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.
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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.
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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 checklist
1. 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 Weaknesses
This 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 technology
Bear 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 external
opportunities and threats, and b) internal weaknesses with external opportunities and threats
to 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
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Understanding TOWS Matrix
Posted by Neni Manize
Why use the tool?
TOWS Analysis is an effective way of combining a) internal strengths with external
opportunities and threats, and b) internal weaknesses with external opportunities and threats
to 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 to
determine 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 determine
how 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 to
determine 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 to
determine both can be avoided.
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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, 18-40
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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. Spiritual
Is 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. Social
The 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. Professional
The 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. Recreational
What 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. Creational
We 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?
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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 insurers
Insurers 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.
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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.m
The 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.

comments (0) | Labels: i

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‚Äôs 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‚Äôs 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.
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