Strategic Management Report: Prudential Plc's Business Strategies

This report provides a strategic management analysis of Prudential Plc, a financial services group operating internationally. It begins with an introduction to strategic management and its importance in the business context. The report then delves into the business environment of Prudential Plc using PESTLE and Porter's Five Forces models, analyzing political, economic, social, technological, environmental, and legal factors, as well as competitive forces within the industry. The report then examines Prudential's organizational strategy, including resources, capabilities, and differentiation strategies, and performs a SWOT analysis to identify strengths, weaknesses, opportunities, and threats. The analysis considers Prudential UK & Europe's approach to financial services for the age cohort, emphasizing its technology-friendly website and flexible resources. The report concludes with a critical appraisal and references, providing a comprehensive overview of Prudential Plc's strategic management practices.

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Strategic Management
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Table of Contents
Introduction......................................................................................................................................3
Business environment (pestle and portors 5 forces)........................................................................3
Organisation strategy analysis.........................................................................................................6
Strategic Resources and capabilities............................................................................................6
Organisation's structure, culture, management, system and HR strategy........................................9
Critical Appraisal ..........................................................................................................................10
Conclusion.....................................................................................................................................10
References......................................................................................................................................11
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Introduction
Strategy management is an art of managing resources of an organisation efficiently in to
achieve its objectives and goals in a planned manner (Bagley, 2015). For the purpose of
managing both external and internal business activities businesses requires to formulate effective
strategies. This can be done by conducting a detailed analysis of the business environment. For
this purpose prudential Plc has been taken to analyse the importance of strategic management.
Prudential Plc is a financial service group that operates and provide life assurance, and other
financial products and services internationally (Prudential, 2016). For this report, Prudential UK
& Europe has been selected to analyze its strategies (Bapat, Soni and Joshi, 2014). For the
strategy analysis, different concepts and models like SWOT analysis and value chain analysis
will be used. It will help to cover the key elements of the strategies used by Prudential UK &
Europe (Bagley, 2015).
Business environment (pestle and portors 5 forces)
Prudential Plc is a UK based company engaged in the business of retailing financial
services and thus capturing post and pre-retirement market providing products such as unit trusts,
insurance, pension plans, annuities, bonds, mutual funds and such other related financial
services. The macro environment analysis of the company is being done by using PESTLE
model for evaluation (Tabassum, 2014).
POLITICAL- Industry scenario of European Union is expected to be affected by the European
Commission's Solvency II. The capital requirements of the insurance industry are going to
change, according to which the insurance companies would be required to set apart the capital as
per the risks they are exposed to. Hence the regulatory requirements are expected to change with
the effect due to the political changes (Klumpes, Komarev and Eleftheriou, 2016).
ECONOMIC- The financial crises and economic crunch of the industry in the year 2008, have
increased the scrutiny requirements on the insurance and the financial service providers (Datta
and et.al, 2015). Due to these financial crises the confidence of the investors have resulted in
reduced confidence of the investors. This has resulted in the fall in the prices of the securities of
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the insurance companies. The recent disturbances in the industrial market has led to the increase
in the market volatility and fallen interest rates. There is a decline in the overall performance of
the insurance companies globally (Shah and Sengupta ,2016). As a result of which Prudential has
set its annual bonus rates at 3 % for most of the profit bonds and personal pension policies and
2% for annuity customers, thereby suggesting its strong capital position to help it overcome the
difficult economic times.
SOCIAL- Population of both the countries that is UK & European are over the age of 45 years.
This suggests that the current and the upcoming decade is going to face an ageing population.
This suggests the increase in the market for the pension plans and other such products in these
markets. Hence it is important for Prudential Plc to support the ageing population by providing
specific products that meets the changing requirements of the customers. Also presently the
market is reluctant to opt for these financial services due to the poor performance of the overall
UK market along with the complexity and mis selling of the financial products in UK.
Researches suggests that the estimated savings gap of £27 billion per year in UK as the whole.
