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 - – digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, increasing commodity prices, increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs,
geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, 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 -
Analytics focus
– Dividends Progressive is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Timothy A. Luehrman, Brenda Chia can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
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.
Superior customer experience
– The customer experience strategy of Dividends Progressive in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Dividends Progressive is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Dividends Progressive is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Progressive Corporation: Variable Dividends Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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.
Successful track record of launching new products
– Dividends Progressive has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Dividends Progressive 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.
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.
Strong track record of project management
– Dividends Progressive is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Dividends Progressive digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Dividends Progressive 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.
High brand equity
– Dividends Progressive has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Dividends Progressive to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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 -
High bargaining power of channel partners
– Because of the regulatory requirements, Timothy A. Luehrman, Brenda Chia suggests that, Dividends Progressive 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Progressive Corporation: Variable Dividends 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 Dividends Progressive 's lucrative customers.
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.
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.
Skills based hiring
– The stress on hiring functional specialists at Dividends Progressive has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Progressive Corporation: Variable Dividends, is just above the industry average. Dividends Progressive 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.
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 star products
– The top 2 products and services of the firm as mentioned in the Progressive Corporation: Variable Dividends HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Dividends Progressive has relatively successful track record of launching new products.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Dividends Progressive is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Progressive Corporation: Variable Dividends 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 Dividends Progressive is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Dividends Progressive needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Dividends Progressive to focus more on services rather than just following the product oriented approach.
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 -
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.
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.
Learning at scale
– Online learning technologies has now opened space for Dividends Progressive to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
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.
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.
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. Dividends Progressive 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. Dividends Progressive 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
– 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Dividends Progressive to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Dividends Progressive to hire the very best people irrespective of their geographical location.
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.
Using analytics as competitive advantage
– Dividends Progressive 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 Progressive Corporation: Variable Dividends - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Dividends Progressive to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Dividends Progressive can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 -
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.
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 .
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.
Shortening product life cycle
– it is one of the major threat that Dividends Progressive is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Consumer confidence and its impact on Dividends Progressive 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. Dividends Progressive needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Dividends Progressive in the Finance & Accounting sector and impact the bottomline of the organization.
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.
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. Dividends Progressive 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
– 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.
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.
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.