Strategy management is an art of managing resources of an organisation efficiently in to achieve its objectives and goals in a planned manner. 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. For this report, Prudential UK & Europe has been selected to analyze its strategies. 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.
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.
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.
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. 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 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. 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.
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 Â£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.
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. 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.
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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.
The UK government has introduced a new tax rate of 50% for anyone making earnings above Â£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.
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. 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.
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 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. 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.
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.
These are as below:
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 âcalculate your incomeâ 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.
The firm also provides flexible services with the help of its capabilities. Like, by utilizing the âMyPruâ service, the people can get information about their product details, personal data and mail safe online messages.
Prudential UK & Europe also follows differentiation that helps it to address the life and pension requirements of the cohort group. The technological features of the company services and products are also based on innovation. It makes the services user friendly, flexibility and accessible for the target group to which it serves in UK and Europe.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 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
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. There is continuous improvement in the brand image of the company in the eyes of all the stakeholders developed by its effective marketing strategies.
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.
SWOT analysis has been conducted as follows 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.
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.
SWOT analysis has been conducted as follows Opportunities
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.
The organization could add more products and services to its current brand assortment to cater the needs of cohort age group more effectively.
SWOT analysis has been conducted as follows 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 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
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.
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. 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.
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. 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 Â£ 31 million as has been stated in the annual report of the company. Individual responsibilities are being assigned to employees regarding their accountability about taking risk averse decisions. The company treats the customers and employees with respect and also provides them transparency in the services and remuneration policy. 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. 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. 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.
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. 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. 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.
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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