AIG - Blame for the Bailout SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of AIG - Blame for the Bailout
This case takes an in-depth look at the events and causes leading to the U.S. government bailout of American International Group. Source material includes testimony before Congress, AIG's public disclosures and various news articles. The case tells the history of AIG, its Financial Products division and credit default swaps. The case then highlights several external and internal factors cited by management, experts and the press as having a role in AIG's failure. These factors include AIG's governance, compensation and risk management policies, as well as the roles played by the rating agencies, accounting standards (specifically mark-to-market accounting) and regulation.
Swot Analysis of "AIG - Blame for the Bailout" written by Maureen McNichols, Nathan T. Blair includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Aig's Aig facing as an external strategic factors. Some of the topics covered in AIG - Blame for the Bailout case study are - Strategic Management Strategies, Financial management, Motivating people, Recession, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the AIG - Blame for the Bailout casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%,
central banks are concerned over increasing inflation, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of AIG - Blame for the Bailout
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in AIG - Blame for the Bailout case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Aig's Aig, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Aig's Aig 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 AIG - Blame for the Bailout can be done for the following purposes –
1. Strategic planning using facts provided in AIG - Blame for the Bailout case study
2. Improving business portfolio management of Aig's Aig
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's Aig
Strengths AIG - Blame for the Bailout | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Aig's Aig in AIG - Blame for the Bailout Harvard Business Review case study are -
Highly skilled collaborators
– Aig's Aig 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 AIG - Blame for the Bailout HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Aig's Aig are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Ability to lead change in Finance & Accounting field
– Aig's Aig 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's Aig in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Aig's Aig in the sector have low bargaining power. AIG - Blame for the Bailout has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Aig's Aig to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Aig's Aig has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
High brand equity
– Aig's Aig has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Aig's Aig to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Aig's Aig has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Aig's Aig 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's Aig digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Aig's Aig 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.
Effective Research and Development (R&D)
– Aig's Aig 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 AIG - Blame for the Bailout - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Aig's Aig in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Strong track record of project management
– Aig's Aig is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Aig's Aig is one of the most innovative firm in sector. Manager in AIG - Blame for the Bailout Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses AIG - Blame for the Bailout | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of AIG - Blame for the Bailout are -
High bargaining power of channel partners
– Because of the regulatory requirements, Maureen McNichols, Nathan T. Blair suggests that, Aig's Aig 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.
Slow decision making process
– As mentioned earlier in the report, Aig's Aig 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's Aig 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.
High operating costs
– Compare to the competitors, firm in the HBR case study AIG - Blame for the Bailout 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's Aig 's lucrative customers.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study AIG - Blame for the Bailout, it seems that the employees of Aig's Aig don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Need for greater diversity
– Aig's Aig has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Interest costs
– Compare to the competition, Aig's Aig 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.
Low market penetration in new markets
– Outside its home market of Aig's Aig, firm in the HBR case study AIG - Blame for the Bailout needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As AIG - Blame for the Bailout HBR case study mentions - Aig's Aig 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.
Aligning sales with marketing
– It come across in the case study AIG - Blame for the Bailout 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 AIG - Blame for the Bailout can leverage the sales team experience to cultivate customer relationships as Aig's Aig is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study AIG - Blame for the Bailout, is just above the industry average. Aig's Aig needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Capital Spending Reduction
– Even during the low interest decade, Aig's Aig has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Opportunities AIG - Blame for the Bailout | 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 AIG - Blame for the Bailout are -
Creating value in data economy
– The success of analytics program of Aig's Aig has opened avenues for new revenue streams for the organization in the industry. This can help Aig's Aig to build a more holistic ecosystem as suggested in the AIG - Blame for the Bailout case study. Aig's Aig can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Aig's Aig has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
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's Aig in the consumer business. Now Aig's Aig can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Aig's Aig to increase its market reach. Aig's Aig 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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Aig's Aig can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Aig's Aig 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.
Using analytics as competitive advantage
– Aig's Aig 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 AIG - Blame for the Bailout - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Aig's Aig to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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's Aig 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's Aig 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.
Building a culture of innovation
– managers at Aig's Aig 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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Aig's Aig to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Aig's Aig 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, AIG - Blame for the Bailout, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Aig's Aig can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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's Aig can use these opportunities to build new business models that can help the communities that Aig's Aig operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Threats AIG - Blame for the Bailout External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study AIG - Blame for the Bailout are -
Regulatory challenges
– Aig's Aig 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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Aig's Aig will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Technology acceleration in Forth Industrial Revolution
– Aig's Aig has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Aig's Aig 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.
High dependence on third party suppliers
– Aig's Aig 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Aig's Aig 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 AIG - Blame for the Bailout .
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Aig's Aig 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.
Consumer confidence and its impact on Aig's Aig 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 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's Aig needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Aig's Aig with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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's Aig can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Aig's Aig needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Aig's Aig can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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.
Weighted SWOT Analysis of AIG - Blame for the Bailout 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 AIG - Blame for the Bailout 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 AIG - Blame for the Bailout 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 AIG - Blame for the Bailout 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 AIG - Blame for the Bailout 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's Aig needs to make to build a sustainable competitive advantage.