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Strategic Analysis

[Type the document subtitle]


Vikash Mehta 24181

2017

APEEJAY SCHOOL OF MANAGEMENT


About Company
Star Health and Allied Insurance Co Ltd commenced its operations in 2006 with the business
interests in Health Insurance, Overseas Mediclaim Policy and Personal Accident. With no other
insurance category to focus and divide our attention, we use our resources to focus on service
excellence, design products and use core competency of innovation to deliver the best to our
customers.

At Star Health Insurance, the company offers a wide range of health insurance products at
affordable prices to make health insurance every human beings right, and as a company, single-
mindedly dedicated to health insurance.

We have built a promising path for our future with a capital base of Rs.1050 crores. We have
emerged as Indias first stand-alone Health Insurance Company, dealing in personal accident,
Medi-claim and overseas travel insurance.

Vision
To Become The Largest And Most Preferred Health Insurance Company In India, And to
Provide Financial Security For Health Care Management.

Mission Statement
To Offer Wide Range of Innovative Products / Services.
To Provide Prompt, Courteous And Quality Service To Customers.
To Leverage State Of Art Technology for Customer Satisfaction.
To Adopt Best Management Practices In Business Operations.

EVALUATION OF MISSION AND VISION

Product Oriented: Star-health insurance mission statement as its promise to offer innovative
product. But mission does not state what the product offer by the company is.

Customer: Mission statement talks about customers and promise to provide quality service.

Technology: Star-health Insurance promise to use latest technology to provide customer


satisfaction.

Concern for Public Image: Star-health insurance promise to best management in the business
operations.
Overall we can conclude that mission statement of star-health insurance is not that good, as it did
not cover many aspects i.e. Markets, Technology, Economical, Philosophy and Self Concept.

COMPONENTS of Mission YES/NO


Statement

1. MARKETS NO

2. TECHNOLOGY YES

3. SURVIVAL, GROWTH, NO
PROFITS

4. PHILOSOPHY NO

5. SELF- CONCEPT NO

6. PUBLIC IMAGE YES

7. EMPLOYEES NO

8. CUSTOMERS YES

9. PRODUCTS AND SERVICES YES

SWOT Analysis

STRENGTHS

Medical Coverage

Strong Reach and Development ability

Easy Claim Experience

Distribution and Geographical Access

Surplus and Return Management

Using of New technology


Increase in Product Line ( i.e. providing insurance cover for multiple diseases )

WEAKNESSES

Limited High End Products

Low Profit Margin

Less Number of products

Customers opting against insurance

OPPORTUNITIES

Government encouraging people to opt for health insurance

Growing Health Insurance Market

Trend shows the increase in percentage of expenditure on health

Increasing presence and visibility in the Markets

People getting more conscious for Health

New Technology

THREATS

Low penetration and accessibility

Mindset and cultural practices

Low Spending on health Insurance

Strong Competitors

Low literacy levels and information penetration


External Factor Evaluation Matrix
Key External Factors Weight Rating Score

Opportunities
Government encouraging people to opt for health insurance 0.06 1 0.06
Growing Health Insurance Market 0.15 4 0.6
Trend shows the increase in percentage of expenditure on health 0.10 3 0.3

STAGE 1
Increasing presence and visibility in Markets 0.09 3 0.27
People getting more conscious for Health 0.07 2 0.14
New Technology 0.12 3 0.36
Threats
Low penetration and accessibility 0.12 1 0.12
Mindset and cultural practices 0.07 4 0.28
Low Spending on health Insurance 0.10 2 0.2
Strong Competitors 0.14 1 0.14
Low literacy levels and information penetration 0.08 3 0.24
TOTAL 1.00 - 2.74

By using the EFE matrix we identify the key external opportunities and threats that are affecting
or might affect the star health insurance. By doing PESTEL analysis of the Star Health insurance
we have identified the factors which may impact the Star health and also the opportunity for the
star health.

I have identified opportunity and threats and assigned the weight on the basis of analysis I have
done. Health insurance is quite new concept in India and it has started to take a big leap now.
People are getting more conscious about their health and opting for the insurance cover and also
we can clearly see a trend which is growing day by day for the health insurance that is certainly a
good news for the insurance sector and insurance companies as they could exploit the
opportunity they would get in future. So the maximum weight is given to growing health
insurance market (0.15) followed by trend which shows people are more expending on their
health (0.10) and new technology (.12) a recent article which is published on business standard
talks about the technology is evolving the insurance sector and helping insurance sector to make
the claim process of customer more easier and hassle free.

