Strategic Operations Management

POSTGRADUATE DIPLOMA IN
BUSINESS MANAGEMENT

MODULE:
STRATEGIC OPERATIONS MANAGEMENT

ASSIGNMENT TITLE:
STRATEGIC REPORT
ON
CHURCHILL INSURANCE

June 2011

Ashima Nakra
PGDBM-WESTERN GOVERNORS GRADUATE SCHOOL
STUDENT ID: 00126489
SUBMITTED ON 15TH OF June 2011

INDEX

Churchill insurance- An Introduction - 5 -

Association of Birds Eye Operations Strategy and Business Strategy - 8 -

Operations Strategy - 8 - Business Strategy - 9 - How Operations Strategy and Business Strategy are associated - 9 -

Evaluation of Issues relating to Layout, Processes and Technologies - 11 -

Layout - 11 - Processes used and Technologies deployed - 12 -

Evaluation of Quality assurance and Utilization of Value chain - 13 -

Quality assurance - 13 - Value and Supply chain - 15 -

Conclusions - 16 -

References - 17 -

Bibliography - 18 -

Table of Figures

Figure 1: Churchill Insurance Logo - 5 -
Figure 2: Churchill Insurance Dog - 5 -
Figure 3: Churchill Insurance website - 5 -

Birds Eye- An Introduction

Churchill Insurance is one of the pioneers in general insurance industry in UK. It today covers all aspects or general insurance from car to pets. Insurance industry within in the UK is one of the largest industries and is a big contributor to the total economy of UK. Moreover UK is the biggest insurance industry in Europe and is third largest in the world making insurance companies interested in this sector and this country. It has been awarded as the Best Motor Insurance Provider 2006, 2007 and many others in the last few years.

Churchill Insurance was launched by founder Martin Long in June 1989 as a direct car insurance provider. Long was backed by Winterthur, then a Credit Suisse subsidiary as one of the UK 's first direct motor insurers. In 1990, Churchill started selling home insurance and, over the years, have extended the services, now offering car insurance, home insurance, travel insurance, pet insurance, breakdown cover, van insurance and motorcycle insurance. Churchill Insurance are a UK based company with all call centres in the UK and sell insurance policies by phone and on the Internet. In 2003, Churchill was acquired by the Royal Bank of Scotland Group and now forms part of the RBS Insurance division. (Anon, churchill.com, 2011).

Churchill Insurance, one of Britain 's first and largest direct insurers, began life in June 1989 with 88 employees selling car insurance policies, and added home insurance products the following year. In 1995 Churchill launched their first website, a credit card and also became the first UK insurer to offer motor insurance estimates via interactive media kiosks. In February 1996 Churchill took the revolutionary step to open an IT software house in New Delhi, India. Further expansion also led to Churchill launching new call centres in Stockton-on-Tees, Teesside with two locations in Ipswich. Today, Churchill has a customer base of 3.8 million and its employees have burgeoned to now over 7,000 in Bromley, Biggin Hill in Kent, Teesside, Ipswich and New Delhi, India. (Anon, Fujitsu.com, 2010)

Churchill Insurance, a member of the Winterthur Group, markets its insurance products directly to the customer. This means that it provides simplified and streamlined policyholder service and claims processing for car, home and travels insurance. These activities are handled promptly by the company 's workforce of over 2,000 people in various locations throughout Great Britain, thus assuring a high level of customer satisfaction. Churchill bought Prudential’s insurance business in 2002 before they too were purchased. RBS paid Credit Suisse £1.1bn for the insurer in 2003, bringing Churchill into its insurance division alongside Direct Line – another company Long had been involved in launching. (Anon, Evening Standard, 11th June 2003).

