Business Plan: Geico (Research Paper Sample)

Student Instructor Course Date ENVIRONMENTAL SCANNING: GEICO Background Information Government Employees Insurance Company (GEICO) is one of the most successful auto insurance companies in the United States. The company performs well in the insurance company of the United States of America. It was founded in Fort Worth, Texas in 1936 by Leo Goodwin. The company is currently headquartered in Chevy Chase, Maryland (GEICO). The company's management has enhanced its growth to the highest limits that any company can strike in terms of development. Currently, the company boasts of approximately 27, 000 employees who are dedicated to serve over 13 million motor vehicles owned by approximately 12 million policy holders (GEICO). The company has managed to provide quality service for the years it has been operational. The core principle stated in its long-term objectives is to provide quality service to its customers. As an insurance company, the company is supposed to adhere to the policies that such companies are supposed to respect and implement. GEICO's main mission is to utilize the available business opportunities for the purpose of maximizing business operations (Elliott 1). Through the process of identifying opportunities and taking advantage of them, the company is set to enhance the growth of its mother company, Berkshire Hathaway. Before establishing the subsidiary (GEICO), Berkshire Hathaway conducted an environmental scanning to identify opportunities and threats that the subsidiary was likely to face in its operations. Similarly, GEICO has the task of identifying threats and opportunities through environmental scanning. For the sake of its product (insurance), GEICO should be having interest in establishing an environmental scanning to draft a way forward for its business. The scanning involves identifying the effects of the five business environments on the performance of the company. The five key environments of interest are social, economic, technological, competition, and regulations. Social Factors The first environmental force that GEICO comes across pertains to social factors. Social environment pertains to consumers or the whole society in which a company operates in (Sen 88). Social factors are the greatest determinants of either failure or growth of a business. This is because businesses must have the ability to meet the needs of their customers as regards to selling their services or products. The social factors that pertain to the operation of GEICO in the 50 states its product is sold entail demographic attributes of the population (Klingaman 4). It is also intuitive to state that, people have different values and demographics which greatly impact on the success of business (Kerin 1). The other factors that fall under social environment include beliefs, language, religion, education, literacy, and time orientation. In this case, GEICO's business can only be influenced by demographics such as education, values, and time orientation. GEICO has taken advantage of the necessity of people to respect the values of insuring their private vehicles. The 13 million people that the company serves are aware of the benefits of insuring their vehicles. This is the greatest opportunity that the company can utilize to increase the market size (Kroon 45). Additionally, literacy enhances the understanding of subscribing to an insurance company. The literate members of the society are therefore, more likely to purchase insurance to take care of their lives and vehicles. For instance, people are aware that insurance companies can replace their cars or even pay their medical bills in case of accident. It is therefore important to for motor vehicle owners to subscribe to insurance services to safeguard standard living. In terms of maximizing on opportunities and tackling threats, the company tends to focus on the former. There are more opportunities as compared to threats. For instance, demographics are not directly related to insurance because the business is not directly related to ethical issues. Owning a car and finding the best insurance has nothing to do with gender, race, values, religion, and age, respectively, every individual has equal opportunities when it comes to owning a vehicle and finding the best insurance cover for the automobile. This means that there are very negligible challenges in the social environment in which the business operates. Economic Environment This environment describes the economic factors that a business encounters while promoting the sale of its products or services (Morrison 94). The economy greatly impacts the operation of organizations in their physical set-ups. Some of the most common economic factors include inflation rate, customer liquidations, spending power, recession or boom, and the number of people in pensionable age. Economic factors that can impact the operation of GEICO include inflation rate, spending power, recession, and boom. While facing the above economic factors, the company may either use the chance to develop its business or put in place combative measures to counter threats. Inflation is the worst thing that can happen to a business. Business environment during inflation is not favorable for growth. Most often, inflation is associated with high costs of living due to increased commodity prices. People therefore, tend to spend more on the most basic needs while suspending expenditure on other commodities. Most consumers suspend expenditure on tertiary needs. In this case, most people would unlikely subscribe for insurance for a specific period of time. For spending power, people consider the available resources and the economic status to determine their spending. Spending power is likely to go up if the economic circumstances are favorable. Significantly, boom and recession are the other factors that impact spending. In boom, businesses incur more profits as compared to recession times. This is because people tend to spend more in boom seasons as compared to the more economical recession times. Selling insurance tends to be more functional in times when the economy is favorable for such operations. Table 1: U.S GDP by Industry Industry GDP Value $ billions % of total GDP Real estate, renting, leasing 1,898 13% State and local government 1333 9 Finance and insurance 1159 8 Health/social care 1136 8 Durable manufacturing 910 6 Retail trade 905 6 Wholesale trade 845 6 Non durable manufacturing 821 6 Federal government 658 5 Information 646 4 Arts, entertainment 591 4 Construction 529 4 Waste services 448 3 Other services 447 3 Utilities 297 2 Mining 290 2 Corporate management 284 2 Education services 174 1 Agriculture 173 1 Total 15, 075 100 Source: Bureau of Economic Analysis Website According to the GDP table above, the finance and insurance industry boast of a GDP of approximately 1159 billion dollars (Bureau of Economic Analysis). There is direct relationship between the GDP and the performance of the company in terms of economic success. The data above shows that the company is on the right track. The company belongs to the insurance industry, which currently ranks at the third position. This implies that success of the company derives its support from the financial success of the whole industry. There is likelihood that failure to comply with the basic financial requirements in the industry can lead to the failure of the company to perform better in the corporate world. GEICO can take advantage of the high amounts of revenues in the industry to improve business growth. This is the opportunity that the company should focus on. Financial factors that can contribute to the failure of GEICO's operations include recession and low expenditure powers. Economic recession decrease the level of power of spending by consumers. Significantly, decreased spending or redirecting expenditure to other commodities is likely to reduce the number of customers that subscribe to the company's insurance. The consequences of such moves are very dire as far as the quest to maximize income is concerned. Businesses need enough capacity that is proportional to the output. Very few people would prefer subscribing to the company's services and products in such hard financial crises. The most appropriate of solving this problem is to be ambitious in the process of attracting more customers. The company will then be forced to lower commodity prices to maintain capacity. It would be important for the company to lower insurance prices to levels that are affordable to consumers who are experiencing financial problems. Piece reduction is definitely a potential setback that can harm business growth (Kroon 45). Decreasing prices is a risk that needs proper management to reduce the intensity of loses that the company is likely to incur. There should be ways of countering the threats. For instance, in case the company reduces prices, it should be able to monitor its liquidity ratios to evade further debt crises. Technology Technological forces also need scanning because they impact on the operation of businesses. Technology is a broad spectrum of tools that enable businesses to take care of service promotions and the sale of their goods (Nkongolo-Bakend 43). Some of the basic elements that fall under this environment include rate of change in technology, social media, electronic media, internet, and e-commerce. Businesses should fully utilize technology to advance their operation within a certain region. For instance, the use of internet has turned the world into a global world. Companies are currently taking advantage of the intern...