analyze AIG Insurance strategy and competitive advantage. As a reminder, students are expected to set their team performance and collaboration expectations early in the semester and follow them.
Step-by-step Directions
Identify if the company competes based on cost advantage or product differentiation. Provide evidence to support your conclusion. (1 slide)
Explain how the company maintains its competitive advantage. (2-3 slides)
If it focuses on cost advantage, discuss each of the five sources of cost advantage and identify which ones the company uses and how (refer to Table 4.1, Dyer et al., 2022, p.60)
If it focuses on product differentiation, discuss each of the four sources of differentiation advantage and identify which ones the company uses and how (refer to Figure 5.1, Dyer et al., 2022, p.78)
Analyze how the company creates value through diversification by applying thoroughly either the Exploit and Expand Resources and Capabilities Model (refer to Figure 6.1, Dyer et al., 2022, p.98) or the Eight Ss Model. (2-3 slides)
Based on your preceding analyses, assess the strategy of the organization (1 slide)
Is the strategy successful and why?
What risks to sustaining competitive advantage the company faces?
What impact does the strategy have on the company, the competitors, and the society?
Full Answer Section
Slides 2-3: Maintaining Competitive Advantage
AIG maintains its competitive advantage through several key strategies:
- Strong Brand Reputation: AIG has built a strong brand image as a global leader in insurance, associated with financial stability and expertise in complex risk management.
- Global Reach: AIG's extensive global network allows it to offer comprehensive coverage for multinational clients, a significant differentiator in the market.
- Financial Strength: AIG's financial stability is crucial in building trust with clients and underwriters, enabling it to offer large-scale coverage and complex risk solutions.
- Risk Expertise: AIG's deep understanding of complex risks, such as terrorism, natural disasters, and cyber threats, allows it to develop innovative insurance products.
- Distribution Channels: AIG's diverse distribution network, including brokers, agents, and direct channels, ensures broad market reach and customer access.
Slides 4-5: Creating Value through Diversification: The Eight S Model
AIG has effectively diversified its business through the Eight S Model:
- Strategy: AIG has pursued a multi-line strategy, offering a wide range of insurance products to diversify risk and tap into different market segments.
- Structure: AIG's decentralized organizational structure allows for flexibility and adaptation to local market conditions.
- Systems: AIG has invested heavily in IT systems to support its global operations and risk management capabilities.
- Staff: AIG employs a diverse workforce with expertise in various insurance lines and global markets.
- Skills: The company focuses on developing employees' skills in underwriting, risk management, and customer service.
- Style: AIG's corporate culture emphasizes innovation, customer focus, and risk management.
- Shared Values: A commitment to integrity, financial strength, and customer service is embedded in AIG's corporate culture.
- Strategic Assets: AIG's strong brand, global network, and financial resources are key strategic assets.
Slide 6: Strategy Assessment
AIG's product differentiation strategy has been largely successful, driven by its strong brand, global reach, and financial strength. The company has effectively leveraged diversification to manage risk and capture growth opportunities.
However, AIG faces significant risks, including economic downturns, regulatory changes, and intense competition. The company must continue to invest in innovation, risk management, and customer service to sustain its competitive advantage.
AIG's strategy has had a profound impact on the insurance industry, shaping the competitive landscape and driving innovation. The company's focus on complex risks has led to the development of new insurance products and services. However, the industry is also facing challenges such as climate change, cyber threats, and emerging risks, which require ongoing adaptation and innovation.