Churchill Insurance is almost as well known for the nodding dog as for good value insurance, they have certainly done a good job on their marketing strategy. The Churchill dog is based on the nodding dog toy which was made popular on the parcel shelves of cars in the seventies. He was used for the first time in advertising in 1994 and became a brand in his own right in 1996. He has been seen in a number of famous locations and with quite a few celebrity friends over the years including the skier Eddie “the Eagle” Edwards, Melanie Sykes, Rolf Harris and Roy Walker. Churchill the nodding dog now has his very own Facebook Page which has become hugely popular. It is possible to buy nodding dog merchandise from the Churchill website. Churchill the nodding dog even has his own page which gives his personal details such as his star sign (Gemini), his catchphrase (Oh yes!) and his favourite food (curry and sausages). (Anon, www.theanswerbank.co.uk, 24th May, 2010)

[pic] Figure 1: The Churchill Dog

In 2006 the high profile "Challenge Churchill" campaign was launched, involving the people of Britain challenging the brand mascot to find them cheaper car and home insurance. As part of a new nationwide campaign, Churchill Insurance launched this ‘Challenge Churchill’ price promise campaign and was very successful in the same. The insurer promised to beat existing renewal quotes for all new car and home insurance customers on an equivalent basis. During the recent times, Churchill Insurance had concentrated a lot on the web based marketing and selling over the internet. [pic] Figure 2: “Challenge Churchill” campaign

Figure 3: The Churchill Insurance Website

Association of Churchill Operations Strategy and Business Strategy

Operations Strategy and Business Strategy are two distinct yet highly interdependent aspects of any business. Operations are related to the resources from which goods and service are generated. Operations strategy is a key element in the overall model of strategic business decisions required for setting out roles and objectives of operations. At the same time, for a corporate to place itself in internal and external environment for the purpose of creation and maintenance of relations with customer, employees, investors and competitors, a strong business strategy is a must for achieving its aims and objectives. Therefore we can say that an operations strategy is a key part of any business strategy which enables any company to achieve its long term vision and mission as well as execute day to day operations efficiently. Let us analyse both the strategies within Churchill Insurance and how are they operating.
Operations Strategy Operations strategy is the sum total of the decisions which shape the long-term capabilities of various types of operations and their contribution to the overall strategy, through the reconciliation of market requirements with resources (Slack and Lewis, 2009). Organisations making products and/or services and delivering them rely on a handful of processes to get their products manufactured properly and delivered on time. Each of the process acts as an operation for the company and this is essential to the company. Due to this importance, managers find operations management more appealing. We begin this section by looking at what operations actually are (Anon, tutorvista.com, 2010). Imagine a car without a steering wheel? Whilst, the underlying feature is to be able to drive the car from one location to another, it can only be made possible with each and every part of the car working together and attached. Organisations behave in a similar manner. The company has an ultimate goal of delivering goods to a client, but the processes of designing, manufacturing, analysing and then finally being delivered are the driving forces behind the company 's success. All these chunks of processes that collectively define a bigger purpose together form operations for that particular organisation. More effective these processes or operations, more productive and profitable will be the business. This is not only applicable to goods but also to services.

Business Strategy
Business strategy is defined as a long term plan of action designed to achieve a particular goal or set of goals or objectives. It is management 's game plan for strengthening the performance of the enterprise. It states how the business should be conducted to achieve the desired goals. In absence of a sound strategy, the management has no roadmap to guide them. Creating a business strategy is a core management function. At the same time, it is worth noting that that having a good strategy and executing the strategy well, does not guarantee success. Organisations can face unforeseen circumstances and adverse conditions through no fault of their own. Therefore it is not only important to have a strong strategy but to also assess it regularly to validate its effectiveness. Ideally it should be frequently reviewed against prevailing external and internal environment by using tools such as SWOT analysis. Every 5 to 15 years most companies suffer from some unexpected misfortune. Indeed one part of a strategy should be to build in sufficient buffer or slack to be able to ride out any storm. (Anon, rapid-business-intelligence-success.com, 2010)

