Ping An – A Case Study
Ping An Insurance Company has always had the goal of becoming a global player in the world insurance industry. In 2007, this goal came close to realization when Ping An ranked second largest life insurer in China’s insurance industry. This forced it to expand its business to also include banking and asset management. Being three businesses in one, Ping An named this strategy, “the three-pillar’’ strategy. This was intended to play the role of propelling Ping An into the international market. Ping An sought international growth by investing, both locally and internationally. Two local banking assets were acquired, in addition to an asset management partnership with Fortis; a Belgo-Dutch financial corporation. Ping An bought a close to 4.2% stake in Fortis, and later increased this stake. However, this investment suffered great loss owing to the global financial crisis experienced, which adversely affected Fortis. Despite all this, Ping An continues to adopt this strategy, hoping this will strengthen it, especially after losing out with Fortis (Fung and Gao 12).
The three-pillar strategy adopted by Ping An, is more of a diversification model than a growth-cycle model. By investing more, Ping An exhibits its interest in diversification, and not growth. If Ping An would have been after growth, it would invest heavily in product development so as to produce better products. It could also develop inclusive consumer insights in order to achieve customer satisfaction. Concentrating on strategy formulation to grow by acquisition or by moving into new or adjacent markets was paramount. Although Ping An formulated a this type of growth strategy, the strategy was rather rigid and could not accommodate the changes in the market. In addition, little attention to consumer needs cannot result in growth of business. In Ping An’s three-pillar-model, its customers are not given special attention. An ideal growth model concentrates more on product improvement and customer satisfaction, rather than making foreign investments only.
Ping An ought to have adopted a more detailed strategy for its growth. The three-pillar strategy is fine but lacks the necessary details for effectiveness. More time and resources would have been used to develop a corresponding organizational competency. For instance, a conclusive market research through in-house research and development units in the company is mandatory in order to develop the capability of the products. This development of customer insights capability calls for developing strong feedback links between the sales force, or service lines, and product developers.
Experimentation with alternative growth models is advantageous for any company. The more flexible a model is, the more likely it is to survive the market dynamics. This way, potential competitors are realized, as well as lowering the risk of taking wrong business path. This way also, the small amounts of investments can be easily regained in case of loses. Treating a growth model as a variable, and not a constant can boost business growth. If Ping An had adopted this approach, it would not have been severely affected when financial crisis hit Fortis, where Ping An had greatly invested (Fung and Gao 13).
Fung, Hung-Gay, and Gao, Gerald. “Ping An’s Overseas Expansion: Financial Uncertainties
and Risk Management.” Asia Case Research Centre, The University of Hong Kong 445C (2009): 1-24.
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