Discuss about the Mission And Vision Of Insurance Australia Group.
The current business scenario demand diverse and effective business strategies in order to stay competitive in the market. Moreover, with the rapid increase in the competition in the certain industries, it is becoming for important for the business organizations to adopt the most effective organizational approach (Somerville, 2013). However, on the other hand, there are number of controversies also get emerged in order to do so. One of the major organizations in the Australian market that went through various ups and downs in the recent past is Insurance Australia Group. They are the leading brand in the Australian insurance sector.
According to the information in their official website, Insurance Australia Group aims to provide all round or holistic financial protection and stability to their stakeholders. According to them, they provide different types of insurance services and it helps them to cover the diversified needs and requirements of the stakeholders especially the customers (www.iag.com.au, 2018). One of their major core competencies is huge geographical coverage. Currently, Insurance Australia Group has their operation in Australia, New Zealand, Indonesia, Thailand and Vietnam. Thus, they able to cater to huge number of customers along with having the opportunities to tap the international market also. Another major core competency for them is the diverse workforce and the concept of shared value in the organization. This helps them to gain competitiveness from the internal management of the organization.
The vision of Insurance Australia Group states that they want to be a sustainable business in the insurance sector by providing more valued return to their stakeholders. Moreover, it is also stated in their official website that they want to enhance their business potentiality along with developing their core insurance business (www.iag.com.au, 2018. Thus, it can be concluded that the vision statement of Insurance Australia Group denotes that sustainability is one of their core business area that they aim to develop in future.
There are number of strategies being initiated by Insurance Australia Group in the recent past according to the originated situation. One of the major strategies initiated by them in the recent time is the strategic alliances. According to the reports, Insurance Australia Group went for strategic relationship with Berkshire Hathaway (www.iag.com.au, 2018). In 2015, both these companies went in to strategic partnership for the 10 years agreement. According to the agreement, Berkshire Hathaway invested US$ 500 million for 3.7 percent of stake in Insurance Australia Group. This extra capital helped Insurance Australia Group to invest in newer business sectors and ensure their future growth.
Overview of Insurance Australia Group
In addition, it is also reported that Insurance Australia Group acquired the insurance underwriting business of Wesfarmers Limited for US$ 1.845 billion. It helped them to grow horizontally in the Australian and New Zealand market. Horizontal growth of them also ensured that the home markets for Insurance Australia Group are more stable and largely penetrated (www.iag.com.au, 2018). On the other hand, they also follow some of the Porter generic strategies such as cost leadership and product differentiation. According to the official report, Insurance Australia Group follows the strategy of cost leadership by offering their services at most competitive prices. According to their strategy, they aim to target maximum number of customers and thus they price their offerings accordingly (www.iag.co.nz, 2018). This is helping them to cater to most number of potential customers. Furthermore, the also follow differentiation strategy in order to create the distinctive position in the market. It is reported that Insurance Australia Group differentiates themselves from their competitors by providing added services and benefits. Thus, it also helps them in having competitive advantages in the market by providing unique services to the customers.
In majority of the cases, Insurance Australia Group had succeeded in their business operation except for some incidents. In the recent past, there are some criticisms and controversies being faced by them regarding their business strategies and internal management. One of the major criticisms being faced by them is came from their former chairman, Nicholas Whitlam. He chaired the organization till 2001 and according to him, expanding their business in Britain is the worst example of ineffective business strategies (Johnston, 2018). This is due to the reason that Insurance Australia Group incurred a huge loss in operating their business in Britain. Thus, according to their former chairman, the upper level management should have effectively determined the market trend and potential prior to entering in the British market. This is also a major example for improper business strategies by Insurance Australia Group.
However, it is stated by the current management of Insurance Australia Group that expanding the business in British market was taken after determining the entire required criterion. Thus, the decision was not wrong but the emergence of the economic recession caused the loss in the business and it cannot be determined in advance (www.ft.com, 2018).
Another major criticism faced by Insurance Australia Group is from the employees regarding the providence of spirit bonuses. It is reported that Insurance Australia Group decided to provide spirit bonus of US$ 2.55 million, which caused huge backlash for them (Martin, 2018). This got emerged due to the fact that Insurance Australia Group failed to connect their business approach with that of the requirement of the employees. Employee union also criticized Insurance Australia Group in relation to their decision of outsourcing their partial operation to foreign countries. It is reported that Insurance Australia Group is insisting to outsource their partial operation to the foreign countries in order to reduce the cost of operation and maintain the affordable price of their offerings (www.nzherald.co.nz, 2018). This decision is criticized by the employee union due to the fact that it will cause unemployment. Moreover, it is also criticized by the employee union that outsourcing of the service will also lead to the vulnerability of the secured data of the customers along with affecting the service quality.
Insurance Australia Group's Core Competencies
The above sections discussed about the past criticisms faced by Insurance Australia Group in their business operation. Therefore, it is important to determine their internal effectiveness in order to measure their current scenario. SWOT analysis will be used to determine their internal factors.
· Huge brand value and exposure helps Insurance Australia Group to effectively operate in their home markets.
· Insurance Australia Group is having their market presence in different countries. This helps them to cater to larger and diverse section of potential customers.
· Initiation of the cost leadership strategy also helps them to cater to larger section of the market. This is due to the reason that offering affordable services helps them to have larger market share. This also acts as their competitive advantage (kaliappen & Hilman, 2013).
