic which
exist, it can be understood that for the particular segment which the firm is serving, the
strategy which they have employed is the Focus Differentiation strategy. This can be stated
because, the firm has been targeted the female drivers who often fail to find the right kind of
car insurance for themselves (Ginter, Duncan & Swayne, 2018). Hence, through this
initiative, the firm aims to ensure that, they will be successfully able to meet with their needs.
In addition to this, through this initiative the firm also aims to ensure that along with an
insurance, the different clients are provided with considerably affordable prices with full value
coverage. In this manner, the firm is successfully able to ensure that the customer needs will
be met with successfully and that the company will be successful in adding more customers
to its portfolio.
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Extent to which competitive advantage is achieved
Hence, as understood from the previous section, the Sabre insurance company has
been following the Focus strategy whereby it aims to differentiate itself by making use of the
differentiator strategy and focuses on the different female drivers with their special driving
and coverage needs (Wheelen et al., 2017). From this, it can be rightfully understood that,
the firm has created a designated target market for itself which it aims to exploit and ensure
that its focus increases reasonably. However, in order to gain an understanding of whether
the firm has been performing well or not, it becomes important to ensure that, the
advantages of the strategy to the firm are rightfully understood. The following aspects have
been discovered:
1. The strategy of Sabre has assisted in building a strong relationship with the target
audience.
As the focus strategy of the firm has been largely successful, it has assisted in
ensuring that the firm is successfully able to lead the business and meet the needs of the
targeted audience successfully. In addition to this, as the firm offers a specific value
proposition to the different customers which further tends to attract them. Moreover, it assists
the organization in creating sound relationships with the different consumers.
2. The strategy assisted Sabre to bring in expertise into the offering
In order to ensure that any organization is able to bring about the best product in the
targeted market, it is important for the firm to ensure that they are successfully able to bring
about expertise in the brand. Once the firm is able to offer the expertise offering then in this
case, they will be able to limit the competition which exists within the scope of the firm (David
& David, 2016).
3. It limited the competition what the different brands
As mentioned earlier, once a firm is performing well in the focus strategy, then in
such a case, it will be able to ensure that, the firm performs well in the industry and that
there does not exist any other competition as present for the brand. This is because, the
niche is so unique that it becomes comparatively difficult for the other firms to engage in a
similar offering and hence, the competition automatically reduces.
4. It helped Sabre in building the overall image of the brand
Once the firm was able to come up with a unique offering for its different customers
and specifically targeted the different customers, then in such a case, the overall brand
image of the firm in the eyes of the customers increased considerably (Moutinho & Vargas-
Sanchez, 2018). Additionally, it can also be mentioned that it is due to this, improved image
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of the brand in the eyes of the customers, the firm will be able to ensure that it is able to gain
a larger consumer base and in a similar manner, be also able to ensure that they can comply
with the legal regulations as well which then will limit the overall barrier for the firm.
5. It improved the overall customer service
Lastly, another way in which the overall competitive strategy has been achieved can be
stated to be the improvement in the customer service. This means that, as the firm will just
focus on a particular market segment through a particular brand, the customer service with
the customers will increase considerably and in line of this, it can also be understood that, if
the customer service of the firm increases, the overall operations of the firm shall also
improve.
Hence, it can be largely observed that there have been various dimensions with
respect to which it can be rightfully understood that, the firm has been successfully able to
take advantage of the focus differentiation strategy ad in line of this, it has also been largely
successful in reaching out to the right target audience for itself and in a similar manner, the
firm has earned considerable revenue. Therefore, this strategy can be stated to be suitable
for the firm.
Recommendations
Although it can be understood, that the different strategies which have been adopted
by the firm have been largely successful and has brought about a sustained competitive
advantage for the long run of the firm, the following recommendations will be provided in
order to ensure that, the firm is able to make use of its capabilities and resources in the right
manner and also be able to gain better capabilities and success.
a) Increase the utilization rates: The current market segment is quite comprehensive
and the firm can undertake considerable strategies to ensure that it is successfully
able to improve the utilization rates of this given initiative (Noe et al., 2017). This
means that, it needs to engage itself in extensive promotion which will ensure that
the firm is successfully able to gather the different customers to use their insurance
and hence, the overall popularity of the product will increase considerably. The firm
can adopt various strategies like the digital marketing strategy or the social media
strategy which will ensure that it can make the different customers aware of the
offering and then engage them in a long term relationship with the company (Ansoff
et al., 2018)
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b) Find ways to promote future growth: Although the present strategy of the firm can be
stated to be quite comprehensive in nature, it has to be understood by the
organization that in order to make the firm grow and prosper, it is important to
promote future growth of the organization. Additionally, it also has to be understood
that, the firm must look out for different opportunities to increase its consumer
offerings which will ensure that the firm is able to experience good results. An
increase in the geographical location of the operations might be understood to be a
useful strategy in the long run.
Hence, if Sabre Insurance is successfully able to undertake the given initiatives, it will
be able to ensure considerable success in the long run.
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Referencing must be completed before submission
All sources must be referenced in the body of your answer as well as in your reference list. See
the 945 Specimen coursework assignment and answer for examples of how to reference
correctly in text and in your reference list.
References
Books
Ansoff, H. I., Kipley, D., Lewis, A. O., Helm-Stevens, R., & Ansoff, R. (2018). Implanting
strategic management. Springer.
David, F. R., & David, F. R. (2016). Strategic management: A competitive advantage approach,
concepts and cases. Pearson.
Frynas, J. G., & Mellahi, K. (2015). Global strategic management. Oxford University Press,
USA.
Ginter, P. M., Duncan, W. J., & Swayne, L. E. (2018). The strategic management of health care
organizations. John Wiley & Sons.
Lasserre, P. (2017). Global strategic management. Macmillan International Higher Education.
Morden, T. (2016). Principles of strategic management. Routledge.
Moutinho, L., & Vargas-Sanchez, A. (Eds.). (2018). Strategic Management in Tourism, CABI
Tourism Texts. Cabi.
Noe, R. A., Hollenbeck, J. R., Gerhart, B., & Wright, P. M. (2017). Human resource
management: Gaining a competitive advantage. New York, NY: McGraw-Hill Education.
Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.
Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2017). Strategic management
and business policy (p. 55). Boston: pearson.
Journals
Hitt, M., & Duane Ireland, R. (2017). The intersection of entrepreneurship and strategic
management research. The Blackwell handbook of entrepreneurship, 45-63.
Meyer, G. D., Neck, H. M., & Meeks, M. D. (2017). The entrepreneurship‐strategic
management interface. Strategic entrepreneurship: Creating a new mindset, 17-44.
Internet Websites
Sabre.co.uk (2019). Sabre Insurance UK. [online]. Available at: https://sabre.co.uk/ (Retrieved
on: 26 April. 2019).
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Glossary of key words
Analyse
Find the relevant facts and examine these in depth. Examine the relationship between
various facts and make conclusions or recommendations.
Construct
To build or make something; construct a table.
Describe
Give an account in words (someone or something) including all relevant characteristics,
qualities or events.
Devise
To plan or create a method, procedure or system.
Discuss
To consider something in detail; examining the different ideas and opinions about
something, for example to weigh up alternative views.
Explain
To make something clear and easy to understand with reasoning and/or justification.
Identify
Recognise and name.
Justify
Support an argument or conclusion. Prove or show grounds for a decision.
Outline
Give a general description briefly showing the essential features.
Recommend with reasons
Provide reasons in favour.
State
Express main points in brief, clear form.
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