PORTERS FIVE-FORCE ANALYSIS

Porters fives forces model is an excellent model to use to analyse a

particular environment of an industry. So for example, if we were
entering the PC industry, wewould use porters model to help us find out
about:1 . C o m p e t i t i v e
Rivalry2.Power of suppliers3.Power of buy ers 4.Threa
ts
of
substitutes5.Threat
of
new
entrants.The above five main factors are key factors th
a t i n f l u e n c e i n d u s t r y performance, hence it is common sense and
practical to find out about these factors before you enter the industry. Lets
look at them below.
Competitive rivalry
A starting point to analysing the industry is to look at competitive rivalry.
If entry to an industry is easy then competitive rivalry will likely to
be high. If it is easyf o r c u s t o m e r s t o m o v e t o s u b s t i t u t e p r o d u c t s f o r
e x a m p l e f r o m c o k e t o w a t e r t h e n again rivalry will be high. Generally
competitive rivalry will be high if:

There is little differentiation between the products sold between customers.

Competitors are approximately the same size of each other.

If the competitors all have similar strategies.

It is costly to leave the industry hence they fight to just stay in ( exit barriers)
Power of suppliers
Suppliers are also essential for the success of an organisation. Raw
materialsa r e n e e d e d t o c o m p l e t e t h e f i n i s h p r o d u c t o f t h e
o r ga n i s a t i o n . S u p p l i er s d o h a v e power. This power comes from:

If they are the only supplier or one of few suppliers who supply that particular raw
material.

If it costly for the organisation to move from one supplier to another (knownalso as
switching cost).

If there is no other substitute for their product.

Power of buyers

Buyers or customers can exert influence and control over an industry in

certaincircumstances. This happens when:

There is little differentiation over the product and substitutes can be foundeasily.

Customers are sensitive to price.

Switching to another product is not costly.

Threat of substitutes
Are there alternative products that customers can purchase over your
productthat offer the same benefit for the same or less price? The threat
of substitute is highwhen:

Price of that substitute product falls.

It is easy for consumers to switch from one substitute product to another.

Buyers are willing to substitute.

Threat of new entrant
The threat of a new organisation entering the industry is high when it is
easyfor an organisation to enter the industry i.e. entry barriers are low.An
organisation will look at how loyal customers are to existing products,
howq u i c k l y t h ey c a n a c h i e v e e c o n o my o f s c a l e s , w o u l d t h ey h a v e
a c c e s s t o s u p p l i e r s , would

MARKET SHARE OF INSURANCE INDUSTRY

Life Insurance Industry grows 49 per cent in April

N e w D e l h i : Th e l i f e i n s u r a n c e i n d u s t r y c l o c k e d 4 9 p e r c e n t
g r o w t h i n n e w businesses, while general insurance players saw 16 per cent
increase in April, the firstmonth of the current financial year.Strong
performance by
Life Insurance Corporation,
ICICI
Prudential
and SBILife helped the 16 player-strong life insurance industry to mop
up Rs 2,982 crore inApril this year compared with Rs 1,996 crore
collected in the same month last year,according to data compiled by the
Insurance Regulatory and Development Authority.The countrys largest life insurer,
LIC, saw new premiums grow 57 per cent toRs 2,134 crore in April by selling
15,89,684 policies against Rs 1,355 crore a year ago. It had a market share
of 71.56 per cent in April.

LIC
LIC (Life Insurance Corporation of India) still remains the
l a r g e s t l i f e insurance company accounting for 64% market share. Its share,
however, has droppedf r o m 7 4 % a y e a r b e f o r e , m a i n l y o w i n g t o e n t r y
o f p r i v a t e p l ay e r s w i t h i n n o v a t i v e products and better sales force.
ICICI Prudential Life Insurance Co Ltd
ICICI Prudential Life Insurance Co Ltd is the biggest private life
insurancec o m p a n y i n I n d i a . I t e x p e r i e n c e d g r o w t h o f 5 8 %
i n n e w b u s i n e s s p r e m i u m , accounting for increase in market share to
8.93% in 2007-08 from 6.97% in 2006-07.
Bajaj Allianz Life Insurance Co Ltd
B a j a j Al l i a n z L i f e I n s u r a n c e C o L t d h a s r e p o r t e d a g r o w t h o f 5 2 %
a n d i t s m a r k e t s h a r e w e n t u p t o 6 . 9 8 % i n 2 0 0 7- 0 8 f o r m 5 . 6 6 % i n
2 0 0 6 - 0 7 . Th e c o m p a ny ranked second (after LIC) in number of policies
sold in 2007-08, with total marketshare of 7.36%.
SBI Life Insurance Co Ltd
SBI Life Insurance Co Ltd in terms of new number of
p o l i c i e s s o l d , t h e company ranked 6th in 2007-08. New premium
collection for the company was Rs4,792.66 crore in 2007-08, an increase of
87% over last year.
Reliance Life Insurance Co Ltd
Reliance Life Insurance Co Ltd Total collected was Rs 2,792.76 crore and
itsm a r k e t s h a r e w e n t u p t o 2 . 9 6 % f r o m 1 . 2 3% a y e a r b a c k . I t n o w
r a n k s 5 t h i n n e w business premium and 4th in number of new policies sold in
2007-08.
HDFC Standard Life Insurance Co Ltd
HDFC Standard Life Insurance Co Ltd with an income of Rs 2,680 crore
inFY2007-08, registering a year-on-year growth of 64%. Its market share
is 2.88% andit ranks 6 th among the insurance companies and 5th amongst the
private players.
Birla Sun Life Insurance Co Ltd
Birla Sun Life Insurance Co Ltd market share of the company increased
from1.22% to 2.11% in 2007-08. The company moved to the 7th position in 200708 from8the a year before, pushing down Max New York Life insurance company.

