Great Marketing Skills of an Organization - Essay Example

Management For an organization to have a competitive advantage it is highly important to ensure that it has great marketing skills and this is heavily dependent on the management. Marketing is an important aspect in any business and therefore there is great need to come up with the best marketing strategies to improve the sales and productivity of a firm. Creation and development of companies over the years has contributed greatly to the increased competition across all industries. Therefore, firms need to come up with effective marketing strategies in order to remain relevant in the various industries. For instance, the insurance industry is highly competitive thereby necessitating the need to have great marketing techniques among other skills in order to gain competitive advantage over the competitors. Focusing on two of the main insurance companies in the United States, Geico and State Farm Insurance, using VRIO analysis gives a clearer picture of how to gain competitive advantage in highly competitive sectors such as insurance. Several approaches can be used to attain an efficient marketing strategy. Some of the commonly used approaches include blue ocean strategy, porter’s five forces model, and advertising. The blue ocean strategy is deeply dependent on innovation and discovery of new consumer demands that are not yet explored. The blue ocean strategy focusses on improving the current market, for instance, by combining two or more closely related demands. In addition, it is highly dependent on the quality while still maintaining low costs of the products and services offered. The less valued products and services are replaced by the highly valued and demanded ones thereby raising the standards of the market and making it stronger. For example, the State Farm has many subsidiaries that offer great insurance services that range from fire, casualty, and mutual insurance among others. However, despite the increasingly many subsidiaries, State Farm has been able to fully satisfy it clients thereby creating unlimited loyalty. Additionally, Geico offers full time response service hence satisfying the customers fully. Moreover, Geico offers low rates to military personnel and government workers which is arguably different from what some of the other insurance companies do. As a result, Geico has greatly grown over the recent surpassing some of the great insurance companies such as Allstate. According to a report by SNL, GEICO made $4.89 billion through direct premiums based on the third quarter of 2013 whereas Allstate made $4.65 billion through premiums (Insurance Journal 2013). This implies that differentiation and improving services provided is highly useful in gaining competitive advantage. The model is based upon five determinants that firms can use to determine the levels of competition in a given industry. Results of the model can be used to show profitability levels in a particular industry. With Porter’s five force model, firms can determine whether to join a given industry and also can be able to come up with appropriate measures to face competitors. According to Porter, the underlying profit drivers are the same in all industries (2008, p.3). Therefore, the Porter’s five model can be applied even in the insurance industry. The five determinants include ease of entry in the industry, threat of substitutes, bargaining powers of customers and suppliers, and intensity of competition. Both Geico and State Farm insurance companies have set quite high bars making it difficult for new firms to pose any significant threats. Therefore, Geico and State Farm insurance companies can arguably be considered to have set barriers for new entrants hence reducing levels of competition. The insurance industry has increasingly many substitutes due to existence of many firms hence it is vulnerable to low profits for insurance companies without a competitive advantage. This is because the customers have a wide range of insurance companies to choose from hence increased competition for the best services and favorable prices. For example, Geico offers low rates to military personnel and government workers hence making it a favorable choice for these groups. Additionally, State Farm insurance company offers many discounts such as up to 20% car discounts among other discounts. This can be considered as one of the reasons that motivates clients of State Farm insurance company. Therefore, offering great prices either through discounts or other means, can be regarded as one of the great factors giving Geico and State Farm Insurance Company a competitive advantage over their competitors. Bargaining power of the customers is also a determiner of any viable industry such as insurance industry. Customers in the insurance industry have high bargaining power hence threatening profitability levels in the industry. Increased bargaining power can be attributed to the fact customers force insurance companies to compete for the best prices in a bid to win a large customer base. With significantly many products that are spread across the country, State Farm has been able to remain highly competitive and gained the best position in relation to performance in the US. This can be attributed to the fact that offering many products gives people increased options at different prices hence covering almost all people’s needs at desirable prices. Similarly Geico offers increasingly many insurance options some of which are not offered by some of the smaller insurance companies. Based on the increasingly many resources such as finances, Geico is able to offer services at relatively lower prices hence gaining favor from people. Therefore, it is important to include the factor of customer bargaining power in the insurance industry in order to gain a competitive advantage. The insurance industry is greatly dependent on the workforce performance therefore it is extremely important to have a talented team. This is because the insurance industry mainly deals with convincing customers to opt for the particular insurance company in play. Additionally, the success of insurance companies is heavily dependent on advertisements. Advertisements create awareness of the firm’s existence thereby increasing chances of gaining more customers. Through advertisements, people get to learn of the policies offered at the particular company doing the advertising hence enabling comparison to other similar firms. However, advertising is relatively expensive and requires many resources especially finances. This implies firms with a higher financial standing have a better chance benefiting more from advertising. This can be attributed to the fact that effective advertising may sometimes require repetitions on advertising channels such as media and in order to get more time there is need for more finances. For example, Geico spends approximately $1 billion dollars annually in advertisements. This has fueled the great growth experienced by Geico and some have termed it as the fastest growing insurance company in the US (VanBoskirk 2011, p.12). Therefore it is of utmost importance to invest in advertising. Conclusively, the success of Geico and States Farm insurance companies is heavily dependent ensuring that the firms have a competitive advantage over their competitors. The competitive advantage can be attributed to such factors as differentiating their services, offering discounts, offering the best price rates, and increased advertisements among other factors. However, the success of Geico and States Farm insurance companies has been facilitated greatly by the large resources possessed by the two large companies. Therefore, with increased resources and great marketing the companies have been able to gain a competitive advantage. Works Cited Porter, Michael. “The Five Competitive Forces that Shape Strategy”. Harvard Business Review, (2008). Insurance Journal. “GEICO Passes Allstate to Become 2nd Largest U.S. Auto Insurer: SNL” 16 Dec. 2013. Web. 25 Nov. 2014. < http://www.insurancejournal.com/news/national/2013/12/16/314530.htm>. VanBoskirk, Shar. “US Interactive Marketing Forecast, 2011 to 2016”. Forrester Research Inc., 2011. Read More