SWOT ANALYSIS | TOWS ANALYSIS This all content about SWOT analysis TOWS analysis SWOT matrix and TOWS matrix. Identifying Strength Opportunities, Weakness, Threats which can be useful for your organization management.Using SWOT Analysis to formulate Strategy Posted by Neni Manize Using SWOT Analysis as a tool to formulate Strategy is one of the most effective tool in Strategic Planning. It is a factual analysis due to its extensive data collection and analysis of the data collected. It is effective because the analysis covers a wide spectrum of business environment during data collection. Its takes into consideration external business environment as well as internal capabilities. This is perhaps the most powerful usage of SWOT Analysis in the Strategic Planning Process. I am going to show you how to used the four factors of SWOT to develop Strategies Assuming you have collected several data pertaining to the Strengths, Weaknesses, Opportunities and Threats. Then you will use them to formulate strategy. Not sure how to do it? Don't worry, I take you through the steps.

Step 1 - Evaluate the surrounding

Let's take a moment to think about both of us as the coach for two teams of football teams. Before the game starts, you and I have certain strategies that we want the team to follow. As the game progresses, there is sign of difference between the two teams in terms of the game as well as the condition of the team members.

Step 2 - Identify the Strengths, Weaknesses, Opportunities and Threats

Now, it is time to evaluate the teams in the four factors of SWOT. Lets take the following examples as the result of the evaluation:

- Strengths -- Your team is full of fighting spirit

- Weaknesses -- One of your team members is hurt

- Opportunities -- Your opposition team seems to loose stamina

- Threats -- Your opposition team is full of energy

Note: Some of these factors seem to be conflicting each other. For the purpose of this step, this conflict is ignored.

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Step 3 - Pair the SWOT factors to formulate strategies

Now, you would start to formulate strategies in the four categories. Namely: SO Strategies (Strengths and Opportunities Strategy ) ST Strategies (Strengths and Threats Strategy ) WO Strategies (Weaknesses and Opportunities Strategy ) WT Strategies (Weaknesses and Threats Strategy )

In this case, your strength is " your team is full of fighting spirit " and paired with your opportunities is " Opposite team is loosing stamina" . With this scenario, what would you do? Perhaps you formulate a strategy to " ATTACK ". There it goes, you just formulate a attacking strategy. Then you do the same procedure for SW Strategies, WO strategies and WT strategies.

Step 4 - Evaluate the strategic options

At the end of this paring of SWOT factors, you would have end up several strategic options. Do a quick evaluation of each of these strategies to the extent of meeting the company objectives.

Step 5 - Selecting Strategic Options

At this step, you would have a long list of strategic options. Too many strategies to implement may not be practical. Therefore, you need to shorten the list to perhaps maximum three strategies. After you have completed all the 5 steps to use SWOT Analysis to Formulate Strategies, you have a list of strategies for you to implement to your business.comments (0) |

SWOT Analysis on an Example Posted by Neni Manize Strengths and weaknesses in the SWOT analysis are internal value creating factors such as assets, skills, or resources a company has at its disposal relatively to its competitors. Below you can find a few examples of what your strengths might be:

Unique product Location of your business Patents, know-how, trade secrets Worker's unique skill set Corporate culture, company image Quality of your product Access to financing Operational efficiency

The following list shows a few examples of weaknesses: Location of your business Lack of quality and customer service

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Poor marketing and sales Access to resources Undifferentiated products or services

Opportunities and threats are external value creating (or destroying) factors a company cannot control but emerge from either the competitive dynamics of the industry or market or from demographic, economic, political, technical, social, legal, or cultural factors.An opportunity in the SWOT model could be for example:

A new emerging or developing market (niche product, place - new country, less competition)

Merger, joint venture, or strategic alliance Market trends New technologies Social changes (for example demographics)

And now the final one, threats. A threat could be: New competition in the market, possibly with new products or services Price wars Economic conditions Political changes Competitor oligopoly or monopoly Taxation Availability of resources

Factors related to each aspect of the SWOT model depend very much of the nature of your business. SWOT for a manufacturing company will be different from a SWOT for an internet start-up.comments (0) |

Undertaking a SWOT analysis Posted by Neni Manize This checklist is for those carrying out a SWOT analysis, SWOT being the acronym for Strengths, Weaknesses, Opportunities and Threats. It is a simple, much-used technique which can help to prepare or amend plans, in problem solving and decision making.

Definition

SWOT analysis is a general technique which can be applied across diverse functions and activities, but it is particularly appropriate to the early stages of planning for a TIPD visit. Performing a SWOT analysis involves the generation and recording of the strengths, weaknesses, opportunities, and threats in relation to a particular task or objective. It is customary for the analysis to take account of internal resources and capabilities (strengths and weakness) and factors external to the organisation (opportunities and threats).

