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IAI Actuarial Core Principles · Business Management · Strategy, competitive advantage, strategic decision process and PEST analysis

Sahyadri Life, a mid-sized Indian insurer, sells only term cover to salaried doctors and hospital staff. It designs policy features, claim handling and communication around the needs of this one group and charges a premium for the tailored service. Under Porter's framework, which strategy is this?

This is differentiation focus. The insurer targets a narrow segment, doctors and hospital staff, and competes by tailoring products and service to them at a premium price, rather than by low cost or by appealing to the whole market.

  1. ACost leadership across the whole market
  2. BBroad differentiation across all customer groups
  3. CCost focus
  4. DDifferentiation focusCorrect
  5. A hybrid strategy with no clear target segment

Explanation

The target market is narrow (doctors and hospital staff) and the firm competes through tailored features and service for which customers pay a premium. This is differentiation focus. Cost focus would mean serving the niche at lower cost, and broad differentiation would target the whole market.

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