The Performance of Admiral Group Plc - Case Study Example

Managing Strategic Change Customer Inserts His/Her Name Customer Inserts Grade Course Customer Inserts Tutor’s Name (27, 03, 2009) TABLE OF CONTENTS 1. Introduction…………………………………………………………………………….. 2. Review of Company…………..………………………………………………………... 3. Key Influences and Performances.…………………………………………………….. 4. Management of Change Approaches..…………………………………………………. 5. Conclusions...……………………………………………………………………........... 6. Recommendations...……………………………………………………………………. 7. Appendix 1..……………………………………………………………………………. 8. Appendix 2..……………………………………………………………………………. 9. Bibliography..…………………………………………………………………………... Managing Strategic Change Introduction There has been an increasing need for change due to some factors, like the introduction of technology, growing requirements of the society, expansion of worldwide companies buying and selling different products. It is important that change takes place because it is essential if a business is to survive and compete effectively. However, the procedure happens to be complicated as there are certain human resource plus traditional obstacles which are to b crossed to proceed to success. It is fact that many people do not like change and tend to resist it. However, in recent times they have learnt to accept the fact that change is required for their betterment and that it would be better it they adapt themselves to it because it is going to affect them anyhow. Thus, for change management to be efficient it is required that it is not undervalued and that it is executed after considering it thoroughly and putting in their best; the managers and the employees too. For a business to be successful there are various issues that have to be accounted for. First of all the company should have a strong management team as that would allow for good performance of the business. The location should also be proper so as to get the maximum benefit. Along with this the employees have to be skilled enough so that they are able to meet the requirements of the company’s products and services. Then, the presence of economic management and planning is vital (Western People, 2007). An important factor happens to be innovation. By means of innovation, a business is able to distinguish itself from its rivals. This allows for variation and development. Then there has to be good planning in every stage of the business. A planned business would be vastly better than an unplanned one. The business plans should be laid out beforehand and then implemented. This would see to the fact that there is no neglect on the part of managers and proprietors and would allow for the success of a business or company. On the other hand unplanned businesses usually fail. Along with planning and innovation, the business should have enough financial backup to deal with the expenses. It is particularly required when the business just starts. If there is not enough capital there can be problems as the capacity becomes limited. Thus, it is important to have the monetary conditions in a good state. Then there is the marketing of the company that plays a part in the success of it. Even if a company produces products with very high quality and which are user friendly, there would not be profits for the firm if there is no marketing. This is because the people would not be knowing about it. Therefore, it is important that when a business exists, there should also be marketing done to promote its products and services. Another element is the supplies. A business needs to have an adequate supply of raw materials so as to ensure that it can produce enough to meet the market requirements. For this the company has to have good ties with its suppliers. This would make sure that the company is offered good enough service and possibly may also get the items at a lower price; all an advantage. Then there is the labour problem. The company should be employing the type of people that it requires for the work so as to see to the fact that the productivity is the desired one. Also, too few or too many employees would also create trouble. In the former case the performance of the company would be at risk while in the latter case it would only be added expense to the company. Thus, the business has to plan this out and determine what number of employees they actually require. These were only few of the elements required for the success in a business. Following these values would allow a business to thrive and pose itself as a threat to its competitors. Review of Company For the purpose of writing this report we have chosen Admiral Group plc as the company that we are going to review. After a review of the various reports and publications of the company that were available, we see that Admiral Group plc is in a good condition. As of 3rd March 2009 there was an announcement of a very good position of the Group. Statistics show that the annual result was a profit of £202.5 million for the year to December 2008 (Admiral Group plc, 2009). This data is for before tax. This means that there was a rise in the profits as compared to last year, and it reached over 11%. The turnover was over 13%, reaching to £910 million. The turnover consisted of all premiums plus other income (Admiral Group plc, 2009). Source: ADMIRAL GROUP PLC 