The Strategic Unite Competitive Advantages of the General Insurance Industry


Added on  2019-09-24

18 Pages4618 Words252 Views
Executive SummaryThis report will analyse and explain the competitive environment of the General Insurance Industryand the strategic unite CGU’s competitive advantages. It covers providing analysis to the generalenvironment, Porter’s 5 forces analysis to measure the attractiveness of the industry, 7s MckinseyFramework and Value Chain analysis to understand CGU’s internal environment and corecompetencies. In addition, it includes describing the corporation, CGU’s product lines, and revenuecentres. These analyses will contribute in proposing recommendations for IAG including CGU fortheir strategic direction. The findings revealed that the General Insurance Industry will grow around 4% from 2018 to 2023.Both IAG and CGU need to adapt new strategies in order to maintain their market share and profitmargin. The current competitive advantages can help in the short-term, however, the long-term andsustainable competitiveness requires considering new strategies such as blue ocean strategy, productlines development and technology exploitation. 1.For this assessment you are not required to come up with strategies for dealing with these issues – you areonly required to identify and draw conclusions about relevant opportunities and threats.2.Your focus should only be on the external environment and how it affects the company,NOTon matters internal to the company, such as the history of the company, or its internal strengths and weaknesses. Youmust place emphasis on future expectations for the firm, not the past0 | P a g e

1.Corporation at a Glance Selecting corporation as a case study for this report, starts from understanding the definition. It canbe described by law as a large company or set of firms that authorized to act as a single entity. It hasthe right to sign agreements, hire employees, own assets and borrow from financial institutes as aseparate entity (Perlmutter, 2017). In addition, the services portfolio is the collection of all theproducts or services offered by a company, which provides indication about the growth prospects,income contributions and profit drivers (Rosemann, 2010)1.1Insurance Australian Group (IAG). IAG Limited, which generates itsrevenue from general insurance,corporate services and investing, isan Australian public company(IBISWorld, 2017 p2). The Sydneybased company is the parentcompany of a general insurancegroup with controlled operations inAustralia, New Zealand, Thailand,Vietnam and Indonesia (IAG,2018). With a strategy to optimisethe core insurance business whilecreating future growth options, IAGprovides a wide range of generalinsurance products to protect the homes, lifestyles and businesses of their customers (IAG, 2018).For instance, it offers a comprehensive range of insurance products to cover the customers’ needs inMotorcycle, Property, Construction & Engineering, Health, Education, Saving & Investment,Retirement and many other insurance products. Moreover, the Group selling insurance under manyleading brands and businesses including NRMA Insurance, CGU, SGIO, SGIC, Swann Insuranceand WFI(Australia); NZI, State, AMI and Lumley Insurance (New Zealand); Safety and NZI(Thailand); AAA Assurance (Vietnam); and Asuransi Parolamas (Indonesia) (IBISWorld, 2017 p4).Over the past 10 years, The Group enlarged and developed its operations through acquisitionsparticularly in the Asia-Pacific region (IBISWorld, 2017 p14). Moreover, IAG focused on research1 | P a g e

to create wide range of customized insurance products allowed the company to satisfy thecustomers’ needs. For instance, IAG has commissioned a national research project to understandsome of the barriers Indigenous people face when it comes to insurance (IAG,2018). This allowedIAG to reap benefits in terms of revenue gains. According to Figure 1.1, IAG obtains most of theincome from the General Insurance industry in Australia and by distributes almost 50% of theirinsurance products directly to the consumers (IBISWorld, 2017 p12-13). As a result, it occupies therank number 16 out of the top 2000 companies in Australia (IBISWorld, 2017 p5). Figure 1.1: 2 | P a g e

2. Business Unit Research 2.1Strategic Business Unit - CGUStrategic Business Unit (SBU) can be defined as part of an organisation which performs asindependently (Bonnici and McGee, 2015). The dependency level of the strategic business unit isusually determined by the management. According to Galbraith (2014), SBUs acts separately interms of mission and internal performance, which lead to boosts the productivity and performanceof the firm.Operations of Insurance Australia Group (IAG) extends over several countries and multiplestrategic business units in Australia, New Zealand and Asia (IAG, 2018). The below graph (Figure2.1) shows the distribution of IAG’s business units. This report will analyse CGU as a primary andstrategic business unit in IAG Australia. Figure 2.1:CGU is a business unit that backed by IAG and operates as a commercial, personal and rural linesinsurer (CGU, 2018). With a purpose “to protect tomorrow so you can enjoy today”, CGU deliver aconsiderable range of insurance products through brokers, partners, and agents in every state acrossAustralia to cover the local customers’ needs. CGU aims to deliver sustained high performance fortheir customers, employees and partners. According to Abell’s Framework , CGU can be defined as following 3 | P a g e

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