Zurich Insurance Strategic Marketing Analysis and Plan

Key Strategic Issues

Zurich Insurance Company is a powerful player in the global insurance industry. Despite the economic pressures of recent years, the company strives to expand its operations in a dual sense: deeper penetration of markets in which it already operates, as well as entry into new, emergent markets. This situation reveals the need for complex strategic approaches, materialized primarily in the recommendations to pursue market penetration and market development strategies.

The company faces the strategic decision to expand its operations. This desire is subject to a wide array of competitive challenges, including the following:

Vision, Mission, and Corporate Objectives

Zurich Insurance Company strives to become the best provider of insurance products and services. In the company's own words, the aim is to be "the best global insurer, as defined by our customers, our shareholders and our people" (Website of Zurich Financial Services Group, 2011).

The executives at Zurich Financial Services Group strive to attain their organizational objectives and accomplish the corporate vision through the full satisfaction of the needs and wants of a wide array of stakeholders, including employees, customers, business partners, and the general public. At the customer level, the mission is constructed around the Zurich Help Point — positioning the firm as being close to its customers to help them in a multitude of challenging life situations, such as encounters with damages or the need for financial security (YouTube, 2011).

The ultimate objective of Zurich Insurance Company is to register improved financial results. The means by which it achieves this goal comprise a series of smaller, intermediary objectives, such as customer satisfaction, stakeholder satisfaction, and expansion into both existing and new markets.

Situational Analysis

In order to formulate the most relevant recommendations, it is necessary to begin with a thorough analysis of the situation. This refers to the assessment of a wide array of contexts: the internal organizational climate, the industry in which the firm operates, and the broader macroenvironment.

Political forces: Switzerland is a democratic state in which policies are developed and implemented based on agreement among several political parties. Since Zurich Financial Services Group operates at an international scale, however, it must comply not only with Swiss regulators but also with international regulators and the national regulatory frameworks of every market in which it sells insurance products and services.

Economic forces: At an international level, the economic crisis that commenced in the United States continues to negatively affect consumers' purchasing power, which means that demand for insurance products is under downward pressure. Switzerland maintained a relatively prudential economic posture and did not expose itself excessively to globalization, so the crisis did not generate immediate negative effects domestically. Nevertheless, the financial difficulties are now impacting this Western European country (News Week, 2011).

Socio-cultural forces: The socio-cultural environment affects the insurance industry in several important ways. Changing purchasing power influences sales and revenues. Growing customer expectations translate into demand for higher-quality products, as well as social and environmental responsibility, which in turn raises costs for insurance agencies. Additionally, perceptions of insurance vary significantly across markets: in developed countries, insurance is generally treated as a daily necessity, whereas in less developed and emergent economies it is often regarded as an unnecessary cost and therefore neglected.

Technological forces: Modern society is developing at a rapid pace, often driven by the information technology and communications sector. This sector generates significant advances that are eventually integrated into business operations, including those in the insurance industry. Replacing older technologies with new developments raises productivity and operational efficiency, but also increases operational costs. The integration of technological advances is a competitive imperative rather than an option.

Environmental forces: Environmental protection is becoming increasingly important and affects the insurance industry directly, most notably through the growing need to create insurance products that offer coverage against environmental risks.

Legal forces: The insurance industry continues to evolve, and many of its newer product segments are not yet fully regulated. As new risks emerge and new products are created to address them, new laws are also being developed. This situation generates additional regulatory complexities for players in the insurance industry.

The Swiss insurance industry is characterized by high levels of competition, and the success of insurance agencies depends on their ability to attract and retain as many customers as possible. Porter's Five Forces provides a useful framework for understanding the competitive dynamics of the industry.

Bargaining power of buyers: Individual buyers have relatively little bargaining power over insurance companies. Larger customers, however — such as corporations or large healthcare institutions — are better able to negotiate more advantageous premium rates.

Bargaining power of suppliers: The bargaining power of suppliers is generally limited, but a notable risk exists at the level of human capital. Competition for skilled staff is intense, and insurance agencies risk losing talented employees to larger companies.

Threat of new entrants: Entirely new entrants are seldom a real threat; the more significant risk comes from already-established insurance agents who could expand their operations into new markets or with new products, thereby increasing competitive pressure.

Threat of substitute products: Substitute products are represented by comparable insurance offerings from competing firms. This threat is elevated. Smaller firms operating in niche markets are better protected against substitution and therefore possess a degree of competitive advantage in that respect.

Competitive rivalry: Competitive rivalry in the insurance industry is intensifying. Because insurance products and services tend to be similar, the firm that offers the most compelling combination of lower costs, increased coverage, ease of access, and attractive marketing stands the greatest chance of achieving business success (Investopedia, 2011).

The most intense competition currently faced by Zurich Financial Services Group comes from Allianz SE, Aviva Plc, and AXA. A comparative overview of the four companies based on 2009 data is presented below:

Demand for insurance products and services is driven by demographics, transaction volumes, and legal requirements such as mandatory automobile or real estate insurance. Large insurance providers secure success through economies of scale and effective marketing strategies. Smaller providers generally compete in niche markets by offering specialized products and services to well-defined customer segments.

Industry profitability has been declining as a result of the global economic crisis. As one industry source notes, "In the late 2000s recession, insurers saw revenues decline sharply when their investment portfolios lost value after the market fell. Insurance carriers rely heavily on their investment portfolios, which is where they invest premiums collected until they are needed to pay claims or benefits. In addition, deregulation of the insurance and financial services industries led to increased risk taking that hurt insurers' credit ratings" (Hoovers, 2011).

Strengths:

Weaknesses:

Opportunities:

Threats:

Zurich Financial Services Group is an international player in the insurance industry, currently focused on enhancing its competitive position. To do so, it must capitalize on its strengths and available market opportunities while working to reduce its weaknesses and mitigate the threats it faces. The immediate strategic approach to attaining this goal is through focused marketing efforts.