2008 FULL YEAR RESULTS ANNOUNCEMENT, 2009. The Group Chief Executive, Henry Engelhardt, commented on the results and talked about how good the position of the company is. He said that “the 2008 dividend will be the biggest in their history” (Admiral Group plc, 2009). Commenting on the reason for such successes he said that it was due to the UK business. They raised their customer figure and to do this they offered attractive prices along with excellent service. The next year they would be launching two projects. According to Engelhardt the Admiral Group is likely to be prospering wildly by the next decade due to the new businesses that are operating outside the UK. Similar remarks were obtained from the Group Chairman of the company, Alastair Lyons. Understandably he was also pleased at the results and said that their continuous expansion in the UK accounted for around 6% of the UK private motor market - that means 1.6 million vehicles. They are eager to initiate their business in the US (Admiral Group plc, 2009). The performance of Admiral Group plc is also to be taken as great due to the fact that it has a total of three competitors but all behind it. In fact Direct Line happens to be the only brand other than Admiral Group that “has yet to have a presence on any price comparison site” (Smart Money, 2009). Concerning the market, Admiral Group was improved in the year 2008, as was released in the 2008 Full Year Results Announcement. The combined ratio happened to be 81%, whereas in 2007 it had been 83%. That meant a two percent betterment. While in the private motor market the combined ratio of 2007 was 104%, which means that Admiral managed to gain a 21 percent on its outperformance during that year (Admiral Group plc, 2009). Key Influences and Performances The review of Admiral Group plc is given in this paper for the last three years. That is, we are going to consider the data available of the company from 2006 to 2008 and assess the Group’s performance. FTSE 100 (the Financial Times Stock Exchange 100) is a market capitalization weighted index used in order to represent the topmost 100 organizations on the London Stock Exchange. This index comprises greater than 80% of the all financing in UK. For the year 2008 the Admiral Group plc happens to be in the FTSE 100 list (FTSE, 2009). This was the case in 2007 as well, when it first managed to reach to this height. This remarkable feat was achieved in the month of December. Before this the Group was in the FTSE 250 index, since 2004 (Admiral Group plc, 2008). So this means there was an improvement in the company’s performance such that it came up to this level. There has been an enhancement in the Group’s revenue growth since, we can say, forever. The revenue continues to grow year by year which shows that the Group continues to perform better each year and get more profits than previous year. A chart comparing the revenues of the Group for the last 16 years is given on the website of Admiral Group. We have used the values of the last three years in order to produce the following chart so as to compare the growth over this time period (Admiral Group plc, 2009). Although there had been new entrants into the market in the year 2008, Admiral managed to surpass them instead of allowing them to pose as a threat. Engelhardt admitted that there is fierce competition for the Group and they have to adjust accordingly. In 2007 Lyons was noted for saying that the competition is high and that must result in a decreased market share for “Confused”, a service of the Admiral Group plc. In 2008 the “Confused” profits fell but it was at a much higher marketing cost. Price comparison, which was initially 24%, turned to 37%, and still growing continuously. It was due to marketing expenses that there was such a lot of reduction in the profits (Admiral Group plc, 2009). The Group managed to counter competition by continuing to provide quality service to its customers. According to Engelhardt, the success of the Group in the year 2008 was due to their looking after the customers better than its competitors did. The Admiral Group managed to increase their customers by as much as 15%. This they did by offering attractive prices along with excellent service. Therefore, their combined ratio fell and there was an increase in their premium income (Admiral Group plc, 2009). Management of Change Approaches When change takes place in a company there has to be mechanisms present that would manage that change. Change can be internal or external. Internal change includes alterations in leadership, growth, innovation, portfolio, ownership, etc; whereas external change includes any political, social, economic or technological change that occurs. Over the three years that we are reviewing Admiral Group, there was no change in the leadership at the company. The chairman and the chief executive were the same all this time. However, the company experienced increased growth and it expanded. Now the company accounts “for some 6% of the U.K. private motor market covering 1.6 million vehicles” as said Lyons, the Group Chairman (Smart Money, 2009). For this purpose there had to be certain strategies that had to be covered in order to continue success. According to Greiner (1972), there is the growth model that every organization