Porters Five Force Model

Threat of New Entrants.
The average entrepreneur can’t come along and start a large

insurance company. The threat of new entrants lies within the insurance industry
itself. Some companies have carved out niche areas in which they underwrite
insurance. These insurance companies are fearful of being squeezed out by the big
players. Another threat for many insurance companies is other financial services
companies entering the market.
Power of Suppliers. The suppliers of capital might not pose a big threat, but the
threat of suppliers luring away human capital does. If a talented insurance
underwriter is working for a smaller insurance company (or one in a niche industry),
there is the chance that person will be enticed away by larger companies looking to
move into a particular market.
Power of Buyers. The individual doesn’t pose much of a threat to the insurance
industry. Large corporate clients have a lot more bargaining power with insurance
companies. Large corporate clients like airlines and pharmaceutical companies pay
millions of dollars a year in premiums. Insurance companies try extremely hard to get
high-margin corporate clients.
Availability of Substitutes. This one is pretty straight forward, for there are plenty of
substitutes in the insurance industry. Most large insurance companies offer similar
suites of services. Whether it is auto, home, commercial, health or life insurance,
chances are there are competitors that can offer similar services. In some areas of
insurance, however, the availability of substitutes is few and far between. Companies
focusing on niche areas usually have a competitive advantage, but this advantage
depends entirely on the size of the niche and on whether there are any barriers
preventing other firms from entering.
Competitive Rivalry. The insurance industry is becoming highly competitive. The

difference between one insurance company and another is usually not that great. As
a result, insurance has become more like a commodity – an area in which the
insurance company with the low cost structure, greater efficiency and better
customer service will beat out competitors. Insurance companies also use higher
investment returns and a variety of insurance investment products to try to lure in
customers. In the long run, we’re likely to see more consolidation in the insurance
industry. Larger companies prefer to take over or merge with other companies rather
than spend the money to market and advertise to people
Porter Five Forces is a holistic strategy framework that took strategic decision away from just
analyzing the present competition. Porter Five Forces focuses on - how MetLife, Inc. can
build a sustainable competitive advantage in Life Insurance industry. Managers at MetLife,
Inc. can not only use Porter Five Forces to develop a strategic position with in Life Insurance
industry but also can explore profitable opportunities in whole Financial sector.
MetLife, Inc. Porter Five (5) Forces Analysis for

Financial Industry
Threats of New Entrants
New entrants in Life Insurance brings innovation, new ways of doing things and put pressure
on MetLife, Inc. through lower pricing strategy, reducing costs, and providing new value
propositions to the customers. MetLife, Inc. has to manage all these challenges and build
effective barriers to safeguard its competitive edge.
How MetLife, Inc. can tackle the Threats of New Entrants

 By innovating new products and services. New products not only brings new customers to
the fold but also give old customer a reason to buy MetLife, Inc. ‘s products.
 By building economies of scale so that it can lower the fixed cost per unit.
 Building capacities and spending money on research and development. New entrants are
less likely to enter a dynamic industry where the established players such as MetLife, Inc.
keep defining the standards regularly. It significantly reduces the window of extraordinary
profits for the new firms thus discourage new players in the industry.
Bargaining Power of Suppliers

All most all the companies in the Life Insurance industry buy their raw material from
numerous suppliers. Suppliers in dominant position can decrease the margins MetLife, Inc.
can earn in the market. Powerful suppliers in Financial sector use their negotiating power to
extract higher prices from the firms in Life Insurance field. The overall impact of higher
supplier bargaining power is that it lowers the overall profitability of Life Insurance.
How MetLife, Inc. can tackle Bargaining Power of the Suppliers

 By building efficient supply chain with multiple suppliers.
 By experimenting with product designs using different materials so that if the prices go up of
one raw material then company can shift to another.
 Developing dedicated suppliers whose business depends upon the firm. One of the lessons
MetLife, Inc. can learn from Wal-Mart and Nike is how these companies developed third
party manufacturers whose business solely depends on them thus creating a scenario where
these third party manufacturers have significantly less bargaining power compare to Wal-
Mart and Nike.
Bargaining Power of Buyers
Buyers are often a demanding lot. They want to buy the best offerings available by paying
the minimum price as possible. This put pressure on MetLife, Inc. profitability in the long run.
The smaller and more powerful the customer base is of MetLife, Inc. the higher the
bargaining power of the customers and higher their ability to seek increasing discounts and
offers.
How MetLife, Inc. can tackle the Bargaining Power of Buyers

 By building a large base of customers. This will be helpful in two ways. It will reduce the
bargaining power of the buyers plus it will provide an opportunity to the firm to streamline its
sales and production process.
 By rapidly innovating new products. Customers often seek discounts and offerings on
established products so if MetLife, Inc. keep on coming up with new products then it can limit
the bargaining power of buyers.
 New products will also reduce the defection of existing customers of MetLife, Inc. to its
competitors.
Threats of Substitute Products or Services
When a new product or service meets a similar customer needs in different ways, industry
profitability suffers. For example services like Dropbox and Google Drive are substitute to
storage hardware drives. The threat of a substitute product or service is high if it offers a
value proposition that is uniquely different from present offerings of the industry.
How MetLife, Inc. can tackle the Treat of Substitute Products /

Services
 By being service oriented rather than just product oriented.
 By understanding the core need of the customer rather than what the customer is buying.
 By increasing the switching cost for the customers.
Rivalry among the Existing Competitors
If the rivalry among the existing players in an industry is intense then it will drive down prices
and decrease the overall profitability of the industry. MetLife, Inc. operates in a very
competitive Life Insurance industry. This competition does take toll on the overall long term
profitability of the organization.
How MetLife, Inc. can tackle Intense Rivalry among the Existing
Competitors in Life Insurance industry
 By building a sustainable differentiation
 By building scale so that it can compete better
 Collaborating with competitors to increase the market size rather than just competing for
small market.
Implications of Porter Five Forces on MetLife,

Inc.
By analyzing all the five competitive forces MetLife, Inc. strategists can gain a complete
picture of what impacts the profitability of the organization in Life Insurance industry. They
can identify game changing trends early on and can swiftly respond to exploit the emerging
opportunity. By understanding the Porter Five Forces in great detail MetLife, Inc. 's
managers can shape those forces in their favor.

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Threat of New Entrants.

The average entrepreneur can’t come along and start a large

Competitive Rivalry. The insurance industry is becoming highly competitive. The

MetLife, Inc. Porter Five (5) Forces Analysis for

How MetLife, Inc. can tackle the Threats of New Entrants

Bargaining Power of Suppliers

How MetLife, Inc. can tackle Bargaining Power of the Suppliers

How MetLife, Inc. can tackle the Bargaining Power of Buyers

How MetLife, Inc. can tackle the Treat of Substitute Products /

Implications of Porter Five Forces on MetLife,

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