Chapter 91 6. Diversify strategies and give full play to comprehensive performance

Cai Hongtu started his business with Cathay Life Insurance, but after years of operation, he gradually realized the limitations of single product development.Cai Hongtu believes that Cathay Life Insurance is a large company with good channels, but its shortcoming is a single commodity company, and its competitiveness may decrease in the future. For example, after the customer is 60 or 65 years old, after receiving the maturity payment, he can’t sell any products to him, because he is over 65 years old, insurance cannot be bought, and he has a sum of money at that time, maybe not Maturity payment, but because he has savings or a successful career, he has tens of millions, but you can't serve him.If there is a bank at this time, some wealth management products can be sold to him through the salesman, and the overall performance will definitely be brought into play.

In fact, Cai Hongtu can describe the integration of multiple businesses as "looking forward to it". He believes that once the life insurance company and the bank are combined, the overall performance will come out. Of course there will be overlap among the customer groups. No matter what, this must be OnePlus One is greater than two; second, there are many marketing channels that can be used.For example, a bank has one or two hundred branches, and we have three or four hundred bases, so we have more marketing bases.Then, in terms of products, banks have bank financial planning packages, Cathay Life Insurance has insurance, banks can sell Cathay’s insurance, and Cathay’s people can also market their financial products.

In order to welcome the advent of the era of diversity, Cai Hongtu has made a lot of solid preparations.Efforts have been made to carry out more complete education and training for employees, the so-called cross selling (cross-selling), so that employees can expand their knowledge of property insurance, tax saving, financial management, computers, lending and other professional knowledge while strengthening their life insurance profession, greatly improving Improve the overall quality of the team. "I can sell a lot of things to this client. I can sell insurance through banks and securities. I can also sell bank wealth management packages and trust funds through insurance. The future will be an 'integrated marketing'." Cai Hongtu said.

The key to integrated marketing lies in the scale and quality of the network, and this is where Cathay Pacific's incomparable strengths have long been formed. On October 1, 2001, Taiwan implemented the "Financial Holding Company Law", allowing the three major financial industries of banking, insurance, and securities to operate across industries; financial institutions can directly invest or acquire subsidiaries according to their business objectives to expand their financial territory.Cai Hongtu was keenly aware that the turning point of Cathay Pacific had arrived, so in 2002 Cathay Financial Holdings Co., Ltd. was established.

Accompanied by it, Cai Hongtu moved frequently. In April 2002, it was incorporated into Cathay Bank and Dongtai Insurance, and Dongtai Insurance was renamed Cathay Century Insurance in August of the same year; in December 2002, it was included in the well-established World China Bank; in April 2003, Cathay Ventures was established , and make it a subsidiary. In October 2003, World China Bank and Cathay Bank merged into Cathay United Bank; in April 2004, Yitai II Venture Capital was established; in July 2004, Yitai Management was established; in August 2004, Cathay General Securities was established , In September 2005, it was formally incorporated into the Seventh Commercial Bank.A large financial institution combining insurance, securities, banking and other diversifications was born.

By the end of 2004, the assets of Cathay Pacific Financial Holdings reached 679.5 billion yuan, and the operating income of that year was 100 million yuan.It also has 570 business locations, 31,300 employees and about 10 million customers, and can use funds (including real estate, stocks, and bond investments) as high as NT$1 trillion. About 10 million customers means that almost one out of every two people in Taiwan is a Cathay Pacific customer, and NT$100 million is 15% of Taiwan's annual GDP. Synergies often arise when different products share common channels and customers.Old products drive sales of new products, and new products can in turn open up markets for old products, thereby increasing total sales.At the same time, due to the common market, the enterprise does not need to add additional sales expenses for new products, thereby reducing the unit marketing cost of the enterprise.For closely related products such as life insurance, banking, and securities, the integration can give full play to the original marketing channels.

At the same time, a very important strategic benefit of diversification is to achieve the purpose of diversifying business risks by reducing the fluctuation of corporate profits.The diversification strategy implemented for this purpose should establish a product portfolio that minimizes the risk of the enterprise and maximizes the benefits.Generally speaking, companies should choose a product portfolio that is negatively correlated in price fluctuations, which is most conducive to diversifying risks.The highly correlated product portfolio is not conducive to the diversification of business risks.This high degree of correlation includes: all products belong to the same stage of the product life cycle; all products are risky products or slow-moving products; all products have a heavy dependence on a certain resource, etc.

Of course, it costs a company a lot to raise funds in the external capital market, and at the same time, it also involves issues such as qualification examination.Therefore, enterprises that implement diversification strategies can establish capital markets within their enterprises, and realize the capital needs of various business fields through the flow of funds between different business fields.A very important step forward in companies implementing diversification strategies is the establishment of internal banks, which play a decisive role in the formation of internal capital markets.In this regard, Cathay Financial Holdings is the most obvious.

Finally, when a company faces a mature or even declining industry, it is unwise to urgently invest in this industry to obtain growth. In order to seek further growth of the company, the company must enter a new industry.