Taking about the threat the maximum weight is given to strong competition (0.14) the
competition is quite high in the health insurance. There are other companies which have good
hold on the market share for example Max Life health insurance, Bajaj health insurance, Religare
etc. The other threats include low penetration as people are not aware about the health insurance
and they see the health insurance as sunk cost, apart from that other threats include low literacy
levels and mindset and culture practices.
Competitive Performance Matrix(CPM) - STAGE 1
Max Bupa Bajaj Allianz
Star-Health Health Apollo General
Parameters Insurance Insurance Munich Insurance
Critical Success Factors Weights Rating Score Rating Score Rating Score Rating Score
Branch Locations 0.04 4 0.16 2 0.08 3 0.12 2 0.08
Market Share 0.15 4 0.6 3 0.45 2 0.3 2 0.3
Customer Loyalty 0.08 2 0.16 4 0.32 2 0.16 2 0.16
Market Penetration 0.09 4 0.36 3 0.27 4 0.36 2 0.18
Advertising 0.07 2 0.14 3 0.21 3 0.21 2 0.14
Product Variety 0.06 2 0.12 3 0.18 2 0.12 2 0.12
Claim Ratio 0.08 2 0.16 3 0.24 2 0.16 2 0.16
Brand reputation 0.08 2 0.16 3 0.24 2 0.16 2 0.16
Financial Position 0.12 4 0.48 2 0.24 4 0.48 2 0.24
Price Competitiveness 0.03 2 0.06 3 0.09 2 0.06 2 0.06
Customer Services 0.10 2 0.12 3 0.18 2 0.12 2 0.12
Product Quality 0.05 2 0.18 3 0.27 2 0.18 2 0.18
Product Promotions 0.03 4 0.12 4 0.12 4 0.12 2 0.06
Organization Culture 0.02 1 0.02 3 0.06 3 0.06 3 0.06
TOTAL 1.00 - 2.84 - 2.95 - 2.61 - 2.02

The Competitive performance matrix identifies a firms key competitors and compares them
using industrys critical success factors. The analysis also reveals companys relative strengths
and weaknesses against its competitors, so a company would know, which areas it should
improve and, which areas to protect.

Weight

Each critical success factor should be assigned a weight ranging from 0.0 (low importance) to
1.0 (high importance). The number indicates how important the factor is in succeeding in the
industry. If there were no weights assigned, all factors would be equally important, which is an
impossible scenario in the real world. The sum of all the weights must equal 1.0. Separate factors
should not be given too much emphasis (assigning a weight of 0.3 or more) because the success
in an industry is rarely determined by one or few factors. In our first example, the most
significant factors are strong online presence (0.15), market share (0.14), brand reputation
(0.13).
Rating

The ratings in CPM refer to how well companies are doing in each area. They range from 4 to 1,
where 4 means a major strength, 3 minor strength, 2 minor weakness and 1 major
weakness. Ratings, as well as weights, are assigned subjectively to each company, but the
process can be done easier through benchmarking. Benchmarking reveals how well companies
are doing compared to each other or industrys average.

So we have given the maximum weight to the market share (.15) and financial position (.12)
followed by customer services (0.10) brand reputation (.08) and so on. So after analyzing the
CPM we can conclude that Star health insurance is well positioned in the market comparing to its
competitors only Max Health insurance has highest weighted score (2.95) than Star Health
Insurance(2.84).

Also we came to know about the strength of the star health insurance comparing to its
competitors as Star health is doing in holding of good share of market, product promotion and
location of branch. However there are some areas which need to improve i.e. customer service,
brand loyalty and claim ratio.
Internal Factor Evaluation Matrix
Key Internal Factors Weight Rating Score

Strengths
Medical Coverage 0.06 4 0.24
Strong Reach and Development ability 0.09 4 0.36
Easy Claim Experience 0.05 4 0.2
Distribution and Geographical Access 0.15 4 0.6

STAGE 1
Surplus and Return Management 0.05 3 0.15
Using of New technology 0.10 4 0.4
Increase in Product Line ( i.e.providing insurance cover for
multiple diseases ) 0.08 4 0.32
Weakness
Limited High End Products 0.15 1 0.15
Low Profit Margin 0.07 2 0.14
Less Number of products 0.10 2 0.2
Customers opting against insurance 0.10 1 0.1
TOTAL 1.00 - 2.86

IFE matrix means Internal Factor Evaluation Matrix; is a popular strategic management tool for
auditing or evaluating major internal strengths and internal weaknesses in functional areas of an
organization or a business.IFE matrix also provides a basis for identifying or evaluating
relationships among those areas. The IFE matrix is used in strategy formulation.