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Benefits

SWOT analysis can provide: a framework for identifying and analysing strengths, weaknesses, opportunities and

threats an impetus to analyse a situation and develop suitable strategies and tactics a basis for assessing core capabilities and competences the evidence for, and cultural key to, change a stimulus to participation in a group experience.

Action checklist1. Establish the objectives The first key step in any project: is to be clear on what you

are doing and why. The purpose of conducting a SWOT may be wide or narrow, general or specific.

2. Select appropriate contributors. Important if the final outcome is to result from consultation and discussion, not just personal views, however expert.

3. Allocate research and information gathering tasks. Background preparation is a vital stage for the subsequent analysis to be effective, and should be divided among the SWOT participants. This preparation can be carried out in two stages: exploratory, followed by data collection, and detailed, followed by a focused analysis. Gathering

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information on Strengths and Weaknesses should focus on the internal factors of skills, resources and assets, or lack of them. Gathering information on Opportunities and Threats should focus on the external factors over which you have little or no control, such as social or economic factors.

4. Create a workshop environment. If compiling and recording the SWOT lists takes place in meetings, then do exploit the benefits of workshop sessions. Encourage an atmosphere conducive to the free flow of information and to participants saying what they feel to be appropriate, free from blame. The leader / facilitator has a key role and should allow time for free flow of thought, but not too much. Half an hour is often enough to spend, for example, on Strengths, before moving on. It is important to be specific, evaluative and analytical at the stage of compiling and recording the SWOT lists - mere description is not enough.

5. List Strengths. Strengths can relate to the group, to the environment, to perceptions, and to people. "People" elements include the skills, capabilities and knowledge of participants. Other people strengths include:

friendly, cooperative and supportive participants appropriate levels of involvement through delegation and trust.

6. List WeaknessesThis session should not constitute an opportunity to focus on the negative but be an honest appraisal of the way things are. Key questions include:

what obstacles may prevent progress? which elements need strengthening? are there any real weak links in the chain?

It is not unusual for "People" problems - poor communication, inadequate leadership, lack of motivation, too little delegation and no trust - to feature among the major weaknesses.

7. List Opportunities

This step is designed to assess the socio-economic, environmental and demographic factors, among others, to evaluate the benefits they may bring to the TIPD visit. Examples include:

the availability of new technologyBear in mind just how long opportunities might last and how the group may take best advantage of them.

8. List Threats

The opposite of Opportunities - which may, with a shift of emphasis or perception, have an adverse impact. Weighing threats against opportunities is not a reason to indulge in pessimism; it is rather a question of considering how possible negative experience may be limited or eliminated. The same factors may emerge as both a threat and an opportunity, for example, Information Technology. Most external factors are in fact challenges, and whether the groups perceives them as opportunities or threats is often a valuable indicator of morale.

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9. Evaluate listed ideas against Objectives

With the lists compiled, sort and group facts and ideas in relation to the objectives. It may be necessary for the SWOT participants to select their five most important items from the list in order to gain a wider view. Clarity of objectives is key to this process, as evaluation and elimination will be necessary to cull the wheat from the chaff. Although some aspects may require further information or research, a clear picture should, at this stage, start to emerge in response to the objectives.

10. Carry your findings forward

Make sure that the SWOT analysis is used in subsequent planning. Revisit your findings at suitable time intervals e.g. on return from you visit to check that they are still valid.

Dos and don'ts for SWOT analysis

Do Be analytical and specific. Record all thoughts and ideas in stages 5-8. Be selective in the final evaluation. Choose the right people for the exercise. Choose a suitable SWOT leader or facilitator.

Don't Try to disguise weaknesses. Merely list errors and mistakes. Lose sight of external influences and trends. Allow the SWOT to become a blame-laying exercise. Ignore the outcomes at later stages of the planning process.

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Case Study- Application of the TOWS Matrix to Volkswagen Posted by Neni Manize TOWS Analysis is an effective way of combining a) internal strengths with externalopportunities and threats, and b) internal weaknesses with external opportunities and threatsto develop a strategy.

Volkswagen (VW) was chosen because it demonstrates how a successful company experienced great difficulties in the early 1970s, but then developed a strategy that resulted

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in an excellent market position in the late 1970s. The TOWS Matrix shown in Figure 1 will focus on the crucial period from late 1973 to early 1975. The external threats and opportunities pertain mostly to the situation VW faced in the United States, but a similar situation prevailed in Europe at that time.