Moreover there are 10 million people in UK which falls in the group of the people which is not
saving enough as per the income standard and 3 million people who are not saving at all despite
the ability to save.
TECHNOLOGICAL- The increased importance of internet and digital marketing has
revolutionized the marketing aspect of the products and services sold by the insurance
companies. At present internet accounts for approximately 8 % of the global advertising which is
further growing rapidly (Klumpes, Komarev and Eleftheriou, 2016).. As per recent studies
suggests that the financial services industry is lagging behind in the area of digital marketing in
contrast to other industries. In reference to the present challenges to which the Prudential Plc and
other insurance companies are exposed, it is crucial for the them to use digital marketing concept
and grab a larger market share. Also the technologies should be adopted by the companies which
enhances the transparency in the system which will enable in retaining the customers and also
attract new ones. Therefore the increased use of the digital marketing and technology in the
business will help Prudential Plc in developing better relations with its customers (Shah and
Sengupta ,2016).
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ENVIRONMENTAL- Various international agreements like Johannesburg Summit 2002, Kyoto
Protocol 1997, etc. have led to the nations and companies to take actions for the purpose of
ensuring sustainable development. Thus there are increased efforts being made by the companies
globally in this direction to ensure environmental protection. Prudential is one of the 38
companies from the financial services sector which endorses the Climate wise Principles in the
year 2007. These principles are being developed by the leading global brokers, insurers, and
asset managers promoting an action and thereby creating awareness on climate change. Thus the
company encourages the other organizations to incorporate the concept of sustainable
development into their business activities (Bapat, Soni and Joshi, 2014).
LEGAL- The UK government has introduced a new tax rate of 50% for anyone making earnings
above £100 thousand (after certain adjustments). The increased in tax rate will negatively impact
the UK market as the buyers might make profits by investing offshore securities and funds.
Portor's Five Forces Analysis
1. Threats of substitutes- The few substitutes of the financial products and services are
investment in jewellery, gold, antiques, etc. Also the investments being made in the
property is also seen as the substitute to the investments in the financial products (Bapat,
Soni and Joshi, 2014).
2. Competition- The financial service industry is facing immense competition in the present
scenario despite the fact that there are only few available substitutes. Most of the
companies in this industry are operating at large scales covering wide geographical area
combined with the strong buying powers which fosters strong rivalry between the players
(Datta and et.al, 2015). This competition is further fueled by liberalisation of these
financial markets and the reduction in the barriers between different types of institutions.
Companies which are operating already in the industry also try to maintain the
competitive edge by diversification into the new ventures and thereby occupying a larger
market share (Klumpes, Komarev, and Eleftheriou, 2016).
3. Threats of new entrants- The threat of new entrants for Prudential Plc is quite low. This
is due to the strong market barriers and brand identity created by Prudential Plc.
Moreover, the strategies of product differentiation and customer loyalty of the company
further reduces this threat. Also high level of expertise and knowledge is required to enter
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into the business of financial products and services which creates an effective market
entrant barrier.
4. Bargaining powers of buyers- The bargaining power of buyers is moderate due to the fact
that the individual customers are many of the company and the impact of losing a single
customer is very low or insignificant. However the buying power is higher for the
corporate clients as they procure the products and services in bulk quantity. As the result
there is high premium earnings by these clients which if lost has a significant impact on
the on the revenues of the company (Klumpes, Komarev and Eleftheriou, 2016).
However, there are many other options available with the industry but the cost of
switching cost over the investments is high which reduces the impact on the bargaining
powers of the buyers.
5. Bargaining power of suppliers- The overall bargaining power of the suppliers is
considered to be strong for the Prudential Plc. This due to the fact the companies
operating in this industry requires a reliable and secure ICT infrastructure in order to
conduct vital client facing and back office functions like online banking and equity
trading (Shah and Sengupta ,2016). These specific types of services and security places
the suppliers in a special position to enable them with a strong bargaining position. The
key suppliers which provides such complex and specialized services are IBM, Microsoft
etc.
