PORTER’S 5 FORCES

1 Threat of new entrants◦ How easy or difficult is it for new players to enter the market &

What barriers exist for new entrants?

For LIC the major competitor’s started coming after the year 2000 major companies among them are ICICI Prudential, Kotak Mahindra & Birla Life Insurance. When they entered the insurance sector, it was monopolised by LIC and hence it has remain a major challenge for most of the private players. Collectively new entrants have remained a low threat to LIC

THREAT: LOW

2 Threat of substitutes

All other firms provide similar product to the customers and hence creating almost similar value for them and in some cases even better service than LIC, the only advantage that LIC has over others is the perception of authenticity.

THREAT: HIGH

3 Bargaining power of suppliers◦ How strong is the position of suppliers & are there a few suppliers

to choose from or many?

Since the major model of LIC is based on it’s suppliers that is it’s agents, they have a much higher bargaining power than at other institutes. Although LIC has been successfully satisfying them for a long time by building a family like relations with them, it is quite probable that other players might use LIC’s own suppliers against it- By providing better commission rates,etc.

THREAT: HIGH

4 Bargaining power of buyers◦ How strong is the position of buyers?

The presence of powerful buyers reduces the profit potential in an industry. Buyers increase competition within an industry by forcing down prices, bargaining for improved quality or more services, and playing competitors against each other.As already discussed their are many companies competing in the insurance sector- This has given rise to excess power of bargain to the customers, which might become more clear in the years to come.

THREAT: HIGH

5 Rivalry among existing players

◦ How strong is the competition between existing players ?

In India for a long time insurance sector has been a monopoly of LIC. By market share it still is, the competition of other players is generally between them only. Although the risk they possess

against LIC in the future can not be ignored.

THREAT:HIGH