Strategies For Market Growth: Insurance Australia Group Essay.

Strategic Priorities

Discuss About The Growth Strategy To Operations Into Markets.

Insurance Australia Group is an international Insurance corporation, with its headquarters situated in the city of Sydney Australia. The company came into being through a change of ownership of NRMA Insurance from a mutual organization to a joint stock company. This change of ownership gave birth to Insurance Australia Group in the year 2000. The company holds a number of popular Australian Insurance brand. Its operations are spread across Australia, New Zealand, Thailand, Vietnam, Malaysia, Indonesia, and India. The Organization’s strategy has been optimizing Core insurance business while generating opportunities for future growth. The Company’s main strategy is making the world a safer place for customers, shareholders, employees, partners and the communities that it serves in Asia, Australia and New Zealand (Olivier, 2013).

Agility: Being an Agile organization that is differentiated by its execution skills, Speed, and Innovation

Agility means the act of moving quickly and easily. One of its strategic options is organization focusing on the creation of a disciplined approach to its leadership and management through the introduction of agile working methods and ensuring that their employees clearly understand their roles(Iag, 2018). The organization also identity’s, natures and instills the necessary skills required to achieve its strategy and enable their employees to have a smooth transition to their future work. In addition, the organization also aims at being recognized as an organization that is driven by purpose.

Simplification: A lower cost, modular and simplified model of operation.

The organization aims at minimizing complexities in operations through execution of technology strategy, simplification of its processes and systems, product harmonization and consolidation of technological platforms. The organization also aims optimizing its operation model by influencing its operational partners(Iag, 2018). Finally, IAG is also focused on enhancing the usage of the repairer network to reduce size claim and improve allocation  

Customer: Offering the best customer experience globally

The organization is also focused on providing a satisfying experience for its customers at all times through automation of processes, and connecting with customers easily and within the shortest time possible. This is also facilitated by innovations to increase efficiency and cement its market position. The organization also aims at anticipating the need of its customers through the use of artificial intelligence and embedded cognitive competencies. A better understanding of its customers is also one of the priorities for the organization. It aims at achieving this by making decisions based on data (Iag, 2018).

Successful Past and Current Strategies

Growth Strategies

Among the successful strategies used by the organization in the past are vertical and horizontal growth strategies. The organization has specifically succeeded in developing its markets and penetrating into newer markets. From its establishment as a small insurance firm based in Sydney, the organization has become a reputable global enterprise through its successful penetration into the Asian and New Zealand markets. This achievement has been achieved through major acquisitions in Australia and outside. They include State Insurance in 2001, SGIO 1998, CGU Insurance, 2003, Swan Insurance, 2003, Lumley, 2014, WFI, 2014 and NZI, 2003. (Whyte and Grigg, 2015).Through these acquisitions and global expansion of operations the organization has also been able to develop its markets. With the success achieved through this approach, the company is still relying on the growth strategies as part of its core strategies  

Strategic Partnerships

The organization has also successfully used a strategic partnership approach to improve its operations. A strategic partnership refers to an alliance between commercial enterprises. Strategic partnerships are usually formalized by a single or multiple commercial contracts. Among its strategic partners is Thailand based Safety Insurance, Malaysian based Am Assurance, Indian Based SBI General Insurance Company, Indonesian based PT Asuransi Parolamas and Vietnamese AAA Assurance Corporation. Strategic partnerships are also part of its current expansion strategy (Olivier, 2013).

The Focus strategy

Under the focus strategy, organizations focus on dealing with specific markets through an understanding of the dynamics of such markets as well as the needs of customers in those markets. Insurance Australia Group is still focused on dominating the Asian market through partnerships with business experts and global insurance enterprises. The organization has also put in place measures of understanding the specific needs of their customers in specific market segments in New Zealand and Australia. The focus strategy is aimed at understanding and improving the experiences of customers in specific market segments (Roth, 2014).

The company had in the mid-2000’s invested $1.75 billion in the UK market against the pleas of analysts and shareholders. The expansion into the UK was done against the advice of analysts and shareholders. Its operation in the United Kingdom ended with a loss of $240 million after selling its Red Star business in 2013(Whyte and Grigg, 2015).

The company has been previously criticized for its expansion journey into the China Market. The company has had a fair share of challenges in its expansion journey. Back in 2015, its pursuit of the Chinese market faced a lot of opposition from stakeholders because of the challenges faced in its overseas expansion journey previously. The main concerns were the regulatory and business hurdles associated with the Chinese market (Liew, 2015). Back in 2015, the company sought to pump approximately $1 billion into China, the second largest economy in the world, through partnerships with one of the leading Insurance companies in China. This expansion, however, received much opposition because of the loss suffered during the attempts by the company to expand into the United Kingdom Market. In addition, analysts argued that there were many risks involved in entering the developing Chinese market because of the involved challenges (Liew, 2015).

Controversial Expansion and Exit from the United Kingdom

Concerning its past expansion attempts into New Zealand Asia, analysts have argued that the expansion into the two markets was not the best option as it did not provide greater value to shareholders. On the contrary, they believed that returning excess capital would be the most effective approach as compared to expanding into the UK or Asia (Liew, 2015). Analysts also argued that a return of capital would have translated to a boost of 19% per share for shareholders. There was also an argument that the company would have recorded a 21% profits and 31% increase in prices for its shares in 10 years had it considered the option of returning capital. (Liew, 2015).  

In addition, the opposition also came as a result of the fact that ANZ Bank which had already expanded its operation to China was still struggling to realize any benefits. The company was also targeting Motor Insurance which was classified as the largest insurance casualty in China. (Liew, 2015). This was also one of the reasons for the objection to the expansion move.

In the end, AIG abandoned its controversial attempt to expand into the China market as a result of a protest vote treat by its investors.