Organisation strategy analysis
Prudential UK & Europe offers relentless financial services to the age cohort. Under
these services, investment, pensions, funds, insurance (car and travel) etc are offered to the
customers (Prudential, 2016).
Strategic Resources and capabilities
Prudential UK & Europe has strategic resources and capabilities that support the
execution of its strategies aimed to ensure the fulfillment of life and pension needs of cohort
group (Prudential, 2016). These are as below:
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Tech friendly website: The official website of the organization is technologically proven and
advanced. It supports the customers to even arrange face to face meetings with the personnel to
decide what they want to do with their money. There is also “calculate your income” option
given on the website that helps by using information like value of pension pot and income. There
are also income tax calculator and tax relief calculator. These tools are useful for the people to
understand about their income tax.
Flexible Resources: The firm also provides flexible services with the help of its capabilities.
Like, by utilizing the “MyPru” service, the people can get information about their product
details, personal data and mail safe online messages (Prudential, 2016).
Differentiation
Prudential UK & Europe also follows differentiation that helps it to address the life and pension
requirements of the cohort group (Bapat, Soni and Joshi, 2014). The technological features of the
company services and products are also based on innovation (Messenger and Atkins, 2012). It
makes the services user friendly, flexibility and accessible for the target group to which it serves
in UK and Europe (Partridge& Hunt, 2010).The company offers assistance to the old age people
in terms of their retirement planning, retirement job etc. it helps the customers to use their money
in right directions and live with proud and respect even after the retirement. This factor further
help in enhancing the brand image of the company and thus providing a competitive edge.
SWOT Analysis
SWOT analysis of Prudential UK & Europe is being conducted to make its internal analysis and
thereby enabling its strategy formulation. SWOT analysis has been conducted as follows-
Strengths:
Brand Image: The Company has a strong brand image due to its wide assortment of financial
services and products. The strong market position in Asia, US and Europe have provided an
competitive edge to the company. Prudential is successful is retaining the existing customers and
also is able to create a market for the new customers (Tabassum, 2014). There is continuous
improvement in the brand image of the company in the eyes of all the stakeholders developed by
its effective marketing strategies.
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Technical features: the technical features of the organization are also advanced, as they are user
friendly and accessible for the customers especially the cohort group. Strong technical features
used by the company in its website and other media has helped it in developing a strong brand
image (Klumpes, Komarev, and Eleftheriou, 2016).
Weaknesses:
Low Level of Advertising: The investment into advertising strategies is low as compared to
other organizations. Due to the increase in the competition in the market it becomes very
essential for the company to assure an adequate level of advertising (Bapat, Soni and Joshi,
2014).
High Operating Costs- In the recent times the company is facing problem of incurring high
operating costs and thereby reducing profit margins for the company. This has led to the reduced
profitability of the company which is an issue of concern for the management.
Lack of Consumer recognition: There is also lack of consumer recognition due to different
corporate names of the life insurance company (Klumpes, Komarev and Eleftheriou, 2016).
Opportunities:
Global expansion: The organization could expand its business globally into Asian countries,
where the need of pension programs is higher due to higher population. Expansion particularly in
the Asian market will lead to the increase in the customer base for the company. Also it would
positively impact the profitability of the company. The increase in the economic activity of the
company will increase the probability of the company in becoming a world class provider of
financial products and services (Shah and Sengupta ,2016).
Innovative services: The organization could add more products and services to its current brand
assortment to cater the needs of cohort age group more effectively (Dawson&Andriopoulos,
2014).
Threats:
Competition & increasing frauds: The rising competition in the life insurance industry is
posing threat to current market position of Prudential UK & Europe. The increase in the number
of frauds in the field of insurance and other financial products have resulted in reduction of
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confidence of the customers. With the increase in the scale of operations of insurance and
financial companies have led to the increase in the number of frauds in these industry as well.
