American International Group, Inc. SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of American International Group, Inc.
American International Group, Inc. (AIG), one of the world's largest and most innovative insurers and financial intermediaries, is considering new strategies in an era of new competition and Internet distribution.
Swot Analysis of "American International Group, Inc." written by Kenneth A. Froot, Heidi Suzanne Nelson includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Aig American facing as an external strategic factors. Some of the topics covered in American International Group, Inc. case study are - Strategic Management Strategies, Intellectual property, Internet, Marketing, Strategy execution and Finance & Accounting.
Some of the macro environment factors that can be used to understand the American International Group, Inc. casestudy better are - – geopolitical disruptions, increasing energy prices, increasing commodity prices, increasing transportation and logistics costs, increasing household debt because of falling income levels, supply chains are disrupted by pandemic , there is backlash against globalization,
technology disruption, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of American International Group, Inc.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in American International Group, Inc. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Aig American, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Aig American operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of American International Group, Inc. can be done for the following purposes –
1. Strategic planning using facts provided in American International Group, Inc. case study
2. Improving business portfolio management of Aig American
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Aig American
Strengths American International Group, Inc. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Aig American in American International Group, Inc. Harvard Business Review case study are -
Training and development
– Aig American has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in American International Group, Inc. Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Diverse revenue streams
– Aig American is present in almost all the verticals within the industry. This has provided firm in American International Group, Inc. case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Superior customer experience
– The customer experience strategy of Aig American in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Aig American has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in American International Group, Inc. HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Aig American
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Aig American does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Successful track record of launching new products
– Aig American has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Aig American has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Aig American digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Aig American has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Low bargaining power of suppliers
– Suppliers of Aig American in the sector have low bargaining power. American International Group, Inc. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Aig American to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Finance & Accounting industry
– American International Group, Inc. firm has clearly differentiated products in the market place. This has enabled Aig American to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Aig American to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Aig American is one of the leading recruiters in the industry. Managers in the American International Group, Inc. are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Effective Research and Development (R&D)
– Aig American has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study American International Group, Inc. - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Finance & Accounting field
– Aig American is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Aig American in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses American International Group, Inc. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of American International Group, Inc. are -
High operating costs
– Compare to the competitors, firm in the HBR case study American International Group, Inc. has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Aig American 's lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Aig American needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow decision making process
– As mentioned earlier in the report, Aig American has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Aig American even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Lack of clear differentiation of Aig American products
– To increase the profitability and margins on the products, Aig American needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Aig American has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Aligning sales with marketing
– It come across in the case study American International Group, Inc. that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case American International Group, Inc. can leverage the sales team experience to cultivate customer relationships as Aig American is planning to shift buying processes online.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Aig American is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study American International Group, Inc. can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of Aig American is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Aig American needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Aig American to focus more on services rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As American International Group, Inc. HBR case study mentions - Aig American takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study American International Group, Inc., in the dynamic environment Aig American has struggled to respond to the nimble upstart competition. Aig American has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High bargaining power of channel partners
– Because of the regulatory requirements, Kenneth A. Froot, Heidi Suzanne Nelson suggests that, Aig American is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Opportunities American International Group, Inc. | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study American International Group, Inc. are -
Using analytics as competitive advantage
– Aig American has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study American International Group, Inc. - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Aig American to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help Aig American to increase its market reach. Aig American will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Aig American can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Aig American can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Aig American can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Leveraging digital technologies
– Aig American can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Aig American can use these opportunities to build new business models that can help the communities that Aig American operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Aig American can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Building a culture of innovation
– managers at Aig American can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
Manufacturing automation
– Aig American can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Aig American can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, American International Group, Inc., to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Aig American can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. American International Group, Inc. suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Aig American in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Aig American in the consumer business. Now Aig American can target international markets with far fewer capital restrictions requirements than the existing system.
Threats American International Group, Inc. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study American International Group, Inc. are -
Regulatory challenges
– Aig American needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
Stagnating economy with rate increase
– Aig American can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Aig American needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Consumer confidence and its impact on Aig American demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
High dependence on third party suppliers
– Aig American high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Technology acceleration in Forth Industrial Revolution
– Aig American has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Aig American needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Aig American in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study American International Group, Inc., Aig American may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Aig American can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Aig American is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Aig American
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Aig American.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Aig American can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study American International Group, Inc. .
Weighted SWOT Analysis of American International Group, Inc. Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study American International Group, Inc. needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study American International Group, Inc. is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study American International Group, Inc. is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of American International Group, Inc. is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Aig American needs to make to build a sustainable competitive advantage.