Weaknesses and Threats (WT)

A company with great weaknesses often has to resort to a survival strategy. VW could have seriously considered the option of a joint operation with Chrysler or American Motors. Another alternative would have been to withdraw from the American market altogether. Although in difficulties VW did not have to resort to a survival strategy because the company still had much strength. Consequently, a more appropriate strategy was to attempt to overcome the weaknesses and develop them into strengths. In other words, the direction was toward the strength-opportunity position (SO) in the matrix shown as Figure 1. Specifically, the strategy was to reduce the competitive threat by developing a more flexible new product line that would accommodate the needs and desires of the car-buying public.

Weaknesses and Opportunities (WO)

The growing affluence of customers has resulted in 'trading up' to more luxurious cars. Yet, VW had essentially followed a one-model policy which presented a problem when the design of the Beetle became obsolete A new model line had to be introduced to reach a wider spectrum of buyers. In order to minimize the additional costs of a multi product line, the building block principle was employed in the design of the new cars. This allowed using the same parts for different models that ranged from the relatively low-priced Rabbit to the higher priced Audi line. Another weakness at VW was the rising costs in Germany. For example, in 1973 wages and salaries rose 19 per cent over the previous year. Similarly, increased fuel costs made the shipping of cars to the United States more costly. This situation favored setting up an assembly plant in the United States. However, this also created some problems for VW because it had no experience in dealing with American organized labor. To overcome this weakness, VW's tactic was to recruit managers from Detroit who were capable of establishing good union relations.

Strengths and Threats (ST)

One of the greatest threats to VW was the continuing appreciation of the Deutsche Mark against the dollar. For example, from October 1972 to November 1973 the mark appreciated 35 percent. This meant higher prices for the buyer. The result, of course, was a less competitive posture. Japanese and American automakers obtained an increasingly larger share of the small-car market. To reduce the threats of competition and the effects of the

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unfavorable exchange rate, VW was forced to build an assembly plant in the United States. Another strategy for meeting competitive pressures was to build on VW's strengths by developing a car based on advanced design technology. The result of this effort was the Rabbit, a model with features later adopted by many other car manufacturers.

FIGURE 1 comments (0) |

Understanding TOWS Matrix Posted by Neni Manize

Why use the tool?

TOWS Analysis is an effective way of combining a) internal strengths with externalopportunities and threats, and b) internal weaknesses with external opportunities and threatsto develop a strategy.

How to use tool:

To carry out a TOWS Analysis, consider the following combinations:Strengths/Opportunities:Consider all strengths one by one listed in the SWOT Analysis with each opportunity todetermine how each internal strength can help you capitalize on each external opportunity.

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Strength/Threats:Consider all strengths one by one listed in the SWOT Analysis with each threat to determinehow each internal strength can help you avoid every external threat.

Weaknesses/Opportunities:Consider all weaknesses one by one listed in the SWOT Analysis with each opportunity todetermine how each internal weakness can be eliminated by using each external opportunity.

Weaknesses/Threats:

Consider all weaknesses one by one listed in the SWOT Analysis with each threat todetermine both can be avoided. comments (0) |

SWOT ANALYSIS | TOWS ANALYSIS | A Note on Marketing Planning Posted by Neni Manize SWOT (Strengths, Weaknesses, Opportunities, Threats) is a popular framework for developing a marketing strategy. A Google search for “SWOT” and “planning” turned up almost 93,000 hits (August 2004), most all of which laud the use of SWOT Analysis. Some students have said that it is the most important thing they learned at the Wharton School.

Although SWOT is promoted as a useful technique in numerous marketing texts, it is not universally praised: One expert said that he preferred to think of SWOT as a “Significant Waste of Time.”

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The problem with SWOT is more serious than just wasting time. Because it mixes idea generation with evaluation, it is likely to reduce the range of strategies that are considered. In addition, people who use SWOT might conclude that they have done an adequate job of planning and ignore such sensible things as defining the firm's objectives or calculating ROI for alternate strategies. I have observed this when business school students use SWOT on cases.

What does the evidence say? Perhaps the most notable indication is that I have been unable to find any evidence to support the use of SWOT.

Two studies have examined SWOT. Menon et al. (1999) asked 212 managers from Fortune 1000 companies about recent marketing strategies implemented in their firms. The findings showed that SWOT harmed performance. When Hill and Westbrook (1997) examined the use of SWOT by 20 companies in the UK in 1993-94, they concluded that the process was so flawed that it was time for a “product recall.”

One advocate of SWOT asked: if not SWOT, then what? Borrowing from corporate strategic planning literature, a better option for planners is to follow a formal written process to: (1) set objectives, (2) generate alternative strategies, (3) evaluate alternative strategies, (4) monitor results, and (5) gain commitment among the stakeholders during each step of this process.