Value Chain Analysis
Activity Analysis: As per the value chain analysis, the company has a strong and competent
staff. It hires efficient people that can fulfill the life and pension needs of the clients effectively.
The marketing and operational practices of the organization are also effective due to which it is
the leading brand worldwide (Value Chain Analysis, 2016).
Value Analysis: The Company provides up-to-date solutions to the clients by guiding them to
invest their money in a right direction. Quick and customized response is provided to the clients
about their queries and product related questions. It helps the customers to get value for their
invested money and valuable time (Messenger and Atkins, 2012). Each query by the customers is
answered by the knowledgeable personnel. Efficient responses are provided to the clients about
their queries. For example, by using MyPru, customers can get idea about their personnel details,
value of policy, policy details, payment information at any time etc. So, it is convenient and
added value for the customers. By using the official website of the company, the customers can
get idea about retirement planning, ideal retirement job etc (Thompson& Martin, 2010).
Evaluation & Planning: The organization effectively evaluates changes and plan for action by
conducting market research, For example, expansion related plans are implemented as per the
market trend and demand.
Organisation's structure, culture, management, system and HR strategy
Prudential Plc is a holding company operating in the markets of Asia, UK and US with its
headquarters in London. It has provided employment to 23507 people by the end of 2015. It has
a customer base of 24 millions all over the world (Klumpes, Komarev and Eleftheriou, 2016).
The company has integrated its operations all over the world and thereby leading in effective
customer focus and improved services. All the support operations such as risk and compliance,
human resources marketing, IT, finance have been centralised. The top level executives are being
paid handsome remuneration of £ 31 million as has been stated in the annual report of the
company. Individual responsibilities are being assigned to employees regarding their
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accountability about taking risk averse decisions (Bapat, Soni and Joshi, 2014). The company
treats the customers and employees with respect and also provides them transparency in the
services and remuneration policy (Dragu, 2013). For the purpose of development and updation of
employees frequent training sessions are being conducted at regular intervals. Open forums are
being held by Prudential Plc where the employees concerns are being addressed by the senior
management. Also the company provides an informal opportunities for the purpose of meeting
with the managers and discuss regarding a specific issues. The company follows an effective
policies for supporting various charitable issues, and making every possible efforts for assuring
the employee well being. Efficient monitoring is being conducted for the purpose of monitoring
any drawbacks in the policies (Bagley, 2015). The company also encourages the talent
development activities among their employees and reviews the wide range of the developmental
activities that are being managed by the units. The HR departments of the company focuses on
the programmes and activities that are being planned for the senior leaders of the management
(Datta and et.al, 2015). For instance in the year 2015 more than 180 senior officials of the
company participated in these programmes and thus creating a huge benchmark for the industry.
Critical Appraisal
The company uses tech friendly website which is ensuring the user friendly services. On
the contrast it is also open to the potential threats of being attacked by the hackers resulting in the
data loss of the company (Adala, 2014). The company hires an efficient management for the
purpose and pays them handsome remuneration. On the contrast CEO has resigned due some
internal clashes in the management (Bapat, Soni and Joshi, 2014). The company carries
centralized operations which has led to an increase in the efficiency of its services but it has also
neglected the fact of placing individual attention required to the particular region with the
specific customer requirements. This has affected the business of the company currently. Also
the company is making huge operational losses and thereby the profitability of the company is
being hampered (Tabassum, 2014).
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Conclusion
It can be inferred that strategy used by the Prudential UK & Europe is effective, as it helps the
company to fulfill the pension and life insurance related needs effectively. The company enjoys a
strong market position and a brand image and hence creates a competitive edge. The strategic
resource and capabilities of the organization are also effective and competent that supports the
business aims and mission. The company should add innovative services and products to its
current list to gain competitive advantage in the market. The company plays an active role in the
developing the talents of its employees and other officials. Thus it can be concluded that the
company is successful in maintaining an adequate work culture and an effective management. It
can also be concluded that the company has employed effective strategies and thereby enjoying a
brand image.
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