How Operations Strategy and Business Strategy are associated Churchill Insurance, UK has its distinct business and operations strategy. A model has been prepared which presents how Churchill’s operations strategy is helpful to achieve its strategic business goals. A key highlight of Churchill Insurance business is its focus on attracting and retaining best employees as highlighted in their annual report. Churchill holds the nationally recognised "Investors in People" Standard. “Investors in People” is a national Standard that sets out a level of good practice for the development and training of people to achieve commercial goals. Churchill has an effective operations strategy which contributes to the company’s overall business strategy to achieve company’s goal and objectives. Its business model is based on continuous sustainable growth, building brand image, and competitive pricing. On the other hand its operations are conducted in such way so that its strategic business decisions can be fulfilled easily. Therefore it can be said that Churchill’s business strategy and operations strategy are inter-linked with each other. Need to expand this with the accounting information, do not know what to write here, the questions is Critical assessment of the links between operations strategy and business strategy within Churchill. Clearly state any assumptions you make.

Evaluation of Issues relating to Layout, Processes and Technologies

Every organization, whether it produces goods or services, uses certain Layouts, processes and technologies which can either be industry standard or proprietary to provide competitive advantage to the company. Like other aspects of the business these aspects too are susceptible to issues and problems which can cause inefficiencies in the operations. In this section we evaluate these aspects and issues relating to them.

Layout

Proper layout must cover areas such as inbuilt safety, length and clarity of flow, utilisation of space, staff facilities, flexible strategies, easy accessibility and co-ordination of management. Basically there are four types of layouts such as fixed position, functional, cell and product layout. Churchill Insurance has been very successful in saving on the cost by marketing most of its business online. There is minimal face to face interaction and there is no product manufacturing, it being a service industry. Therefore, all customers are served online or through telephone which are called at Churchill call centres based in UK. The business model they have followed is fast rather than face to face interaction and this decision of the company have taken them to the industry leading ranks.

Process type and technologies deployed

The process type used by Churchill is both service process as well as e-service process. Since the product that is in question is a service and is of repetitive in nature the Churchill insurance should have continuous type of process where volume of output is maximum.
Innovative processes and technology transforms resources into goods and services. These can range from very minute processes to elaborate technologies deployed throughout the business and operations. Technological innovations have been known to be helpful to the companies regarding their operations.
At Churchill the company has tried to improve its Supply Chain by continuing to invest in capability and technology for becoming more efficient in service and time involved in the process. It has invested in website marketing, tele-sales etc. in order to capture the major share of the available market of insurance in UK. Also the company kept on adding the product base from Car insurance and now provide insurance not only for Cars, but for Home, Travel, Pet, Breakdowns, Van, Motorbike and also private health. Churchill revved up the process and, paring the wait rate for quote to minutes and follow-up of mails to two days. The goal is “to make the purchase as painless as possible”.
These processes and innovations of Churchill had cut costs, increased efficiency and provided a direct link with the customer. The earlier model of insurance selling involved making agents/brokers (could be individuals or organisations) and they used to sell the insurances as they came in the direct line of contact with the customer, but Churchill’s new innovative idea and process made it most cost effective as commissions that were paid to the agents/brokers are saved and this benefit could be passed on to the customer directly. Also this had shortened the time taken for the money to be passed on to the actual insurer. A customer can call or go online, take a quote in seconds and buy the policy paying with credit/debit card and the insurance documents/policy is sent in two days time.

Therefore it can be concluded that Churchill’s focus on layouts, development of processes and innovative technologies improved operation and business practises in the company.

Evaluation of Quality assurance and Utilization of Value chain

Quality Assurance and effective utilization of Value chain are key factors in the success of any business and Churchill Insurance is not an exception to this. In this section we look at the Quality assurance practices and value chain utilization by Churchill in its business.

Quality assurance

The importance of quality for organisation both operations view and customer’s point of view is widely acknowledged. Quality is the guarantee and surety to the willingness and expectations of the customer. Processes, layouts and technologies are often designed to meet the desired characteristics of products and services. The quality of product and service should be maintained as per the perception and expectation of the consumers. For achieving this, total quality management (TQM) is very useful and directive in every part and group of organisation in order to measure the quality of work and products. TQM is a way to achieve improvements in all areas of business and operations. It covers all aspects such as perception and expectation of customer needs, dealing with all areas of organisation, including work force, determining quality costs and setting and implementing quality standards.

