The survival of a corporation requires two elements: the strategic management of both its external and internal environments. The absence of either environment results in limited profitability. Whether a corporation is dealing with the growing concerns of technological changes or Internet privacy, external and internal factors will have a significant impact on day-to-day operations. Savvy corporations understand that focusing on creating and implementing a sound strategic plan produces above-average returns.
Therefore, the demand to sustain a competitive advantage has caused corporations such as Metropolitan Life Insurance Company (MetLife) to focus on fully understanding its business environment. This paper will analyze two segments of the general environment and its effects on MetLife, identify two forces of competition, examine the external environment for opportunities and threats, and evaluate the internal environment for strengths and weaknesses that impact MetLife.
Choose the two (2) segments of the general environment that would rank highest in their influence on the corporation you chose. Assess how these segments affect the corporation you chose and the industry in which it operates. The general environment is composed of segments like economic, sociocultural, technological, and political/legal trends that indirectly affect all corporations. Although corporations can not directly control the general environment, changes in any element of the general environment can eventually have an effect on a corporation.
Economic and technological trends have had the greatest influence on how MetLife conducts its day-to-day activities. For example, in a stable economy where more individuals are working and household income is increasing, consumers have more money to invest in their insurance needs. More insurance services are bought and sold in a thriving economy versus a shrinking economy. In contrast, in an unhealthy economy consumers spend less and fewer products and services are bought and sold.
Due to the economy’s effects on business decisions, upper management at MetLife are able to scan their economic environment and use these indicators to make business decisions that are in line with their company’s objectives, and offer their clients insurance services at a price that is cheaper than other competitors in their industry. Technology is the tools, methods, and knowledge used to transform information into useful services. MetLife uses technology to provide its clients with efficient and effective products and services.
For instance, their technology consists of equipment, including computers, and software; as well as, the knowledge of sales representatives. MetLife uses technology to decrease cost, and identify new methods that improved their products and services. In the long run, the corporation is able to earn higher returns due to technological innovations. Considering the five (5) forces of competition, choose the two (2) that you estimate are the most significant for the corporation you chose. Evaluate how well the company has addressed these two (2) forces in the recent past.
Competitive forces determine the profitability of a corporation and become vital in strategy formulation. Every corporation faces competition; however, successful corporations make it their primary responsibility to become aware of the competitive forces in their industry, and position themselves to take advantage of their competitors weaknesses. MetLife often uses rivalry among competing firms and threat of new entrants to improve their internal strengths and to avoid mistakes. In the past MetLife sustained a competitive advantage over its rivals by changing prices to gain a temporary edge and improve product differentiation.
The corporation was able to improve its products and services while implementing newly emerging innovations in the process allowing it to improve its position in the market. In addition, because MetLife was able to successfully differentiate their products and services, they were able to gain consumer loyalty. When clients are satisfied with their insurance needs they are less likely to shop for other options. By understanding the threat of new entrants and their underlying causes, MetLife was able to develop and implement entry barriers to stop potential competitors.
For example, because the insurance industry is super competitive, the corporation trained its employees to be highly skilled in product knowledge which attracted new clients and retained old clients. This kept corporations like AIA Group and Aflac from entering into its market and trying to sway its client’s. With the same two (2) forces in mind, predict what the company might do to improve its ability to address these forces in the near future. Hyper competition has changed how corporations offer and sell their products and services.
By fully understanding rivalry among competing firms and threat of new entrants, upper management at MetLife will be able to predict the corporation’s future activities by proactively monitoring its external and internal environments. To completely understand its direct competition, MetLife can utilize competitive intensity to create distribution channels that are difficult to duplicate. The benefits of this will allow the corporation to use technology such as the Internet to gain information about local competition, track market data, and industry trends.
As a result, MetLife will be able to lower its cost and its ability to reach a broader consumer base. Barriers limit the number of new corporations entering the market; as well as, maintain a level playing field for those corporations already established. From a strategic perspective, MetLife can use new innovations and their economies of scale techniques to continue to compete with larger corporations. Finally, as MetLife expands its economies of scale it will become more flexible; ultimately, causing internal growth.
Assess the external threats affecting this corporation and the opportunities available to the corporation. Give your opinions on how the corporation should deal with the most serious threat and the greatest opportunity. Justify your answer. A corporation’s external environment is both dynamic and complex. Because of the effects that the external environment can cause on a corporation’s performance, it is critical that it develop and implement methods and skills required to identify opportunities and threats existing in the external environment.
