Discuss about the Development and Growth of the Organization from its Beginnings to the Present through the Application of Corporate Strategies.
Insurance Australia Group has provided a sound working performance in the previous years (Pulaj et al 2015). A sound working performance was attained by Insurance Australia Group in a setting of challenging situations in its central markets in New Zealand and Australia. Profitability pressures were particularly ostensible in the markets, from a continuation of soft situations, though growing capability to raise rates was evident, mostly in Australia, as years progressed. Insurance Australia Group’s short tail individual lines franchises in New Zealand and Australia has sustained its sound growth and strong profitability over the years as a result of the successful response of emerging target market’s mode of conduct and its market needs through a variety of target market propositions appraised by new product and digital initiatives. Reasonable level raise has countered modest underlying inflation claims.
Insurance Australia Group offers to its target market products, services and social needs for the purposes of customer satisfaction (Robles and Zárraga 2015 p.830). Business undertakings also contribute to the destruction of the environment through the over-utilization of the limited resources existing. The main opportunities are that the corporation can reach out a large number of the distributed population through research and development. Businesses are mainly affected by external factors such as weather changes and political instability.
Mission, core competencies, and vision are business strategies which communicate to the general public on its purpose. The purpose of the company involves things such as; objectives and purpose of the company. Vision, mission, and competencies have gained the Insurance Australia Group a competitive advantage whereby, it is able to compete effectively with its competitors.
Investment planning, budgetary planning, and control are successful strategies which have been positioned by the Insurance Australia Group since the 1950s till now. Investment planning was a key aspect of the company since all the operations depended on the finances available for the company. Therefore, the company was very keen on how the finances of the company were utilized which was achieved through project appraisal, DCF, AND ROI. Budgetary planning and control involved financial control through capital and operational budgeting which ensured the effectiveness of the corporation.
The current strategies of Insurance Australia Group include; agility, customer, and simplification. Agility involves the arrangement of purpose, leadership and management framework and the company’s future workforce. Target market’s strategy involves data, customer experience, innovation and analysis regarding the customers’ needs which are emerging day to day. The strategies of simplification involve operational partnering, supply chain improvement, and transformation of technology which keeps on changing as a result of the emergence of more vibrant communities globally.
Strategies Deployed by the Company
Growth strategies includes fuelling and leading. The aim of leading strategy is to offer inspiring customers experiences via the company’s people, smart ideas, innovative products and technology. Fuelling strategy on the other hand, is adjustment of changes within the company regarding operations for the purposes of simplification of systems and processes and also resource optimization to become more reliable so that the company may capitalize in leading. Fuelling and leading strategies allows a company to measure the extent on target market experience through segmentation and better understanding. Fuelling and leading acts as a driver on the expected business development in relation to its market which is around 3-5%.
Porter’s generic strategies explains how a firm can gain a competitive advantage throughout its selected markets. According to Porter, generic strategies are; differentiation, leadership and focus (Salavou 2015 p.85). With the application of these generic strategies, a company will be able to manage the Porter’s five forces better than its competitors. The three generic strategies may be pursued either through lower costs than those of the competitors or through the company differentiation along dimensions which are valued by the target markets for the purposes of commanding higher prices.
Company’s emergent plans are to meet the emerging customer market needs with the aid of fuelling and leading themes (Skinner 2014). The company may use the theme of fuelling to bring positive adjustments on company’s operational systems to be in line with the customer’s market needs which are emerging daily. The theme of leading on the other hand, will enable the company’s management provide its target customers with experiences resulting from the use of firm’s products and services with the help of technology and brilliant ideas which exists within the company. As a result, the company is able to maximize its profits and able to survive in its market for a long period as they are able to compete effectively within its market.
Company collaboration strengthens the existing relationship amongst them and also harnesses their complementary abilities (Nason and Wiklund 2018 p. 50). Insurance Australia Group (IAG) has established a strategic partnership with Berkshire Hathaway whereby the Berkshire Hathaway takes roughly 3.7% stake in Insurance Australia Group through 500 million dollars placement. Berkshire Hathaway is amongst the largest and most successful firms globally. Partnership has improved financial and strategic flexibilities which has provided the Insurance Australia Group with scope to gain growth openings and consider capital control. 20% Quota share contract throughout the Insurance Australia Group has consolidated insurance operations which has contributed to reduced firm’s capital needs and income volatility.