The IFE Matrix together with the EFE matrix is a strategy-formulation tool that can be used to
evaluate how an organization or a company is performing in regards to identified internal
strengths and weaknesses of an organization or a company. The IFE matrix method conceptually
relates to the Balanced Scorecard method in some aspects.[2]

The IFE matrix comprises factors (strengths and weaknesses), weight (0.0 to 1.0), rating (0.0 to
4.00) and finally the weighted score after multiplying weight with rating.
OPPORTUNITIES THREATS

Government encourgaging Low penetration and accessibility


TOWS people to opt for health
insurance
Growing Health Insurance Mindset and cultural practices
MATRIX Market
Trend shows the increase in Low Spending on health Insurance
STAGE 2 percentage of income on
health
Increasing presence and Strong Competitors
visibility in Markets
People getting more Low literacy levels and information
conscious for Health penetration
New Technology Government Policy
Medical Coverage
Strong Reach and Development
ability
Claim Experience
STRENGTH

Distribution and Geographical


Access Maxi-Maxi Strategy Maxi-Mini Strategy
Surplus and Return Management
Using of New technology
Increase in Product Line ( i.e.
providing insurance cover for
multiple diseases )
Limited High End Products
WEAKNESS

Low Profit Margin Mini-Maxi Strategy Mini-Mini Strategy


Less Number of products
Customers opting against
insurance
TOWS and SWOT are acronyms for different arrangements of the words Strengths, Weaknesses,
Opportunities and Threats. By analyzing the external environment (threats and opportunities),
and our internal environment (weaknesses and strengths), we can use these techniques to think
about the strategy of our whole organization, a department or a team. We can also use them to
think about a process, a marketing campaign, or even our own skills and experience.

SWOT or TOWS analysis helps to get a better understanding of the strategic choices that we
face. (Remember that "strategy" is the art of determining how we'll "win" in business and life.) It
helps to ask, and answer, the following questions: How do we:

Make the most of our strengths?

Circumvent our weaknesses?

Capitalize on our opportunities?

Manage our threats?

A next step of analysis, usually associated with the externally-focused TOWS Matrix, helps us
think about the options that we could pursue. To do this we match external opportunities and
threats with our internal strengths and weaknesses, as illustrated in the matrix above.

Maxi-Maxi" Strategy: Strategies that use strengths to maximize opportunities.

"Maxi-Mini" Strategy: Strategies that use strengths to minimize threats

"Mini-Maxi" Strategy: Strategies that minimize weaknesses by taking advantage of


opportunities.

"Mini-Mini" Strategy: Strategies that minimize weaknesses and avoid threats.

Strengths and Opportunities (SO) How can we use our strengths to take advantage of these
opportunities?

Strengths and Threats (ST) How can we take advantage of our strengths to avoid real and
potential threats?

Weaknesses and Opportunities (WO) How can we use our opportunities to overcome the
weaknesses we are experiencing?

Weaknesses and Threats (WT) How can we minimize our weaknesses and avoid threats?
SPACE Internal Strategic Position External Strategic Position
Financial Strength(FS) Enviornmental Stability(ES)
(+1to +6) (-6 to -1)
3 Revenue -2 Competitive product price
3 operating Cash Flows -4 Technology Changes
X Axis
4 Liquidity -3 Government Policy
4 Leverage 2 Competitive Pressure
3.5 Average -1.75 Average 1.75
TOTAL X AXIS Score:
Competitive Advantage(CA) Industry Strength(IS)
(-6 to -1) (+1to +6)
-2 Product Quality 5 Entry Barriers
-2 Differentiation 3 Growth Potential
Y Axis -2 Brand & Image 5 Access to financing
-3 Customer Service 4 Product Life Cycle
-3 Cost Leader 5 Profit Margin
-2.4 Average 4.4 Average 2
TOTAL Y AXIS Score:
The SPACE matrix is a management tool used to analyze a company. It is used to determine
what type of a strategy a company should undertake.

The Strategic Position & Action Evaluation matrix or short a SPACE matrix is a strategic
management tool that focuses on strategy formulation especially as related to the competitive
position of an organization.

The SPACE matrix is broken down to four quadrants where each quadrant suggests a different
type or a nature of a strategy:

Aggressive
Conservative
Defensive
Competitive

There are many SPACE matrix factors under the internal strategic dimension. These factors
analyze a business internal strategic position. The financial strength factors often come from
company accounting. These SPACE matrix factors can include for example return on
investment, leverage, turnover, liquidity, working capital, cash flow, and others. Competitive
advantage factors include for example the speed of innovation by the company, market niche
position, customer loyalty, product quality, market share, product life cycle, and others.