Market trends show that MetLife is currently experiencing external threats as more banking institutions begin to offer life insurance products at low costs, and the risk of ObamaCare potentially taking the place of employee benefit programs currently being offered by small businesses. Nevertheless, MetLife can take advantage of its diversification growth opportunities such as collaborating with other corporations unrelated to current business, to help in sustaining a competitive advantage.
In my opinion, to cope with its external threats, MetLife should complete an environmental scan in order to determine and utilize its available opportunities. This scan will help the corporation to make key decision on whether to consider offering products and services to its current clients at a lower cost than the banks to avoid losing its current market. Next, the corporation should consider divesting older businesses that no longer fit in with current operations in order to reduce cost.
Finally, these steps should allow the corporation to extend the reach of its brand and add value to its shareholders. Give your opinion on the corporation's greatest strengths and most significant weaknesses. Choose the strategy or tactic the corporation should select to take maximum advantage of its strengths, and the strategy or tactic the corporation should select to fix its most significant weakness. Justify your choices. The most successful corporations recognize that above-average returns and strategic competitiveness are the direct result of strategic management.
Corporations that study their internal environment are able to identify their strengths and weaknesses and make the necessary changes in order to keep in line with their strategic objectives. It is my assumption that MetLife greatest strength has been its ability to collaborate globally with other corporations in the same industry while maintaining its position as market leader in the United States. In addition, the corporation has a large client base. Its most significant weakness is that all though the corporation is located globally, it lacks the global recognition compared to other market players like Hartford (HIG) and Prudential.
To take maximum advantage of its strengths and fix its weaknesses, it is important that MetLife periodically reassess its business strategy, and completes a strengths and weakness analysis. Completing this analysis will allow the corporation to link its strengths and weaknesses to its internal environment and reveal any gaps that need fixing. Determine the company’s resources, capabilities, and core competencies. Strong corporations are able to create core competencies and superior capabilities while taking advantage of their valuable resources.
High-performing corporations achieve market success when they effectively manage and align their resources, capabilities, and core competencies with their corporate goals; thus, giving them a lead over rivals . MetLife resources can be connected to its high profit margins, satisfied shareholders, large client base, and its global presence. In addition, the corporation takes advantage of social media networks to sell its products and services, which has earned the corporation a reputation as market leader in life insurance, annuities, and employee benefit programs.
The capability MetLife uses to execute its business strategy is by being the first to offer products and services to potential clients in untapped markets. Finally, MetLife core competencies is being able to offer its clients better products and services; therefore, making the corporation among the top brands in the insurance industry. Analyze the company’s value chain to determine where they can create using the resources, capabilities, and core competencies discussed above. Most corporations define value in terms of offering their clients the best products and services at the lowest possible price.
Thus, value can be defined as a trade-off between cost and quality. Therefore, corporations must have a mix of resources, capabilities, and core competencies in order to deliver customer value. MetLife can create value by offering products and services to its client’s at a price lower than its competitors. By offering products and services at a lower price, MetLife will be able to buy and sell more goods to a larger client base, the more clients the corporation gains the more profitable it will become.
In addition, MetLife can create value by building strong relationships with its employees, clients, and stockholders. When corporations build positive relationships with their employees, clients, and stockholders this give them access to external resources, an opportunity to become competent, and a chance to utilize their capabilities to earn above-average returns. For example, if a client buys a product or service from MetLife and the outcome of that transaction is positive, the client might share that experience with family and friends which gives MetLife access to an additional customer base by word-of-mouth.
This type of relationship creates value because the client was satisfied with the product or service being offered and how well it was communicated. In the end, MetLife must fully understand that its competitive advantage comes from how it utilizes its resources and capabilities to develop its competencies . Conclusion Resources, capabilities, and core competencies provides an opportunity for corporations to earn above-average returns. A corporation’s external and internal environment brings about both benefits and costs.
On the one hand, corporations must learn to utilize their strengths and opportunities to sustain a competitive advantage. On the other hand, corporations must close any gaps in their threats and weaknesses in order to build efficiency, quality, and customer value. Finally, effective formulation will allow corporations to match their resources, capabilities, and core competencies to its competitive environment. Doing so is instrumental in the success of a corporation.