Mission, Vision, Core Competencies
Insurance Australia Group got into a 20% whole-of-account share plan with Berkshire Hathaway (BH) which became effective on 1st July in the year 2015 (Meyer 2015). The quota share contract was to be effective for a duration of ten years or more according to the Insurance Australia Group choice (Ting and Cheng 2015 p. 10). Berkshire Hathaway (BH) Quota Share underpinned the strategic relations with the Insurance Australia Group after the BH’s announcement on quota share which was made in June in the year 2015. As a result of Berkshire Hathaway agreement by the Insurance Australia Group on quota share, the IAG has faced various outcomes which include; lowered revenues volatility through the percentage-based payment that Berkshire Hathaway incurs for the purposes of accessing the Insurance Australia’s Group major strong franchise. Another outcome is that the Insurance Australia’s Group underlying margin has improved by roughly 250 basis points (Watson 2017). Also, the Insurance Australia Group regulatory capital needs have been decreased by approximately 400 million dollars and finally, the Insurance Australia Group’s new and complementary corporate openings have been promoted. Therefore, despite the critique of the corporate practice, the company has been able to operate well in the market through effective competition with its competitors.
Run-off portfolio reinsurance protection is another practice that the Insurance Australia Group has undertaken for years (Wuebker et al 2017). The Insurance Australia Group (IAG) made its innovation reinsurance announcement in the second half of the fiscal year, 2011, which mitigated its exposure materially to asbestos and Canterbury earthquakes. As result the Insurance Australia Group faced various outcomes which were; a reinsurance preparation in respect to workforce and liability compensation threats with exposure to asbestos and these outcomes relates mainly to written policies that were put in place by the Australian Industry in the 1970s and 1980s. The practice also involved an adverse development cover which offers NZ$600 for protection purposes with additional NZ$4.4 billion for the month of February in the year 2011 Canterbury earthquake occasion. Therefore, despite the critique of the corporate practice, the firm has been able to perform well in its market through effective competition.
The criticisms came from the Insurance Australia Group competitors regarding the above-named practices (Liu and Gima 2018). The practices that the IAG undertook led to its better operation in its market. As a result of better performance in the market, the company has been able to survive in the market in the long term through effective competition. Therefore, the Insurance Australia Group competitors criticized IAG’s practices as they feared that the company may undertake them completely. The complete undertaking will involve those companies losing their customers which in return will result in reduced profits. In most cases, customers tend to shift to those companies which are performing better in the market.
Successful Strategies Deployed in the Past
General Environments (PESTEL) Analysis
PESTEL analysis is an important tool which executives may rely on to organize elements within the general settings and to determine how these elements impact firms within them (Johanson and Mattsson 2015 p.120). PESTEL is an acronym which stands for six segment which includes; political, economic, social, technological, environmental and legal (Kaya 2015 p. 665). Companies’ executives may use PESTEL to identify major threats and opportunities to adjust in accordance with their companies’ strategies. PESTEL helps the firm’s management in identification of opportunities and threats and they are able to take chances to risk their investment in those upcoming opportunities and also to come up with strategies to prevent threat occurrence within the six segments.
Specific analysis is an important aspect of better performance of the organization (Grant 2016). For the organization to exist in the market, there must exist, customers, partners, industry, competitors, and suppliers. The main purpose of business set up is to make profits by firms. Therefore, there must exist customers whom the business will sell its products and services to for the purposes of raising revenues since the customers are the firms’ target market. Competitors are another element of an effective market as they facilitate the improvement of services and product’s quality in efforts of making one’s firm more competitive than those others (Focarelli 2017 p. 340). As a result, the target customers are able to obtain high-quality products at an affordable price. A partnership among companies strengthens their relationship which facilitates their combination of efforts in ensuring that they deliver to their target market high-quality products and services which are in line with their market needs. Suppliers are an important factor in the success of any business as it is the sources of company’s raw materials (Giannakis and Papadopoulos 2016 p. 460). Without the existence of suppliers, a business may not exist or may perform poorly than if the suppliers existed. Finally, there is an industry in which the business operates in. Every business must operate in a specific industry in which it can easily be classified with.
