Case Study Description of Progressive Corporation: Variable Dividends
To maximize their effectiveness, color cases should be printed in color.In 2006, Progressive Corporation announced a change in its dividend policy. Henceforth, dividends would be paid annually rather than quarterly and, more important, would be set according to a formula that would result in considerably greater year-to-year variability than was the case historically. Under the new policy, dividends would be tied to the company's underwriting results, its performance relative to pre-determined goals, and a target payout ratio. Progressive's new policy was intended to help with overall capital management in the cyclical property and casualty insurance business.
Swot Analysis of "Progressive Corporation: Variable Dividends" written by Timothy A. Luehrman, Brenda Chia includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Dividends Progressive facing as an external strategic factors. Some of the topics covered in Progressive Corporation: Variable Dividends case study are - Strategic Management Strategies, Financial markets and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Progressive Corporation: Variable Dividends casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, there is increasing trade war between United States & China, increasing energy prices, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion,
talent flight as more people leaving formal jobs, wage bills are increasing, etc
Introduction to SWOT Analysis of Progressive Corporation: Variable Dividends
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Progressive Corporation: Variable Dividends case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Dividends Progressive, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Dividends Progressive 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 Progressive Corporation: Variable Dividends can be done for the following purposes –
1. Strategic planning using facts provided in Progressive Corporation: Variable Dividends case study
2. Improving business portfolio management of Dividends Progressive
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 Dividends Progressive
Strengths Progressive Corporation: Variable Dividends | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Dividends Progressive in Progressive Corporation: Variable Dividends Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Dividends Progressive 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.
Training and development
– Dividends Progressive has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Progressive Corporation: Variable Dividends 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.
Organizational Resilience of Dividends Progressive
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Dividends Progressive does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Dividends Progressive is one of the leading recruiters in the industry. Managers in the Progressive Corporation: Variable Dividends are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Innovation driven organization
– Dividends Progressive is one of the most innovative firm in sector. Manager in Progressive Corporation: Variable Dividends Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Operational resilience
– The operational resilience strategy in the Progressive Corporation: Variable Dividends Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Sustainable margins compare to other players in Finance & Accounting industry
– Progressive Corporation: Variable Dividends firm has clearly differentiated products in the market place. This has enabled Dividends Progressive to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Dividends Progressive to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Dividends Progressive 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 Progressive Corporation: Variable Dividends - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Dividends Progressive 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.
Diverse revenue streams
– Dividends Progressive is present in almost all the verticals within the industry. This has provided firm in Progressive Corporation: Variable Dividends 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.
Highly skilled collaborators
– Dividends Progressive 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 Progressive Corporation: Variable Dividends HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Dividends Progressive in the sector have low bargaining power. Progressive Corporation: Variable Dividends has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Dividends Progressive to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Progressive Corporation: Variable Dividends | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Progressive Corporation: Variable Dividends are -
Products dominated business model
– Even though Dividends Progressive has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Progressive Corporation: Variable Dividends should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the segment, Dividends Progressive 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.
Capital Spending Reduction
– Even during the low interest decade, Dividends Progressive 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.
Low market penetration in new markets
– Outside its home market of Dividends Progressive, firm in the HBR case study Progressive Corporation: Variable Dividends needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
Dividends Progressive has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Interest costs
– Compare to the competition, Dividends Progressive 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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Dividends Progressive supply chain. Even after few cautionary changes mentioned in the HBR case study - Progressive Corporation: Variable Dividends, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Dividends Progressive vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, Dividends Progressive 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. Dividends Progressive 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 Dividends Progressive products
– To increase the profitability and margins on the products, Dividends Progressive needs to provide more differentiated products than what it is currently offering in the marketplace.
Need for greater diversity
– Dividends Progressive 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.
Aligning sales with marketing
– It come across in the case study Progressive Corporation: Variable Dividends 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 Progressive Corporation: Variable Dividends can leverage the sales team experience to cultivate customer relationships as Dividends Progressive is planning to shift buying processes online.
Opportunities Progressive Corporation: Variable Dividends | 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 Progressive Corporation: Variable Dividends are -
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. Dividends Progressive can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help Dividends Progressive to increase its market reach. Dividends Progressive 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.
Developing new processes and practices
– Dividends Progressive can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing 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 Dividends Progressive in the consumer business. Now Dividends Progressive can target international markets with far fewer capital restrictions requirements than the existing system.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Dividends Progressive can use these opportunities to build new business models that can help the communities that Dividends Progressive operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Building a culture of innovation
– managers at Dividends Progressive 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.
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. Dividends Progressive can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Dividends Progressive has opened avenues for new revenue streams for the organization in the industry. This can help Dividends Progressive to build a more holistic ecosystem as suggested in the Progressive Corporation: Variable Dividends case study. Dividends Progressive can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Dividends Progressive 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Dividends Progressive is facing challenges because of the dominance of functional experts in the organization. Progressive Corporation: Variable Dividends case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Dividends Progressive 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.
Leveraging digital technologies
– Dividends Progressive 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.
Buying journey improvements
– Dividends Progressive can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Progressive Corporation: Variable Dividends 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.
Threats Progressive Corporation: Variable Dividends External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Progressive Corporation: Variable Dividends are -
Increasing wage structure of Dividends Progressive
– 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 Dividends Progressive.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Dividends Progressive 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 Progressive Corporation: Variable Dividends .
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.
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. Dividends Progressive 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
– Dividends Progressive has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Dividends Progressive 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.
Stagnating economy with rate increase
– Dividends Progressive 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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Dividends Progressive business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Progressive Corporation: Variable Dividends, Dividends Progressive 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 .
Regulatory challenges
– Dividends Progressive 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.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Dividends Progressive.
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. Dividends Progressive needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Environmental challenges
– Dividends Progressive 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. Dividends Progressive can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
High dependence on third party suppliers
– Dividends Progressive 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.
Weighted SWOT Analysis of Progressive Corporation: Variable Dividends 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 Progressive Corporation: Variable Dividends 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 Progressive Corporation: Variable Dividends 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 Progressive Corporation: Variable Dividends 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 Progressive Corporation: Variable Dividends 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 Dividends Progressive needs to make to build a sustainable competitive advantage.
