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Porter’s Five Force Model of AXA Group

AXA is an insurance multinational company based in Paris and incorporated in 1859 with an ambition to provide services in order to improve the lives by providing them confidence and peace of mind.  The company is on the leadership position in France and provides advisory services, retirement plans, and life insurance to have better financial strength through different phases of life.  The company is running successfully with a revenue of USD 98.5 billion in 2017 (ACPR, 2018).To grow continuously and keep the streak of success, the industry analysis is critical as it will enable the company to adapt to the rapidly changing environment and advancements in financial and insurance services. To analyze the insurance industry by giving attention to details, Porter’s five forces analysis is presented for the French Insurance industry

Competitive Rivalry

The trend of taking financial advisory and insurance services has increased especially in developed countries like France. There are multiple players competing in the insurance industry of France that mainly includes AXA Group, Credit Agricole, CNP Assurances, BPCE, and Allianz. The market share is majorly distributed among these big giants with a cut of 11.3%, 10.3%, 9.6%, 8.7%, and 7.8% in 2016 for AXA Group,  Credit Agricole, CNP Assurances, BPCE, and Allianz respectively. The market share of each company is close to one another providing evidence of the intense competition in the industry.  This is 46.2 % in accumulation for these five big players which means that the remaining share goes to other large or smaller insurance companies (Statista, 2019). This is also indicating the strength of competition in the industry with no player having an exceptional market share. The difference between the market share of market leader and the company on 5th spot is 3.5 %. Therefore, the competition in the insurance industry of France is intense.

The Threat of New Entrants

The entry into an industry like insurance and financial advisory service is not an easy job.  There are many hurdles that make it a difficult task to start an insurance business in France despite high attraction in terms of market growth and size. The French insurance industry is the 5th largest all over the world but the new entrants face hurdles to entry into the market (ACPR, 2018). The startup capital required to set up an insurance and financial advisory service is massive along with difficult legal requirements. The chances of fraud in this business are more than any other businesses and the French government has made strict laws to reduce the probability of fraud. Thirdly, the customers are reluctant to take services of new firms as a brand image is one of the key factors to attract customers in an insurance company (Manuel, 2016). Keeping in view the hurdles for new entrants, the threat of new entrants in the industry is low.

Threat of Substitutes

The threat of substitute is high when there is likely a substitute in the near future for the products or services of a specific industry.  There seems to be no substitute of insurance and financial advisory services in the near future, especially in the French insurance industry keeping in view the fact that it is the fifth largest market for insurance. The innovation and evolution of services is not the substitute but the improvement in service offerings (Manuel, 2016). This makes the threat of substitutes in the industry on the lower side.

Bargaining power of Buyer

The bargaining power of buyer increases when there is little differentiation among the offerings of competitors along with knowledge of services provided. With the increasing trend of insurance services and technological advancements, today’s customer is well exposed to insurance services with ample knowledge. The mentioned competitors of the French insurance industry also strengthen the bargaining power of buyer due to standardized basic services with little difference. Due to the knowledge of customers about insurance service and no massive difference between the service of competitive firms, the bargaining power of customers in the French insurance industry is high.

Bargaining Power of Supplier

The monthly or annual premium by customers and the experts needed for financial and insurance services are the major suppliers of the insurance industry.  Due to the growth of the market, the supply of money from customers is good but the need of experts makes it difficult for insurance companies to bargain with them.  The role of the insurance expert in the proceedings of France is very crucial that increases the importance of insurance experts (Rouhette & Gallage-Alwis, 2012). The rise is important for insurance experts increases their bargaining power. Therefore, the overall bargaining power of supplier is moderate as insurance expert are also looking for opportunities in firms like AXA Group.

References

ACPR. (2018). The French banking and insurance market. Available at: https://acpr.banque-france.fr/sites/default/files/medias/documents/2017-acpr-statistical-report.pdf
Manuel, E. G. (2016). The Five Competitive Forces of the Insurance and Pension Funds Industry for the Angolan Case.
Rouhette, H., & Gallage-Alwis, S. (2012). The Subtle Role of the Insurer In Expert Proceedings in France. Available at: https://whoswholegal.com/news/features/article/29592/subtle-role-insurer-expert-proceedings-france/
Statista. (2019). Largest insurance groups in France in 2016, by market share
Available at:  https://www.statista.com/statistics/901445/largest-insurance-groups-in-france-by-market-share/

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