Being one of the leading Insurance companies in Australia, IAG has a number of strengths that have enabled it to thrive not only in the Australian market but also in Asia and New Zealand. In addition, the strengths have also enabled the organization to protect its existing markets and enabled it to successfully penetrate into new markets. The Insurance Company also has opportunities that it can utilize to expand its operations(Gray, 2015). However, the company is also faced with threats to its expansion and operations

With its customer-focused approach, the organization has been able to establish an excellent brand identity. The company is a household name in the Australian Insurance Industry. It has also made significant penetration and won an increasing number of customers in New Zealand and Asia. The organization has for a long time invested heavily in building a strong Brand Portfolio.

Customer loyalty

One aspect that organizations value is the kind of experience they have while associating themselves with an organization. The company has for the longest time focused on improving the experience of its customers. Its ability to satisfy the needs of their customers and improve the overall customer experience has enabled it to have a strong customer loyalty.

Controversial Expansion to China

Variety of Services

The company also has a variety of insurance covers that its customers can choose from. Its main services include content, home, and vehicle, commercial and general insurance.

Market share

The Australian insurance giant also has an advantage associated with its large market share. The company’s global market share in the Insurance industry is estimated at 40% while its market share in New Zealand is said to be above 66% (Gray, 2015).

Compared to its competitors, the organization has a lower investment in research and development. Its approach to innovation and development does not compare effectively with that of its main competitors. This has weakened its ability to effectively compete with other players.

Another weakness can be witnessed through the below industry average percentage of its contribution and profitability ratio.

Improper financial planning

The company also has a weakness in that its financial planning is not done efficiently. As suggested by its current liquid asset ratios and current asset ratios, the company can be more efficient in its cash spending than it is currently.

With its strong brand portfolio acquired through mergers and acquisitions, the organization has an opportunity of successfully expanding into newer product categories. The company has also been known because of its track record in developing new product offerings. Therefore, the organization has an opportunity for diversifying its product offerings.

New Market trends

Emerging consumer trends in the Insurance industry can open the organization to new market opportunities giving it an opportunity to diversify into new products and improve its revenues.

Opportunities brought about by changes in Technology

With the increasing changes in technology, Insurance group has an opportunity adopt new practices partly with regard to its pricing strategies. This will enable the company to attract and retain customers hence improving its market position.

The company is facing intense competition from multiple insurance companies. This has negatively affected its profitability and sales.

Differences in liability Countries liability laws

With the expansion in different countries, the insurance group is faced with the threat of being exposed to different liability claims because such countries have different policies

The company has its core values centered on sustainability and improving customer experience. The main purpose of IAG is: Making the world a safer place. This slogan is extended to customers, employees, partners, shareholders, and all parts of the communities served by the IAG across Asia, Australia and New Zealand (Benn and Dunphy, 2013). IAG strategy is optimizing its core insurance business while creating future growth options. IAG operates under three strategic priorities; customer, simplification, and people. These priorities are brought to life by two themes-leading and fueling.

SWOT Analysis

The organization culture can, therefore, be described as a culture that is based on Diversity, teamwork and collaboration, sustainability, creation and upholding of shared values and anchored on creating stronger, safe and more confident communities. In this regard, the company is seeking to have at least 40% of its senior management positions in New Zealand, Australia and 30% in Asia occupied by women by 2020. Through its sustainability and diversity endeavor, the company is focused on reducing the amount of Co2 by 10% in 2020 and having a 1.5% percentage of employees from Aboriginal & Torres Strait Islander respectively. This culture has been developed and maintained by the company’s leadership including its current CEO Peter Harmer (Date, 2015).

Conclusion 

In conclusion, IAG is one of the leading insurance companies in Australia. The Company has grown steadily to become a dominant Insurance company not only in Australia but also in New Zealand and Parts of Asia. The company has achieved its current success because of its core competencies which are a focus on customer experience and sustainability. The company has also succeeded through the application of various strategies in the various markets. The company has in the past successfully used growth strategies to expand its operations in Australia, New Zealand and Parts of Asia. Additionally, the company has also used strategic partnerships with other Insurance companies in its current markets. Focus strategy has also been part of its strategic choices. The company has had criticisms with its expansion to the United Kingdoms and the Chinese markets. While its penetration into the United Kingdom ended with a big loss. Its attempt to penetrate the Chinese markets was terminated due to the objection of its stakeholders and experts. The company also has various strengths, weaknesses and opportunities and treats as shown by its SWOT analysis. The organization has successfully established an organizational culture that is based on teamwork, collaboration, inclusivity, support for the women and upholding of shared values.

References 

Iag, (2018). IAG Limited. [online] Available at: https://www.iag.com.au/ [Accessed 13 May 2018].

Date, F.D., 2015. Insurance Australia Group Limited Preliminary Final Report for the Year Ended 30 June 2015. Change, 1000, p.2014.

Gray, M. 2015. Insurance giant dismisses deal’s impact on the market. Insurance Business NZ

Benn, S. and Dunphy, D., 2013. Corporate governance and sustainability: Challenges for theory and practice. Routledge.

Liew, R. 2016.Harmer to persevere with IAG's China push. The Sydney Morning Herald

Olivier, A. 2013. Organisational Design: What Your University Forgot to Teach You /Andrew Olivier. [Bloomington, Ind.], Xlibris Corp.

Roth, M. 2014. Top Stocks 2015 A Sharebuyer's Guide to Leading Australian Companies. https://rbdigital.oneclickdigital.com.

Newton, P. W. 2008. Transitions: pathways towards sustainable urban development in Australia. Dordrecht, The Netherlands, Springer Science.

Whyte, J, and Grigg, A.2015. IAG scraps China expansion after protest vote threat. The Australian Financial Review.www.afr.com