Porter’s five forces include; the threat of new entrants, substitutes, industry rivalry and customers and suppliers bargaining power (Dobbs 2014 p.35). Industries that tend to generate more revenues will tend to attract many entrants within the market which usually lowers the profitability levels of other existing businesses in the market. An alternative product is that product which meets the same market needs that the existing does (Ingram et al 2015). An industry which produces similar products can easily attract a firm or firms that produce products which can be used as a substitute for those similar products. Substitute products are usually of high quality and at an affordable price than the product which is being substituted. As a result, the profitability of firms already existing in the market has a likelihood of reducing (Eling and Marek 2014 p. 655). Customers’ bargaining power is also a market output as a result of the pressure which they can produce towards a firm or firms regarding prices of company’s products and services. Customers’ bargaining is usually higher when the target market has a variety of alternatives and lower in the case of a few customers alternatives. Therefore, firms should come up with strategies necessary to reduce customer bargaining power pressures as these pressures can affect business performance adversely.
Supplier’s bargaining power is a market input within industries as the suppliers bring into the company resources such as raw material, labour, and services such as expertise. In the case where there are less number of suppliers, the existing suppliers may affect the firms’ performance adversely if they refuse to supply the firm with resources or by charging high prices for the supply of unique supplies. Industry rivalry is the major factor of the competitiveness of any industry (Chen et al 2014 p. 415). With enough knowledge on industry rivals by an organization, there are higher chances that it will be able to compete effectively in the market. These forces are usually close to the company and they affect its ability to serve its customers and make a profit. Any change in these forces will require the company to reassess the marketplace. Porter’s five forces are used by the company management to make a qualitative evaluation of a company’s strategic position.
Resource-Based Model is concerned with the relationship between firm’s external market and its internal abilities. According to the resource-based model, firm’s internal abilities are determined by the number of resources existing within the company (Carraher 2018). Basically, the firm’s internal environment is more crucial in the determination of strategic plan than the external setting. Therefore, the company should apply resource-based model analysis as it will enable the company to focus more on the internal environment than on the external settings. This is because the internal environment of the company is the one that provides the base for a strategy.
Businesses which tend to thrive better in the market are those who have an effective internal environment (Bayraktar et al 2017 p. 40). Business’ internal setting involves an effective system and process of operations, workforce, and management. The company should have a workforce which is working to their capabilities to deliver the best. Better performance by the employees is an indication that they are working towards the achievement of company’s goals. A company requires a management system to ensure that the operations of the company are run accordingly. Firms with a good management system will tend to perform better in the market than that whose management system is poor. A good management system within a company makes good choices regarding the company for its sake. Businesses that have a good operating system will tend to perform better than those whose operating system is poor. A good operating system is that which contains a good manufacturing, distribution and a delivery system. A good operating system increases the company’s profit margin which is the main goal of every business.
Type of Strategies Covered
Insurance Australia Group leadership team has a responsibility of ensuring that the company’s undertakings are efficient and effective (Barney 2014). It is the duty of the company’s management to come up with strategies necessary to curb risks and internal control frameworks. Also, the management team has an obligation to provide the board with timely and accurate information which is necessary to make decisions on behalf of their shareholders.
CEOs who inspired the Employees, Developed/Implemented the Strategies Successfully and Created the Company’s Unique Culture.
The Insurance Australia Group Chief Executive Officer (CEO) who inspired the workforce and developed the firm’s unique culture is; Peter Harmer who is also the managing director of the Insurance Australia Group. Peter Harmer ensures that his leadership team operates effectively and efficiently for the purposes of internal control frameworks and management of risks within an organization. Peter Harmer also ensures that the board of directors is supplied with information which is accurate and on the right time necessary in making decisions on behalf of the company’s shareholders.
With the use of all strategies, general, internal and specific environment analysis, Porter’s Five Force Model and Resource-Based Model the Insurance Australia Group has been able to minimize risk exposure, enhance material efficiency, community relationships and product quality. Also, the corporation has reduced insurance premium with an aim of reaching as many potential customers as possible. Better performance of the IAG within the market for a long period of time has led to its improvement on media coverage (Bamiatzi et al 2016 p. 1450). Finally, good leadership within the company has led to effective and efficient operations as a result of strategies that the management comes up with necessary to control internal frameworks.
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