Question

Give a brief executive summary of the company GEICO auto insurance. Use porter's five forces model to support your response. Please answer the question within atleast 1 page.

Answer 1

GEICO is an second biggest American auto insurance company. The company was founded in 1936 It is a subsidiary owned by Berkshire Hathaway. It covers more than 24 million motor vehicles. The company has their operation in 50 states.

The company has the 38000 employees and managed to earn revenue of $25.483 billion in 2017. Chief Executive Officer is Tony Nicely

Here the Porter’s Five Forces Model on the company.

Bargaining Power of the Suppliers- The suppliers has huge bargaining power. It means the agency which controls the industry does not make the company free what they feel to do. The company has to stick on the rules and regulation. Suppliers have ability to determine the prices of the insurance. So this is a wrak force for the company.

Bargaining power of the customer- Customers have huge bargaining power. There are plenty of insurance companies’ available and the customers can choose from those companies. Hence the customers have negotiation power over the company.

Threat of New Entrants- There is very high barriers to the entry. Insurance is dependent on the risk. So first a company might get trouble to make profit in the initial years. Second there are strict rules and regulations from the government. One needs to have experience as well as capital to invest. So new company has difficulty to set it up. So this is a strong force for the company.

Threat of substitutes- There is very low threat of substitute; this insurance culture will go many more years. There is no any new substitute available into the market. Hence this is again a strong force for the company.

Industry Rivalry- Because there are many companies into the market hence the companies has strong rivalry to attract the customers. This I a moderate force for the company.