Max New York Life Insurance Co Ltd

Max New York Life Insurance Co Ltd has reported growth of 73% in
2007-08. Total new business generated was Rs 641.83 crore as against Rs 387.51
crore. Thecompany was pushed down to the 8th position from 7th in 2007-08.
Kotak Mahindra Old Mutual Life Insurance Ltd
Kotak Mahindra Old Mutual Life Insurance Ltd the fiscal 2
0 0 7 - 0 8 , t h e company reported growth of 80%, moving from the 11th position
to 9th. It captured amarket share of 1.19% in 2007-08. Last year the company
doubled its branch network to 150 from 74.
Aviva Life Insurance Company India Ltd
Aviva Life Insurance Company India Ltd ranking dropped to 10th in
2007-08from 9th last year. It has presence in more than 3,000 locations
across India via 221 branches and close to 40 banc assurance
partnerships. Aviva Life Insurance plans toi n cr e a s e i t s c a p i t a l b a s e by
R s 3 4 4 c r o r e . Wit h t h e f r e s h i n v e s t me n t , t o t a l p a i d - u p capital of the
insurer would go up to Rs 1,348.8 crore.
Current Market Share of LIFE INSURANCE COMPANIES
L I C s t i l l r e ma i n s t h e l a r ge s t l i f e i n s u r a n c e c o m p a n y a c c o u n t i n g
f o r 6 4% market share. Mainly owing to entry of private players with
innovative products and better sales force
B a j a j Al l i a n z L i f e I n s u r a n c e C o L t d h a s r e p o r t e d a g r o w t h o f 5 2 %
a n d i t s market share went up to 6.98% in 2007-08. The company ranked
second (after LIC)in number of policies sold in 2007-08, with total market share
of 7.36%.
ICICI Prudential Life Insurance Co Ltd is the biggest private life
insurancecompany in India. Accounting for increase in market share to 8.93% in
2007-08.
SBI Life Insurance Co Ltd in terms of new number of
p o l i c i e s s o l d , t h e c o m p a n y r a n k e d 6t h i n 2 0 0 7 - 0 8 . N e w p r e mi u m
c o l l e c t i o n f o r t h e c o mp a ny w a s Rs.4,792.66 crore in 2007-08, an increase
of 87% over last year.
Reliance Life Insurance Co Ltd Total collected was Rs.2,792.76 crore and
itsMARKET SHARE went up to 2.96% from 1.23% a year back.HDFC Standard
Life Insurance Co Ltd with an income of Rs.2,680 crore in F Y 2 0 0 7 - 0 8 ,
r e g i s t e r i n g a y e a r-o n - y e a r g r o w t h o f 6 4 % . I t s M A R K E T S H A R E
i s 2 . 8 8 % a n d i t r a n k s 6 th among the insurance companies and 5th
amongst the private players.

Birla Sun Life Insurance Co Ltd market share of the company increased
from1.22% to 2.11% in 2007-08. The company moved to the 7th position in 200708 from8the a year before.
Max New York Life Insurance Co Ltd has reported growth of 73% in
2007-08. Total new business generated was Rs.641.83 crore as against Rs.387.51
crore. Thecompany was pushed down to the 8th position from 7th in 2007-08.
Kotak Mahindra Old Mutual Life Insurance Ltd the fiscal 2
0 0 7 - 0 8 , t h e company reported growth of 80%, moving from the 11th position
to 9th. It captured amarket share of 1.19% in 2007-08.Aviva Life Insurance
Company India Ltd ranking dropped to 10th in 2007-08from 9th last year.
It has presence in more than 3,000 locations across India via
221 branches and close to 40 bancassurance partnerships. Aviva Life
Insurance plans toi n c r e a s e i t s c a p i t a l b a s e b y R s . 3 4 4 c r o r e . Wit h
t h e f r e s h i n v e s t m e n t , t o t a l p a i d- u p capital of the insurer would go up to
Rs.1,348.8 crore

Opportunities

Technology is improving paperless transaction are available.

Busy life, customer need flexible and customizable policies.

Like mobile banking mobile insurance could be a hit.

New innovations in technology-measuring weather variables.

Threats

Weather cycles.

New substitute product emerging.

Increasing expenses and lower profit margins with hard on the smaller agencies
and insurance companies.

Government regulations on issues like health care terrorism can quicklychange the
direction on insurance.