Every business is also affected by the environment in which it operates. SPACE matrix factors
related to business external strategic dimension are for example overall economic condition,
GDP growth, inflation, price elasticity, technology, barriers to entry, competitive pressures,
industry growth potential, and others. These factors can be well analyzed using the Michael
Porter's Five Forces model.

The Aggressive posture in the SPACE Analysis Matrix occurs when all the dimensions are
positive. The implicit strategy is to aggressively grow the business raising the stakes for all
competitors. The main danger is complacency. For more details see Aggressive Strategy in
SPACE.

The Competitive posture arises when a firm has strong advantages in an attractive industry but
its financial strength is insufficient to compensate for environmental instability. The immediate
strategy is to improve its financial strength (raising capital, improving profitability, merging with
a cash rich parent) whilst maintaining its competitive position. For more details see Competitive
Strategy in SPACE.

The Conservative posture arises when the firm is financially strong but is unlikely to make
significant returns from the business. The strategy is to look for diversification opportunities in
more attractive competitive situations. For more details see Conservative Strategy In SPACE.
The Defensive posture in the SPACE matrix occurs when all the dimensions are scored poorly.
Firms in this position are very weak and heading for failure unless the external environment
becomes more favorable. The firm will need to retreat from all but its strongest segments so that
it can concentrate its limited resources on a turnaround. Fore more information see Defensive
Strategies

The directional vector reveals that the firm should adopt Aggressive strategies as it has
good competitive position, positive growth, and financial distress.

Above analysis clearly suggests that directional vector of the SPACE Matrix is the basis of
strategy selection. This vector is based on the average values of each dimension. The average
values are computed from individual values assigned to each variable in the dimensions.
Apparently the Matrix depends on the phenomena that how much these values are near to the
reality and represent the quantification of the factors appropriately. It is required that values
should be assigned after careful thought process by the individuals closely in touch with the
organizations key fundamentals. A well organized process of discussion and debates before
working on the SPACE Matrix is also indispensable.

BCG MATRIX FOR Star Health


Cash cows business units will beat their profit target easily, their management is praised.

They are often allowed to reinvest substantial cash amounts in their businesses which are
matured and not growing anymore.

ANALYSIS:

Star health must continue to expand its operations to overall the India and try to tap the rural
market or semi urban cities.

Star Health can use its generous size and available cash to its advantage in a situation of credit
crisis.

Exploit new market segments and opportunities to support for the concentrated growth strategy.

Utilize the strengths in research and development and human resource to develop its
technological resources.

Star

Strategies for Stars All types of marketing, sales promotion and advertising strategies are used
for Stars. This is because in cash cow, already these strategies have been used and they have
resulted in the formation of a cash cow. Similarly in Stars, because of the high competition and
rising market share, the concentration and investment needs to be high in marketing activities so
as to increase and retain market share.
Question marks

Strategies for Question marks As they are new entry products with high growth rate, the
growth rate needs to be capitalized in such a manner that question marks turn into high market
share products. New Customer acquisition strategies are the best strategies for converting
Question marks to Stars or Cash cows. Furthermore, time to time market research also helps in
determining consumer psychology for the product as well as the possible future of the product
and a hard decision might have to be taken if the product goes into negative profitability.

DOGS

Strategies for Dogs Depending on the amount of cash which is already invested in this
quadrant, the company can either divest the product altogether or it can revamp the product
through rebranding / innovation / adding features etc. However, moving a dog towards a star or a
cash cow is very difficult. It can be moved only to the question mark region where again the
future of the product is unknown. Thus in cases of Dog products, divestment strategy is used.
IE Matrix
EFE
Score
4 Strong Average Weak

I II III
High
Grow and Build
3
2.74
IV V VI
Medium
Hold and Maintain

2
VII VIII IX
Low
Harvest Or Divest

1 4 2.86 3 2 1 IFE
Score
The Internal-External (IE) matrix is another strategic management tool used to analyze working
conditions and strategic position of a business. The Internal External Matrix or short IE matrix is
based on an analysis of internal and external business factors which are combined into one
suggestive mode.

The IE matrix can be divided into three major regions that have different strategy implications.