At Churchill one of the basic ingredients that the company has concentrated on is Quality and customer satisfaction. The company has devised a policy to understand the need of the customer fully and to provide the best of service for those needs. In order to provide quality in service, Churchill since 2004, every month gives 1000 calls to customers and talk to them about their needs and preferences about insurance and what are they looking for. This data is used to be in tune with the changing needs of customer’s everyday.
The salient features of Quality assurance practise at Churchill insurance are: • Quality is given precedence over profitability in the short term. The company’s marketing and USP is to sell directly and cheap insurance to the customer without ignoring the customer wants. Providing of the most suitable cover for the customer is important than selling the most profitable one. • At Churchill, the idea of “customer satisfaction is all about resilience” understood. Since the company works without face to face contact it understands that if a phone call is made, the customer waiting time over the phone to speak to the executive should be the minimum and while on call, the customer should be given all the time in the world for help. As a result the company retains 84% of its previous clients every year. • “Customers are getting smarter”. Churchill Insurance knows that customer preferences, needs are changing every day and customer is getting smarter. In order to be in business and provide quality, the company makes 1000 calls every month to know the customer more and more.

As per the feedback of the customer, the basic criterion that Churchill Insurance has to provide the high level of satisfaction is: • Making sure that the documents are 100% accurate. • Providing with the right cover that suits the customer, not the most profitable one. • Making the price of products competitive. • Ensuring that if the company says they are going to do something, they will do it. • Making it easy for the customer to renew with Churchill. (Anon, churchill.com, 2011)

Value chain

An effective value chain is the back bone of the company as without the delivery of the value, the business will not survive even if the model of business a good one. The value chain involves the customer oriented activities such as operations, marketing, sales, services etc. Since Churchill Insurance is a service industry not involving major face to face contact, the value chain consists of infrastructure, human resources and technology development. Churchill Insurance understands that their customer is not one time emergency type; rather repeated sales to the same customer are the order in the long run. The company would not work if 80% of the new customers, do not repeat to come back. If this happens, the company would fall one day. Rather, a company should retain old customers and keep on adding new business and in turn this will lead to the growth of the company. This is where a successful value chain is important. By a successful value chain a company can get about 20% of increased business without change in service demand. At Churchill once the service job is completed, the team starts the ongoing relationship building with the customer (Customer Relationship Management) so that they can take the customer into the loop and even take referral business from him. Churchill in order to improve on the value chain has a very customer friendly website for the quote where the customer does not even have to call and can do the whole insurance process within minutes and the job is done. The value chain at Churchill also involves reduction of time, cost and effort in order to take the best suitable insurance policy. For the marketing and improving brand image, the company also has a dog called “Churchill” who is an insurance guru and has a facebook account as well, turning technology into improved marketing tool. Thus in respect to the service industry without a face contact with the customer, Churchill has done really well to maintain a good value chain and has reaped benefits of being one of the largest insurance companies in UK.

Conclusions

Churchill insurance is a recognized brand owned by Royal Bank of Scotland. The Churchill along with Direct line brand of RBS has been the leaders in the car insurance sector with about 30 percent of the total market share. Its innovative ideas and a repeat business from the existing customer base are the factors which has kept Churchill ahead of competition. It gives immense stress on quality management and ethical selling for sustainable business growth. The recent bailout of RBS by the government after being in financial crisis is forcing RBS to sell Churchill insurance brand to reduce its balance sheet but this has yet not happened and this might have an adverse effect on Churchill. So far, Churchill is doing all that is required to survive and stay competitive in the longer run, but at the same time it should not get complacent and should therefore continue to monitor and improvise on its strategic operations management.
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References

Bibliography

References: Bibliography