I describe this 5-step procedure in Armstrong (1982). Evidence on the value of this planning process, obtained from 28 validation studies (summarized in Armstrong 1990), showed that it led to better corporate performance: 20 studies found higher performance with formal planning, 5 found no difference, and 3 found formal planning to be detrimental. This support was obtained even though the formal planning in the studies typically used only some of the steps, the steps were often poorly implemented, and the conditions were not always ideal for formal planning.

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Given the evidence, SWOT is not justified under any circumstances. Instead use the comprehensive 5-step planning procedure.

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References

Armstrong, J. S. (1982) “The Value of Formal Planning for Strategic Decisions,” Strategic Management Journal, 3, 197-211. Available in full text at http://jscottarmstrong.com

Armstrong, J. S. (1990), “Review of Corporate Strategic Planning," Journal of Marketing, 54, 114-119 also found in full text at http://jscottarmstrong.com.

Hill, T. & R. Westbrook (1997), “SWOT Analysis: It’s Time for a Product Recall,” Long Range Planning, 30, No. 1, 46-52.

Menon, A. et al. (1999), “Antecedents and Consequences of Marketing Strategy Making,” Journal of Marketing, 63, 18-40comments (0) |

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SWOT ANALYSIS: How to Reboot Your Life with the SWOT MATRIX Posted by Neni Manize We often see, when the computer locks up and nothing functions, there is a convenient option: you can reboot it. There are times when our life gets locked up as well. At those times we feel paralyzed and if we stay in the feeling of paralysis, we can end up with depression or other health problems.

When we’re stuck, we need to reboot our life. Unfortunately there isn’t a convenient button to push. But it’s possible all the same. The first thing we need to look at is why and where our life has got stuck. A great tool to get this overview is the SWOT matrix. SWOT is an acronym for Strength, Weaknesses, Opportunities, and Threats. The first two, Strengths and Weaknesses, are our personal attributes that we bring to our life. The second two, Opportunities and Threats are what the outside world brings to us.

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The way to reboot our life with the help of the SWOT matrix is to look at each of the seven areas of life and check out where we may be stuck and how to move forward. The important point here is that stuckness can result from internal forces, that is from our own personal attributes and how we bring them to bear on the various areas of our life. Stuckness can also result from external factors, that is from forces that impinge on our life from outside.

Here are seven areas of life that we need to consider: Mental Physical Spiritual Social Professional Recreational Creational

If we take each one and investigate it in terms of the SWOT Matrix, we can see how to reboot our life.

1. Mental

This area includes our emotional, as well as our intellectual well-being. Right now, what are your strengths and weaknesses in this particular area? Are you involved in learning something new? Learning is important for our intellectual well-being. We need to use our brain, in order to develop it. After all, the good news is that we can develop intelligence at any age. What threats or opportunities to you see in regard to your mental wellbeing?

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How is your emotional health right now? What is strong about it and where are there weaknesses? What threats or opportunities to you see in regard to your emotional wellbeing?

2. Physical

How is your physical health? Which basket are you in: fit or flab? What are your strength or weaknesses in regard to your body? What threats or opportunities do you perceive? Threats could be health problems.

Maybe you’re out of shape, overweight, or you have other health threats to deal with. Opportunities are actions that we can take to optimize our physical condition.

3. SpiritualIs there a spiritual component to your life? Do you have a spiritual practice, like meditation or prayer? Or are there moments in nature where you feel connected? I’m talking about natural spirituality here.

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What are your strength and weaknesses in respect to spirituality? What threats or opportunities do you perceive?

4. SocialThe social aspect of our life covers all the areas of connection. How are your connections? Are you in a relationship with a special person? Do you have family? Do you have strong friendships? What about colleagues – do you have strong connections? And how is your social life?

Take a look at the SWOT Matrix and consider what your strengths and weaknesses are in respect of your social connections. What threats and opportunities can you discover?

5. ProfessionalThe professional area of life covers what we do for a living, and what we do in order to

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develop new areas of expertise. How is your motivation? What are your strengths and weaknesses in this area? Are there threats and opportunities on the horizon?

6. RecreationalWhat do you do for fun? We all need time out where problems recede and we do something that is pure enjoyment.

How easy is it for you to include fun in your life? What are your strengths and weaknesses? How to you see opportunities and threats in this area of your life?

7. CreationalWe need to be creative in one way or another if we are to feel in balance and happy. How is your creativity? What are your strengths and your weaknesses?

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Many people find it difficult to be creative. Creativity is something we can misplace along the way. Any creative activity can kickstart it again.

Now that you’ve looked at the various areas of your life with the help of the SWOT Matrix, you’ll have a better understanding about how to reboot your life. Even if you just choose one area of your life and look for opportunities, your life will start to open in a new way.m If you focus on all areas of your life and focus on opportunities, your life will reboot completely.

