An application of porter's five forces model to determine the attractiveness of a third party distributor of life and investment products.
Loading...
Date
2006
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
The research centred around the fact that the existing methods of distributing life and
investment products was inefficient and it was decided to research the issue to determine
whether a more suitable cost effective method could be developed. Currently the
distribution of life and investment products is very expensive and therefore an alternate
method of distribution was being explored. This was also endorsed in a survey conducted
by the Financial Services Board were it was found that in order for financial services
company to survive and compete new models need to be developed to compete in this
increasingly globalised industry.
Life assurance and investment products in South Africa and elsewhere in the world is
sold by agents who are employed by the life assurance and investment companies. More
recently other distribution channels have emerged and these include the internet, direct
mail and call centres. The share of business that is obtained through these means is also
an interesting feature to explore when investigating the methods used by new entrants to
this multi billion rand industry.
The situation prevailing in the local industry is that independent brokers secures a
contract with the life company's and this places the broker in a position to market the
company's products through the use of business consultants. There are significant costs
associated with the current model of distributing the companies' products. These are
broker consultant salaries, car allowances and traveling expenses, entertainment
expenses, overriding commission on the business sold by the broker they servIce,
management and support staff expenses and related expenses.
The proposed model will have following characteristics.
• Have distribution contracts with all independent brokers.
• Using the franchise methods of training and recruiting business consultants.
• Variable costing methods in determining payments for service delivered.
• This method would also significantly reduce the cost of distribution by the new
entrants into this multi billion rand industry.
In the final analysis it was shown that the third party distributor would make a difference
to the manner in which life and investments products is distributed in this dynamically
changing industry.
Description
Theses (MBA)-University of KwaZulu-Natal, 2006.
Keywords
Investments--South Africa., Life insurance--South Africa., Theses--Business administration., Theses--Business administration.