Published by MBA Skool Team, Last Updated: February 25, 2022
Porter’s Five Forces Analysis of AIA Insurance covers the company’s competitive landscape as well as the factors affecting its sector. The analysis focuses on measuring the company’s position based on forces like threat of new entrants, threat of substitutes, bargaining power of buyers, bargaining power of suppliers and competitive rivalry.
AIA Insurance Five Forces analysis helps to analyze its current position in the market based on multiple internal and external factors like competitors, customers, suppliers (vendors and partners), financial strength, future scope & alternate solutions.
Let us start the AIA Insurance Porter Five Forces Analysis:
The threat of new entrants in the AIA Insurance Porter Five Forces Analysis can be explained as follows:
AIA Insurance is one the most recognized brands in the insurance industry. The threat of new entrants can be diagnosed through factors such as the existing number of players in the industry, barriers to entry, switching costs, brand equity, differentiability, etc. The barriers of entry are low in case of the insurance industry. Similar is the case with customer switching costs. There is less scope for differentiability in the insurance industry for a company like AIA as every insurance has more or less similar offerings. The difference that can be showcased is minimal. Brand equity plays a major role in customers taking a decision to switch from one insurance to another. A new player in the industry cannot develop as much brand awareness and brand equity as an established player in shorter durations. It is a time taking process of building mutual trust. This is the case for a totally new player wanting to enter the industry. There is a chance of established financial industry players or any other high brand equity firm entering into the insurance industry. In this case, the threat will be higher. Overall, we can say that the threat of new entrants in the industry can be said to be high.
Threat of Substitutes:
Below are the threats of substitute products of Porter’s Five Forces analysis of AIA Insurance:
A substitute can be any product or service, or offering that can pose as a significant alternative to AIA Insurance's offerings for the customers.
There are not many substitutes per se for the same value proposition for the insurance industry, but there is always a risk lurking for the company for the potential alternatives the customers can invest in instead of insurance such as stocks, land, gold, etc. However, we can safely say that there isn't an exact alternative to health insurance. However, it must be noted that the switching costs for the customers are less. But at the same time, as the value proposition is different for the alternate short-term investments or long-term investments, the purpose and functionality are very different, and they cannot completely replace medical and health insurance. Due to the above-mentioned factors, we can infer that the threat of substitutes is less moderate.
Bargaining Power of Customers:
In the AIA Insurance Porter Five Forces Analysis the bargaining power of the customers can be explained as:
Customers for the AIA Insurance group are the individuals or entities that purchase insurance products from AIA The bargaining power of customers can be determined by factors such as the cohesive behavior of customers, quantity and scale of purchase, alternatives availability, differentiability, etc. The individual customers do not exhibit any specific cohesive behavior. Individual customer purchases are not high in quantity, individually speaking. But corporate organizations also purchase insurance packages for their employees, and such purchases are high. Hence, they have the bargaining power to get packages for the best prices. There are a decent number of competitors available for the same value proposition in the industry, and as previously mentioned, differentiability is less. In the case of organizations specifically, the switching costs tend to be on the higher end as the organizations usually tie up for the insurance packages for a certain period of time with a vendor, and it is hard to break the contract once it is sealed.
Owing to all these factors, we can say that the switching costs are moderate.
Bargaining Power of Suppliers:
Following is the bargaining power of suppliers in the Porter’s Five Forces analysis of AIA Insurance:
The suppliers for the insurance industry include reinsurers, lead providers, capital markets, human resource suppliers, etc. Suppliers are one of the important components of the insurance industry supply chain. There are currently more than 100 reinsurers available such as Munich RE. Insurance companies have a good choice of reinsurers to choose from, and there isn't much differentiability between the reinsurers given similar brand equity. There are also a fair number of lead providers available to choose from for AIA, and similar is the case with H.R. suppliers. Capital markets will only be interested in investing in a firm with good brand equity and one that has the potential to grow quickly for the given risk, and AIA insurance satisfies all those criteria. Considering all these factors, the bargaining power of suppliers can be considered low.
The impact of key competitors in the AIA Insurance Porter Five Forces Analysis is as follows:
As previously mentioned, AIA belongs to the insurance industry. There are a decent number of players in this industry already. There are a decent number of players in the insurance industry, such as United Health, Prudential, etc. There is also a threat from competitors and other financial service providers that have the potential to enter into the insurance industry. AIA has good brand equity, but there are equally large companies at play in the market with equally good brand equity, and given the fact that there is less differentiation in terms of the offering, there is price competition in the industry. The competition is not just faced by the international players but also by the local and national players of the corresponding industry.
With all these factors in mind, we can say that there is a high competitive rivalry in the industry for AIA Insurance.
To conclude, the above AIA Insurance Porter Five Forces Analysis highlights the various elements which impact its competitive environment. This understanding helps to evaluate the various external business factors for any company.
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