· They have effectively integrated latest technologies in their business operation, which is further enhancing the customer convenience and their business effectiveness.
· The proportion of the stocked inventory for Insurance Australia Group is more compared to their major competitors. Thus, it is leading to more investment in channel for them. It leads to the increase in the cost of operation for Insurance Australia Group.
· It is reported that Insurance Australia Group is trailing behind their major competitors in terms of the innovation. This is mainly due to the fact that rate of investment in research and development for Insurance Australia Group is lower compared to some of their competitors (Matzler et al., 2015).
· Insurance Australia Group is currently having number of products in their portfolio but they are having gaps between the two offerings. Thus, it poses the challenge of facing new competition for them.
· More global firms are entering in their home markets. These global organizations are having huge access to finance. On the other hand, Insurance Australia Group failed in their foreign business such as in Britain. Thus, they are losing their competiveness to the global brands.
· The operating markets for Insurance Australia Group are slowly regaining from the scenario of economic recession. Thus, the market for the insurances is again showing positive trend. This will help Insurance Australia Group to increase their market share and revenue.
· Offering differentiated services is helping Insurance Australia Group to maintain their competitiveness in the market. Thus, having differentiated approach will further help them to target more customers over their competitors (Davcik & Sharma, 2015).
· As discussed earlier, Insurance Australia Group is having positive and huge brand value in the market. Thus, this will help them in diversify their business in other sectors. This will in turn increase the market value for Insurance Australia Group.
· They can also leverage their positive brand value and differentiated approach in entering in the new foreign markets. This will help them to enhance their market share as well as global brand value.
· Entry of more number of competitors in the market will further increase the threat of competition. This is due to the fact that the more will be the competition; the less will be the profitability of the players in the market.
· There are uncertainties regarding the reemergence of economic crisis in future. Thus, the threat of economic crisis will always be there with Insurance Australia Group.
· Introduction of the stringent rules and regulations regarding the employee management along with the demand of increase in basic payment will lead to reduction in the profitability of Insurance Australia Group (Geistfeld, 2015).
Threat of new entrants
· Threat of new entrants for Insurance Australia Group is moderate.
· Huge capital investment s required for the new entrants in the insurance sector.
· There are number of rules and regulations to be followed by the entrants that further reduce the chances of entering in the market (E. Dobbs, 2014).
· However, the global brands along with the established brands in some other countries can enter the market at any point of time.
Threat of substitutes
· Threat of substitutes is high for Insurance Australia Group.
· This is due to the fact that there are number of players operating in the Australian insurance sector.
· All the competitors are offering same level of services to the customers.
· Lack of differentiation among the core product levels of the offerings (Holahan, Sullivan & Markham, 2014).
Bargaining power of the buyers
· Bargaining power of the buyers is moderate.
· Number of options is available for the buyers to choose from.
· However, customers have higher switching cost in changing their insurance brand (Ting, 2014).
· Moreover, the brand value and image also matters in choosing the preferred insurance company.
Bargaining power of the suppliers
· Bargaining power of the suppliers is lower.
· Insurance Australia Group is having less dependence on the external suppliers.
· They directly deals with the customers except the agents
· These agents do not have upper hand and the branding for them is also important.
· Competitive rivalry is evident in the industry.
· Insurance companies are initiating newer strategies to target more customers.
· More benefits are being provided in insurances for the customers in order to stay ahead in the competition.
In the current time, organizational culture and leadership style determines the effectiveness of the organizations. It also acts as their competitive advantages. In case of Insurance Australia Group, three basic principles are being followed by them, closer, faster and braver. According to closer principle, they promote cooperation and coordination among the internal stakeholders and across the hierarchical level. According to this principle, teamwork is encouraged in the organization in order to have coordinated approach in success. On the other hand, the second principle of braver states that all the employees are encouraged to think big and out of the box. Moreover, they are also promoted to be more curious and open to new thinking and ideas. This helps Insurance Australia Group, to generate more innovative ideas from the internal stakeholders.
The last principle is faster. It states that employees in Insurance Australia Group should be positive and assertive in the organization. Moreover, they are also motivated to be more efficient in their job profile and celebrate their respective job profiles. According to their strategy, the more will be the efficiency of the employees, the faster they will be able to complete their job properly (www.iag.com.au, 2018). In the case of Insurance Australia Group, these principles are given more valuation and concentration on these principles rather than on any other aspects such as leadership. Upper level management selected in the organization is also included in these principles and thus, the leadership roles automatically get matched with the organizational approaches.
This positive vibe in the internal management of Insurance Australia Group helps in having competitive advantages of others. This is due to the reason that it helps them to motivate the employees in generating new and innovative ideas. Thus, this is leading to the innovative approach of the entire organization.
Thus it can be concluded that Insurance Australia Group is having number of challenges and opportunities to be faced by them. This report discussed about the internal factors and competitive environment of Insurance Australia Group in their home markets. In addition, this report also discussed about the criticisms faced by Insurance Australia Group in their recent past regarding their business strategies. Major two criticisms are identified and it denotes that there are gaps in the business strategies of Insurance Australia Group. However, on the other hand it is also discussed in this report that Insurance Australia Group is having favorable and positive organizational culture that is helping them in having motivated and engaged employees in place.
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