What did you notice about your life when you looked at the various areas with the help of the SWOT Matrix? comments (0) |

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Bancassurance: A SWOT ANALYSIS (SWOT STRATEGY) Posted by Neni Manize Before we go to SWOT ANALYSIS or SWOT STRATEGY of Bancassurance you should understand well about Bancassurance. Lets goto the point, Bancassurance in its simplest form is the distribution of insurance products through a bank's distribution channels. In concrete terms Bancassurance, which is also known as Allfinanz - describes a package of financial services that can fulfill both banking and insurance needs at the same time. It takes various forms in various countries depending upon the demmography and economic and legislative climate of that country. Demographic profile of the country decides the kind of products Bancassurance shall be dealing in with, economic situation will determine the trend in terms of turnover, market share, etc., whereas legislative climate will decide the periphery within which the Bancassurance has to operate.

The motives behind Bancassurance also vary. For banks it is a means of product diversification and a source of additional fee income. Insurance companies see Bancassurance as a tool for increasing their market penetration and premium turnover. The customer sees Bancassurance as a bonanza in terms of reduced price, high quality product and delivery at doorsteps. Actually, everybody is a winner here.

Why should banks enter insurance? There are several reasons why banks should seriously consider Bancassurance, the most important of which is increased return on assets (ROA). One of the best ways to increase ROA, assuming a constant asset base, is through fee income. Banks that build fee income can cover more of their operating expenses, and one way to build fee income is through the sale of insurance products. Banks that effectively cross-sell financial products can leverage their distribution and processing capabilities for profitable operating expense ratios.

By leveraging their strengths and finding ways to overcome their weaknesses, banks could change the face of insurance distribution. Sale of personal line insurance products through banks meets an important set of consumer needs. Most large retail banks engender a great

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deal of trust in broad segments of consumers, which they can leverage in selling them personal line insurance products. In addition, a bank’s branch network allows the face to face contact that is so important in the sale of personal insurance.

Another advantage banks have over traditional insurance distributors is the lower cost per sales lead made possible by their sizable, loyal customer base. Banks also enjoy significant brand awareness within their geographic regions, again providing for a lower per-lead cost when advertising through print, radio and/or television. Banks that make the most of these advantages are able to penetrate their customer base and markets for above-average market share.

Other bank strengths are their marketing and processing capabilities. Banks have extensive experience in marketing to both existing customers (for retention and cross selling) and non-customers (for acquisition and awareness). They also have access to multiple communications channels, such as statement inserts, direct mail, ATMs, telemarketing, etc. Banks' proficiency in using technology has resulted in improvements in transaction processing and customer service.

By successfully mining their customer databases, leveraging their reputation and 'distribution systems’ (branch, phone, and mail) to make appointments, and utilizing 'sales techniques’ and products tailored to the middle market, European banks have more than doubled the conversion rates of insurance leads into sales and have increased sales productivity to a ratio which is more than enough to make Bancassurance a highly profitable proposition.

Benefits to insurersInsurers have much to gain from marketing through banks. Personal-lines carriers have found it difficult to grow using traditional agency systems because price competition has driven down margins and increased the compensation demands of successful agents. Over the last decade, life agents have sold fewer and larger policies to a more upscale client base. Middle-income consumers, who comprise the bulk of bank customers, get little attention from most life agents. By capitalizing on bank relationships, insurers will recapture much of this under served market.

Most insurers that have tried to penetrate middle-income markets through alternative channels such as direct mail have not done well. Clearly, a change in approach is necessary. As with any initiative, success requires a clear understanding of what must be done, how it will be done and by whom. The place to begin is to segment the strengths that the bank and insurer bring to the business opportunity.

Collaboration is the key In their natural and traditional roles and with their current skills, neither banks nor insurance companies could effectively mount a Bancassurance start-up alone. Collaboration is the key

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to making this new channel work.

Banks bring a variety of capabilities to the table. Most obviously, they own proprietary databases that can be tapped for middle-market warm leads. In addition, they can leverage their name recognition and reputation at both local and regional levels. Strong players also excel at managing multiple distribution channels, cross-selling banking products, and using direct mail. However, most banks lack experience in several areas critical to successful Bancassurance strategies: in particular, developing insurance products, selling through face-to-face "push" channels underwriting, and managing long-tail insurance products.

Where banks usually fall short, a strong insurer will excel. Most have substantial product and underwriting experience, strong "push" - channel capabilities, and investment management expertise. On the other hand, they tend to lack experience or ability in the areas where banks prevail. They have little or no background in managing low-cost distribution channels; they often lack local and regional name recognition and reputation; and they seldom possess access to or experience with the middle market.