goes through. There are five stages of this model that were portrayed by Greiner. These include: Growth through creativity Growth through direction Growth through delegation Growth through coordination and monitoring Growth through collaboration At Admiral Group plc there was growth through direction, in that that there was sustained growth. As the chart of revenues in this paper shows, there had been continued increase in revenues, thus growth by means of direction. Then there is the life cycle model (Churchill and Lewis 1983) that can be applied to the Group. The stages in this model are as follows: Existence Survival Success Take-off Maturity Using this model we can see that the Admiral Group plc is going through the stage of success. Through the data that we have obtained from various sources, we can conclude that the company has been growing and succeeding a lot. We can say that this success came from organizational systems and the ability of the company leaders to manage the resources appropriately so as to put them to maximum use. The plans were properly designed before their implementation, which allowed for their proper execution and so success of the company. The management was also good. In the Admiral Group plc we see that the company had adopted the democratic management style. In this kind of the style the decisions are taken by the whole company; that is, managers as well as employees. There is a Board of Directors who controls the Group and is in charge of the appropriate management of the Group, as well as making sure that the company’s aims and intentions are being met with. The Board makes the executive directors responsible for certain duties. There are also non-executive directors; three are independent while one is not. The independent directors are important as their ideas are considered and taken into view. This shows that the Group employs democratic style of management as different employees, the executive and non-executive directors, etc, are also taken into consideration when making a decision. They are involved with the management process. Through this style every person’s views are put forward and there can be decisions made according to the majority views. Conclusions The Admiral Group seems to be quite strategically managed. The Group has carried out its activities properly and shown a good overall performance. The revenues have been increasing over the years as was shown above in this paper. All this points to the fact that the Group has been successful in implementing its decisions and plans. The Group has taken proper decisions for the company, which were shared by the majority of the directors, chairman and the chief executive. The Admiral Group plc is a very competitive company with a booming business. It has the required competencies and capabilities that are essential for its development. There is market for its services and people are opting to choose Admiral for acquiring their needed services. The existing culture and the decisions must certainly be matching otherwise the Group would not have succeeded as much as it has. This again relates to the fact that the Group is extremely competitive and has a way with its rivals. There are companies that are very much below Admiral, like the General Motors. Recommendations The Admiral Group is performing quite well and there is no need for any change at the moment. This is because change at this exciting moment may not be good for the company and may lead to unwanted consequences. Thus, the company should not alter the way it is operating at the moment. However, there will be a need for change later as with time the culture and way of business changes. There will be an essential requirement for modification of the company’s rules and operation. The Group can then adjust accordingly. For example, in the case of new competitors, or even if the existing ones get more aggressive, the Group can offer better packages for its customers. Like it can provide with even better customer service and see to it that they are producing what is required by their clients. New and better packages may include decreased rates which would also give a good service. This would attract the customers and the competitors would be defeated. Appendix 1 Generic strategies Admiral Group plc is an important company in the UK market for insurance. The Group gets all kinds of customers, whether individual persons or companies. The Group aims to target most of the market in order to dominate it. Admiral Group plc is a competitive company with differentiated advantages such that we can call it the leading insurance sector company. Among the many implementations that the Admiral Group plc has made, one is the helpdesk software using Metastorm (Computer Weekly, 2007). This is supposed to be assisting the Group in meeting its Information Technology information library (ITIL). Like this there are also other advantages to the Company that other organizations do not have, and thus the Group poses as a threat to those of them. Five forces Admiral Group plc offers insurance packages to people. Their customers are individuals or firms that require insurance. Admiral Group is advantageous in that that their category of service is required by everyone; that the people do not have a choice in