Internal Environment Analysis

Internal Environment Analysis

- CUP Corporation was one of the largest insurance firms based in Europe with world wide operations selling various forms of insurance; health, life, causality, property, and automotive insurance. Another major insurance company recently acquired CUP Corp.

- Company growth boasted more than 25 percent each year over the past 10 years. And despite slowing market conditions, CUP Corp. has often been able to gain market share.

- The CUP Corporation is facing a significant internal strategy shift in response to the increasing defection of customers due to their dissatisfaction with the firm’s services.

External Environment/Industry Analysis

Intensity of Rivalry among Competitors (Strong)

- CUP Corp. is under the pressure of increasing competition and consumer price sensitivity as a result of the deregulation of the European market

- Industry growth has slowed considerably; by 1996 industry growth was flat. As a result, competition to gain greater market share within the current market is intensified.

- Product Differentiability is minimal, therefore, the competition between insurance companies are to gain customers is fierce.

Bargaining Power of Customers (Strong)

- Increasing competition suggests that there is a rising number of insurance suppliers, thus increasing the bargaining power of customers

Threat from Substitutes (Strong)

- Relative price/performance of substitutes isn’t very different; therefore threat of substitutes is strong.

- Buyers switching costs are minimal, thus increasing threat of substitution.

- Buyer’s propensity to substitute is strong and clients aren’t bound by long contracts so clients can easily terminate existing contracts and sign with competitors.

- CUP/Southern focused on a less price sensitive portion of the market, thus, I increasingly difficult economic times the threat of substitution is less than some of their competitors.

Threat of new entry (minimal)

Factors affecting entry barriers are:

- Capital requirements are significant enough to provide a certain barrier to entry in this market.

Business Strategy Identification

Corporate Level Strategy

Extent of diversification:

- Cup Corp offers a variety of different insurance products such as health, life, causality, property, and automotive