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Innovation At Progressive A Pay As You Go Insurance Case Solution

Solution Id Length Case Author Case Publisher
2196 918 Words (5 Pages) Frances X. Frei, Hanna Rodriguez-Farrar Harvard Business School : 602175
This solution includes: A Word File A Word File

Progressive operated in the auto insurance industry as it had been selling auto insurance since its inception in Ohio in 1997. Previously, the main focus of auto insurance providers was on the carriage trades as these were considered less risky. Generally, the insurance industry in the US was quite a thriving one with a large number of players but dominated by the ten largest firms. However, talking about the auto insurance sector specifically, the revenue growth was slow, but the players were able to improve their profitability through higher premiums. The main source of revenue for the players in the industry were through the earned premiums and investment incomes.

Following questions are answered in this case study solution

  1. Industry Definition

  2. Porter Analysis

  3. VRIO Analysis

Case Analysis for Innovation At Progressive A Pay As You Go Insurance Case Solution

2. Porter Analysis

i. Bargaining Power of Buyers- Low

The bargaining power of the buyers is low in the industry as there are a handful of well-known insurance companies in the industry, which leaves the buyers with limited options to choose from as they need to select the insurer with the highest degree of credibility so that they are able to get their claims in case of any accident or damage to their asset. Hence, this allows the insurers to charge higher margins.

ii. Bargaining Power of Suppliers

The bargaining power of suppliers in the industry is low as there are a large number of suppliers. However, this would mean that an insurance underwriter in a small company may get attracted to a larger company as he would get better pay and growth prospects hence, this can be a threat for the players operating in the industry.  

iii. Internal Rivalry

The level of internal rivalry is high as there are a large number of insurance firms operating in the US market as they cater to the different customer segments. There are top ten players that dominate the industry and have a strong reputation in the market. Companies with a low-cost structure, higher efficiency, and improved customer service are able to get a larger market share and attract a larger pool of customers. However, as it is known that there are large ten firms in the industry, there is a possibility that the industry will shift towards consolidation as the smaller firms will be bought by the larger firms.

iv. Threat of Substitutes

The threat of substitutes is low in the industry as most of insurance companies offer a similar range of services. There are products tailored to the different needs of the customers which is why many companies cater to the niche market segments in order to improve their margins. 

v. Threat of New Entrants

The threat of new entrants in the industry is high due to low capital requirements. Also, many banks and other financial institutions may also start offering insurance products which would further intensify the extent of competition in the market. Hence, this is the reason why there are thousands of insurance offering bodies in the United States which makes the industry highly competitive and attractive for the new entrants.  

3. VRIO Analysis

Capability

Nature of Capability

Valuable

Rare

Difficult to Imitate

Organization of Resources

Competitive Advantage Achieved

Brand Image

Strong

Yes

Yes

Yes

Yes

Sustainable Competitive Advantage

Technological Leadership

Strong

Yes

Yes

Yes

Yes

Sustainable Competitive Advantage

Growing Market Share

Strong

Yes

Yes

Yes

Yes

Sustainable Competitive Advantage

Customer Service

Par

Yes

No

No

Yes

Competitive Parity

Widespread Presence

Strong

Yes

Yes

No

Yes

Temporary Competitive Advantage

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