Bancassurance in India - A SWOT Analysis Even though, banks and insurance companies in India are yet to exchange their wedding rings, Bancassurance as a means of distribution of insurance products is already in force in some form or the other. Banks are selling Personal Accident and Baggage Insurance directly to their Credit Card members as a value addition to their products. Banks also participate in the distribution of mortgage linked insurance products like fire, motor or cattle insurance to their customers. Banks can straightaway leverage their existing capabilities in terms of database and face to face contact to market insurance products to generate some income for themselves which hitherto was not thought of.

Once Bancassurance is embraced in India with full force, a lot will be at stake. Huge capital investment will be required to create infrastructure particularly in IT and telecommunications, a call center will have to be created, top professionals of both industries will have to be hired, an R & D cell will need to be created to generate new ideas and products. It is therefore essential to have a SWOT analysis done in the context of Bancassurance experiment in India.

Strengths

In a country of 1 Billion people, sky is the limit for personal lines insurance products. There is a vast untapped potential waiting to be mined particularly for life insurance products. There are more than 900 Million lives waiting to be given a life cover (total number of individual life policies sold in 1998-99 was just 91.73 Million). There are about 200 Million households waiting to be approached for a householder's insurance policy. Millions of people travelling in and out of India can be tapped for Overseas Mediclaim and Travel Insurance policies. After discounting the population below poverty line the middle market segment is

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the second largest in the world after China. The insurance companies worldwide are eyeing on this, why not we preempt this move by doing it ourselves?

Our other strength lies in a huge pool of skilled professionals whether it is banks or insurance companies who may be easily relocated for any Bancassurance venture. LIC and GIC both have a good range of personal line products already lined up, therefore R & D efforts to create new products will be minimal in the beginning. Additionally, GIC with 4200 operating offices and LIC with 2048 branch offices are almost already omnipresent, which is so essential for the development of any Bancassurance project.

Weaknesses

The IT culture is unfortunately missing completely in all of the future collaborators i.e. banks, GIC & LIC. A late awakening seems to have dawned upon but it is a case of too late and too little. Elementary IT requirement like networking (LAN) is not in place even in the headquarters of these institutions, when the need today is of Wide Area Network (WAN) and Vast Area Network (VAN). Internet connection is not available even to the managers of operating offices.

The middle class population that we are eyeing at are today overburdened, first by inflationary pressures on their pockets and then by the tax net. Where is the money left to think of insurance ? Fortunately, LIC schemes get IT exemptions but personal line products from GIC (mediclaim already has this benefit) like householder, travel, etc. also need to be given tax exemption to further the cause of insurance and to increase domestic revenue for the country.Another drawback is the inflexibility of the products i.e. it can not be tailor made to the requirements of the customer. For a Bancassurance venture to succeed it is extremely essential to have in-built flexibility so as to make the product attractive to the customer.

Opportunities

Banks' database is enormous even though the goodwill may not be the same as in case of their European counterparts. This database has to be dissected variously and various homogeneous groups are to be churned out in order to position the Bancassurance products. With a good IT infrastructure, this can really do wonders.

Other developing economies like Malaysia, Thailand and Singapore have already taken a leap in this direction and they are not doing badly. There is already an atmosphere created in the country for liberalisation and there appears to be a political consensus also on the subject. Therefore, RBI or IRA should have no hesitation in allowing the marriage of the two to take place. This can take the form of merger or acquisition or setting up a joint venture or creating a subsidiary by either party or just the working collaboration between banks and insurance companies.

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Threats

Success of a Bancassurance venture requires change in approach, thinking and work culture on the part of everybody involved. Our work force at every level are so well entrenched in their classical way of working that there is a definite threat of resistance to any change that Bancassurance may set in. Any relocation to a new company or subsidiary or change from one work to a different kind of work will be resented with vehemence.

Another possible threat may come from non-response from the target customers. This happened in USA in 1980s after the enactment of Garn - St Germaine Act. A rush of joint ventures took place between banks and insurance companies and all these failed due to the non-response from the target customers. US banks have now again (since late 1990s) turned their attention to insurance mainly life insurance.

The investors in the capital may turn their face off in case the rate of return on capital falls short of the existing rate of return on capital. Since banks and insurance companies have major portion of their income coming from the investments, the return from Bancassurance must at least match those returns. Also if the unholy alliances are allowed to take place there will be fierce competition in the market resulting in lower prices and the Bancassurance venture may never break-even.

Looking Around

Hardly 20% of all US banks were selling insurance in 1998 against almost 70% to 90% in many W. European countries. Market penetration of Bancassurance in new life businesses in Europe ranges between 30% in U.K. to nearly 70% in France. Almost 100% banks in France are selling insurance products. In 1991 Nationale Nederlanden of Netherlands merged with Post Bank, the banking subsidiary of the post office to create the ING Group - a new dimension to the Bancassurance i.e. harnessing the databank of the post office as well. CNP, the largest independent insurance company in France has developed its product distribution through post offices. The merger of Winterthur, the largest Swiss insurance company with Credit Suisse and Citibank with Travellers Group have resulted in some of the largest financial conglomerates in the world.