Cells I, II, and III suggest the grow and build strategy. This means intensive and
aggressive tactical strategies. Your strategies should focus on market penetration, market
development, and product development. From the operational perspective, a backward
integration, forward integration, and horizontal integration should also be considered.
Cells IV, V, and VI suggest the hold and maintain strategy. In this case, your tactical
strategies should focus on market penetration and product development.
Cells VII, VIII, and IX are characterized with the harvest or exit strategy. If costs for
rejuvenating the business are low, then it should be attempted to revitalize the business.
In other cases, aggressive cost management is a way to play the end game.

The IE matrix is based on the following two criteria:

Score from the EFE matrix -- this score is plotted on the y-axis and Score from the IFE matrix --
plotted on the x-axis. The point where horizontal line meets vertical line is the determinant of the
companys strategy i.e. V (Hold and Maintain) in Star Health case. This point shows the strategy
that should follow.

Cells IV, V, and VI suggest the hold and maintain strategy. In this case, Star Health tactical
strategies should focus on market penetration and product development.
Market Development Market Penetration
Total Total
Key External Weigh Attractivene Attractivene
Attractivene Attractivene
Factors t ss score ss score
ss score ss score
Opportunities
Government
encouraging
people to opt for
health insurance 0.06 3 0.18 2 0.12
Growing Health
Insurance Market 0.15 2 0.3 2 0.3
Trend shows the
increase in
percentage of
expenditure on
health 0.10 2 0.2 3 0.3
Increasing
presence and
visibility in
Markets 0.09 1 0.09 1 0.09
People getting
more conscious
for Health 0.07 2 0.14 1 0.07
New Technology 0.12 1 0.12 1 0.12
Threats
Low penetration
and accessibility 0.12 3 0.36 3 0.36
Mindset and
cultural practices 0.07 1 0.07 2 0.14
Low Spending
on health
Insurance 0.10 3 0.3 1 0.1
Strong
Competitors 0.14 2 0.28 3 0.42
Low literacy
levels and
information
penetration 0.08 2 0.16 1 0.08
Total 1.10
Strength
Medical
Coverage 0.06 1 0.06 2 0.12
Strong Reach
and Development 0.09 2 0.18 3 0.27
ability
Easy Claim
Experience 0.05 2 0.1 1 0.05
Distribution and
Geographical
Access 0.15 3 0.45 3 0.45
Surplus and
Return
Management 0.05 2 0.1 2 0.1
Using of New
technology 0.10 2 0.2 1 0.1
Increase in
Product Line (
i.e.providing
insurance cover
for multiple
diseases ) 0.08 1 0.08 1 0.08
Weakness
Limited High
End Products 0.15 3 0.45 1 0.15
Low Profit
Margin 0.07 2 0.14 2 0.14
Less Number of
products 0.10 1 0.1 2 0.2
Customers
opting against
insurance 0.10 1 0.1 2 0.2
TOTAL 1.00 4.16 3.96

Quantitative Strategic Planning Matrix (QSPM) is a high-level strategic management approach


for evaluating possible strategies. QSPM provides an analytical method for comparing feasible
alternative actions

Developing a QSPM makes it less likely that key external/internal factors will be overlooked or
weighted inappropriately in deciding which alternative strategies to pursue. Although
developing a QSPM requires a number of subjective decisions, making small decisions
along the way enhances the probability that the final strategic decisions will be best for the firm.
As evidenced for Star Health, after evaluating two strategies through QSPM matrix the company
should follow the market Development strategy as it indicates better score than market
penetration alternative.
Conclusion:
Star Health need to take some measures although the overall position of the Star health is good in
the market but after the doing strategic analysis of the firm it is found that there are certain areas
where Star Health need to work on for example creating loyal customer base and improving the
customer services. Also they need to adopt aggressive strategy and work upon market
penetration and also taking measures against potential threat which may face in the future.

Various products are offered by the star health and certainly they got the advantage of first
mover advantage as they are first company in health insurance . one thing is also interesting to
see whether star health is opting for IPO or not as govt. has given the green light to insurance
companies for the IPO. This move will be change the scenario in insurance market and large size
of fund will flow in this sector. Insurance companies can take this opportunity and strengthen
their position in the market.

References:

http://health.economictimes.indiatimes.com/news/industry/interview-healthcare-
insurance-challenges-and-opportunities/47999563
http://www.starhealth.in/
https://en.wikipedia.org/wiki/Star_Health_and_Allied_Insurance
http://www.maxi-pedia.com/space+matrix+model+strategic+management+method
https://en.wikipedia.org/wiki/IFE_matrix
https://en.wikipedia.org/wiki/Ansoff_Matrix
https://en.wikipedia.org/wiki/Strategic_management