whether they wish to purchase it or not. They only have to see as to which company they purchase it from. Admiral Group can take advantage of this fact and offer attractive packages and increase its customers. Admiral Group needs certain services from other companies in order to run efficiently and carry out its activities. One such service is e-Service Desk. Admiral Group has adopted this software in order to allow them to provide better service. This service helps in the categorising of calls, customer portal; offers a centralised service desk and an improved incident management along with an enhanced quality of customer service. All these features allow Admiral Group to perform even better. Similar to this are other services that the Group has bought from firms. Admiral Group faces new entrants into the market and this could pose as a threat to the company. So far the Group has managed to counter the competition that it faces because of new entrants, by various ways. For example, it offered attractive prices to the customers with improved services which helped lure more clients. It is reported that the percentage increase in the number of customers due to this was 15%. Admiral Group can be at a disadvantage if there are many substitutes available for the customers for insurance. To avoid this threat it has to keep up with its performance; employing the same tools as described in the above paragraph, else it is possible that the other firms can take over the market share of Admiral Group plc. Admiral Group plc also has to face competition from other firms. One such is Direct Line. The Group can counter the existing competition through the same means that it can utilize for the new entrants, and it has been discussed above. So, through better performance the Group can manage to defeat the prevailing rivalry. Key success factors Admiral Group plc has such a good outlook due to certain factors. The Group looks at the customers’ requirements first and provides them with what they require. This allows for good revenue as more and more people utilize their services. Then there is also the marketing program which promotes the Admiral Group. It is also a key factor in the excellent performance of the Group and is held responsible for the fantastic revenues. Appendix 2 Currently the Admiral Group plc is in a very good state, as has been very often mentioned in this paper. This can be concluded through the review of reports that were available for the general public. The Group has a good market share and can improve further if there is even more attention given to the company. At the moment the Group can take advantage of the position it is in and maintain its position, or better that it improves it. Admiral Group also has the required assets for its expansion. It has capable leaders and decision makers who put in their best for the Group and bring it forward. The Board makes sure that the committees appointed have the necessary competence required for them to work productively. For example, the Committee chairman, Martin Jackson has recent plus appropriate experience in a similar field; he had served for Friends Provident plc as a Group Finance Director between 2001 and 2003, and was the member of the Institute of Chartered Accountants for which he must have required Continuing Professional Development. In this way the employees of the Group are decided carefully so as to make sure that they can carry out their responsibilities properly. That means, the Group has all the required competencies and capabilities and the decisions made by the Group members also tend to be appropriate to a situation. Bibliography Admiral Group plc. 4 March 2008. Admiral Reports Record Profits & Strong Growth. [Online] Available at: http://www.admiralgroup.co.uk/press/pressreleases/04_03_08.php [Accessed 27 March 2009]. Admiral Group plc. 3 March 2009. Admiral Reports Record Profits & Strong Growth. [Online] Available at: http://www.admiralgroup.co.uk/press/pressreleases/03_03_09.php [Accessed 27 March 2009]. Admiral Group plc. ADMIRAL GROUP PLC 2008 FULL YEAR RESULTS ANNOUNCEMENT. 3 March 2009. [Online] Available at: http://www.admiralgroup.co.uk/pdf/rns/2008_FY.pdf [Accessed 27 March 2009]. Admiral Group plc. March 2009. 2008 Full Year Results. [Online] Available at: http://pres.admiralgroup.co.uk/admiral010/documents/analyst_presentation_slide.pdf [Accessed 27 March 2009]. Churchill, N. C. & Lewis, V. L. 1983. The five stages of small business growth. Harvard Business Review. 61(3): 30-50. FTSE. (25 March 2009). FTSE 100 Index Constituents. [Online] Available at: http://www.ftse.com/objects/csv_to_table.jsp?infoCode=100a&theseFilters=&csvAll=&theseColumns=Mw==&theseTitles=&tableTitle=FTSE%20100%20Index%20Constituents&dl=&p_encoded=1 [Accessed 26 March 2009]. Greiner, L. E. July-August 1972. Evolution and revolution as organizations grow. Harvard Business Review. Smart Money. 3 March 2009. Admiral Group Fiscal Year Pretax Profit GBP202.5 Million Vs GBP182.1 Million. [Online] Available at: http://www.smartmoney.com/news/on/?story=ON-20090303-000075-0240&print=1 [Accessed 27 March 2009]. Western People. (27 June 2007). What Makes a Business Successful? [Online] Available at: http://www.westernpeople.ie/news/story/?trs=mhqlcwgboj [Accessed 27 March 2009]. Read More