Despite the phenomenal success of Bancassurance in Europe, property and casualty products have not made much inroads. In Spain, Belgium, Germany and France where more than 50% of all new life premium is generated by Bancassurance, only about 6% P & C business comes from banks in Spain, 5% in Belgium, 4% in France and Italy.

A recent study by Boston Consulting Group and Bank Administration Institute in USA claims that if banks made a major commitment to insurance and a more narrowly targeted commitment to investors, within 5 years they could increase retail revenues by nearly 50%. It

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further states that Banks could capture 10% to 15% of the total U.S. insurance and investment market by selling products to 20% of their existing customers.

Banks' existing infrastructure enables them to operate at expense levels that are 30% to 50% lower than those of traditional insurers.

Bancassurance's bank-branch based sales system sells 3 to 5 times as many insurance policies as a conventional as a conventional insurance sales and distribution force.

By simplifying Bancassurance products each back office bank employee can quintuple managing policies compared to traditional insurers.

Lessons

We should take a leaf from the experienced players and develop Bancassurance only gradually. As happened in France, Italy, Germany and Canada - banks were allowed first only to distribute the insurance products for a fee. This itself amounted to substantial income for banks since they were not carrying the risks and product development was also left to insurance companies. This seems fair since each player should contribute towards something in which he excels; banks in mass distribution and insurance companies in risk management. After stabilization, the roles may be expanded in opposite directions.

We need to develop innovative products and services. CIBC in Canada relieves the customer of having to report and resolve auto claims. The bank assumes responsibility for the process, even phoning the police for the customer at the time of the accident. Another example is provided by Banco Bilbao Vizcaya of Spain who offers a term life policy with simple premium payments and a clear contract that is designed to be sold, issued and signed at the point of sale within 15 minutes.

Banks and insurance companies in India wishing to pursue high aspiration insurance strategies would do well to learn from European bancassurers, who have decades of experience managing insurance subsidiaries. Some of them - Lloyds TSB in the UK, Credit Agricole in France and Spain's Banco Bilbao Vizcaya - are delivering outstanding results. These bank have profitably sold insurance products to more than a fourth of their customers while generating more than 20% on sales. Credit Agricole, the second largest life insurer in France, with $11 billion of premium in force, employs only 170 people in its insurance subsidiary. It is able to limit overhead by harnessing the bank's existing resources and capabilities.

Obstacles and success factors

Even insurers and banks that seem ideally suited for a Bancassurance partnership can run into problems during implementation. The most common obstacles to success are poor

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manpower management, lack of a sales culture within the bank, no involvement by the branch manager, insufficient product promotions, failure to integrate marketing plans, marginal database expertise, poor sales channel linkages, inadequate incentives, resistance to change, negative attitudes toward insurance and unwieldy marketing strategy.

Conversely, Bancassurance ventures that succeed tend to have certain things in common. Factors that appear to be critical to success include strategies consistent with the bank's vision, knowledge of target customers' needs, defined sales process for introducing insurance services, simple yet complete product offerings, strong service delivery mechanism, quality administration, synchronized planning across all business lines and subsidiaries, complete integration of insurance with other bank products and services, extensive and high-quality training, sales management tracking system for reporting on agents' time and results of bank referrals and relevant and flexible database systems.

Finally

The creation of Bancassurance operations has a material impact on the financial services industry at large. Banks, insurance companies and traditional fund management houses are converging towards a model of global retail financial institution offering a wide array of products. It leads to the creation of 'one-stop shop' where a customer can apply for mortgages, pensions, savings and insurance products.

Discovery comes from looking at the same thing as everyone else but seeing something different. Banks' desire to increase fee income has them looking at insurance. Insurance carriers and banks can become part of the vision through strategic partnerships. Now is the time to position your company for the new millennium of insurance product distribution.comments (0) |

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How To Write a SWOT ANALYSIS Posted by Neni Manize A Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis allows business management to formulate strategies to increase profits for a company. The SWOT analysis also helps ma company and its employees to adapt to changing factors in the industry.mThe SWOT can be classified into internal and external factors affecting a company. The Strengths and Weaknesses of the SWOT analysis represent the internal factors that influence the viability of the company. The Opportunities and Threats, on the other hand, are the external factors that may affect the company's performances.What Are Examples of Internal Strengths of a Company?A strength is essentially a factor from within the company that has resulted in the success of the organisation. For example, a management team with strong calibre denotes that the company is forward looking and is flexible to change. Both factors allow the company to presevere amongst competitors, especially when external threats, such as changes in regulation with respects to the industry, occur.

Another example of a company strength is a hefty financial cash flow. Companies that are liquid in cash are more likely to succeed in the long-run than companies that have invested in illiquid assets (such as heavy equipment / renovations in the office.) This is because working capital (cash) is required to sustain the company's ability to pay employees / suppliers / fund marketing campaigns.What Are Examples of Weaknesses within a Company?A weakness of an organisation can be detrimental to the survival of the company. A popular example is poor retention rate of employees. This equates to a high turnover with dissatisfied employees leaving for other job opportunities. The fact that this takes place can be due to a number of reasons. One of them may be poor compensation packages (due to lack of funds). Another example may be a weak organisational culture that inhibits employees from expressing their views and concerns.

What Are Opportunities in the External Environment?

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An opportunity allows a company to increase profits by offering a gap in demand, a wider consumer base, or an opportunity to reduce costs. A company's strategic goal is to move forward to achieving opportunities that arise in the market. For example, a coffee house may find an opportunity when new suppliers of coffee beans enter into the market. This increases competition amongst coffee bean suppliers and thus, reduces costs for the coffee house. Opportunities are almost always found in shifts in consumer preferences. For example, with the increase of women penetrating the workforce, more clothing designers nab the opportunity to produce fashionable career attire for working women.

What Are the Threats Inherent in the Environment?A threat can affect the company negatively, especially if the company is unable to adapt to the threat and mitigate its harmful effects. For example, a threat for small grocery retailers would be the emergence of a hyper-market in the area - Wal-mart - for instance. A common threat in any economy would be an economic recession, which reduces consumers' consumption. This threat generally reduces revenue in companies, regardless of the sector.At the end of a SWOT analysis, the company's plans to move forward should be centred around the opportunities quadrant. Opportunities translate into opportunities to increase revenue as well as to reduce costs; this, in turn, is transformed into higher profits. To achieve success in the opportunities quadrant, the company should look at capitalising on its strengths, such as an effective marketing strategy. By using their strengths, companies should also be able to strategise against the threats that are inherent in the market. Threats are extinguishable but steps to mitigate them can be taken to protect the operations on the company. Although companies always capitalise on their strengths, they should not ignore their weaknesses. Weaknesses represent loopholes within their organisational structure / operations. A company should resolve to fill in their weaknesses in the long-run to ward off aggressive competition.

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SWOT Analysis Example ( Case Study) Posted by Neni Manize Lets to the point, In SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis, the analyst first looks into the business unit to identify its strengths and weaknesses. The analyst then reviews the environment in which the business unit operates and identifies opportunities presented by that environment and the threats posed by that environment. The following lists show questions that an analyst would ask in conducting a SWOT analysis.

Strengths

What does the company do well? Is the company strong in its market?

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Does the company have a strong sense of purpose and the culture to support the purpose?

Weaknesses

What does the company do poorly? What problems could be avoided? Does the company have serious financial liabilities?

Opportunities

Are industry trends moving upward? Do new markets exist for the company’s products/ services? Are there new technologies that the company can exploit?

Threats

What are competitors doing well? What obstacles does the company face? Are there troubling changes in the company’s business environment

(technologies, laws, and regulations)?

The following case study demonstrates how SWOT can be used to create a strong business strategy.

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Case Study

In the mid-1990s, Dell Computer used a SWOT analysis to create a strong business strategy that has helped it become a very strong competitor in its industry value chain. Dell identified its strengths in selling directly to customers and in designing its computers and other products to reduce manufacturing costs. It acknowledged the weakness of having no relationships with local computer dealers. Dell faced threats from competitors such as Compaq and IBM, both of which had much stronger brand names and reputations for quality at that time. Dell identified an opportunity by noting that its customers were becoming more knowledgeable about computers and could specify exactly what they wanted without having Dell salespersons answer questions or develop configurations for them. It also saw the internet as potential marketing tool. The results of dell’s SWOT analysis are:

Strengths

Sell directly to consumers Keep costs below competitors

Weaknesses

No strong relationships with computer retailers

Opportunities

Consumer desire for one-stop shopping Consumers know what they want to buy Internet could be a powerful marketing tool

Threats

Competitors have stronger brand names Competitors have strong relationships with computer retailers

The strategy that Dell followed after doing the analysis took all for of the SWOT elements into consideration. Dell decided to offer customized computers built to order and sold over the phone, and eventually, over the internet. Dell’s strategy capitalized on its strengths and avoiding relying on a dealer network. The brand and quality threats posed by Compaq and IBM were lessoned by dell’s ability to deliver higher perceived quality because each computer was custom made for each buyer.comments (0) | Older Posts

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