American Equity Inv. Life (AEL) SWOT Analysis / TOWS Matrix / MBA Resources
Insurance (Life)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for American Equity Inv. Life (United States)
Based on various researches at Oak Spring University , American Equity Inv. Life is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, increasing energy prices, geopolitical disruptions, central banks are concerned over increasing inflation,
challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of American Equity Inv. Life
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that American Equity Inv. Life can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the American Equity Inv. Life, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which American Equity Inv. Life 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 Equity Inv. Life can be done for the following purposes –
1. Strategic planning of American Equity Inv. Life
2. Improving business portfolio management of American Equity Inv. Life
3. Assessing feasibility of the new initiative in United States
4. Making a Insurance (Life) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of American Equity Inv. Life
Strengths of American Equity Inv. Life | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of American Equity Inv. Life are -
Low bargaining power of suppliers
– Suppliers of American Equity Inv. Life in the Financial sector have low bargaining power. American Equity Inv. Life has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps American Equity Inv. Life to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– American Equity Inv. Life is one of the most innovative firm in Insurance (Life) sector.
Operational resilience
– The operational resilience strategy of American Equity Inv. Life comprises – understanding the underlying the factors in the Insurance (Life) 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.
Successful track record of launching new products
– American Equity Inv. Life has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. American Equity Inv. Life 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 Insurance (Life) industry
- digital transformation varies from industry to industry. For American Equity Inv. Life digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. American Equity Inv. Life 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.
Cross disciplinary teams
– Horizontal connected teams at the American Equity Inv. Life 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.
High switching costs
– The high switching costs that American Equity Inv. Life 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.
Superior customer experience
– The customer experience strategy of American Equity Inv. Life in Insurance (Life) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– American Equity Inv. Life has one of the best training and development program in Financial industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Ability to recruit top talent
– American Equity Inv. Life is one of the leading players in the Insurance (Life) industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Organizational Resilience of American Equity Inv. Life
– The covid-19 pandemic has put organizational resilience at the centre of everthing American Equity Inv. Life does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– American Equity Inv. Life is present in almost all the verticals within the Insurance (Life) industry. This has provided American Equity Inv. Life 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.
Weaknesses of American Equity Inv. Life | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of American Equity Inv. Life are -
Products dominated business model
– Even though American Equity Inv. Life has some of the most successful models in the Insurance (Life) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. American Equity Inv. Life should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee of American Equity Inv. Life is just above the Insurance (Life) industry average. It 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.
Lack of clear differentiation of American Equity Inv. Life products
– To increase the profitability and margins on the products, American Equity Inv. Life needs to provide more differentiated products than what it is currently offering in the marketplace.
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 American Equity Inv. Life supply chain. Even after few cautionary changes, American Equity Inv. Life is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left American Equity Inv. Life vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– American Equity Inv. Life 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.
Low market penetration in new markets
– Outside its home market of United States, American Equity Inv. Life needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As American Equity Inv. Life is one of the leading players in the Insurance (Life) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Insurance (Life) industry in last five years.
Capital Spending Reduction
– Even during the low interest decade, American Equity Inv. Life 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 Insurance (Life) industry using digital technology.
Interest costs
– Compare to the competition, American Equity Inv. Life 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 bargaining power of channel partners in Insurance (Life) industry
– because of the regulatory requirements in United States, American Equity Inv. Life 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 Insurance (Life) industry.
Slow decision making process
– As mentioned earlier in the report, American Equity Inv. Life has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Insurance (Life) industry over the last five years. American Equity Inv. Life 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.
American Equity Inv. Life Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of American Equity Inv. Life are -
Creating value in data economy
– The success of analytics program of American Equity Inv. Life has opened avenues for new revenue streams for the organization in Insurance (Life) industry. This can help American Equity Inv. Life to build a more holistic ecosystem for American Equity Inv. Life products in the Insurance (Life) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at American Equity Inv. Life 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 Insurance (Life) industry.
Low interest rates
– Even though inflation is raising its head in most developed economies, American Equity Inv. Life 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.
Better consumer reach
– The expansion of the 5G network will help American Equity Inv. Life to increase its market reach. American Equity Inv. Life 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, American Equity Inv. Life can use these opportunities to build new business models that can help the communities that American Equity Inv. Life operates in. Secondly it can use opportunities from government spending in Insurance (Life) sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects American Equity Inv. Life can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– American Equity Inv. Life 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Insurance (Life) industry, but it has also influenced the consumer preferences. American Equity Inv. Life can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 American Equity Inv. Life 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for American Equity Inv. Life in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Insurance (Life) industry, and it will provide faster access to the consumers.
Redefining models of collaboration and team work
– As explained in the weaknesses section, American Equity Inv. Life is facing challenges because of the dominance of functional experts in the organization. American Equity Inv. Life can utilize new technology in the field of Insurance (Life) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Insurance (Life) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. American Equity Inv. Life 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. American Equity Inv. Life 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.
Using analytics as competitive advantage
– American Equity Inv. Life has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Insurance (Life) sector. This continuous investment in analytics has enabled American Equity Inv. Life to build a competitive advantage using analytics. The analytics driven competitive advantage can help American Equity Inv. Life to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats American Equity Inv. Life External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of American Equity Inv. Life are -
Technology acceleration in Forth Industrial Revolution
– American Equity Inv. Life has witnessed rapid integration of technology during Covid-19 in the Insurance (Life) industry. As one of the leading players in the industry, American Equity Inv. Life needs to keep up with the evolution of technology in the Insurance (Life) 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.
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. American Equity Inv. Life 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.
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 American Equity Inv. Life business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Insurance (Life) industry are lowering. It can presents American Equity Inv. Life with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Insurance (Life) sector.
Environmental challenges
– American Equity Inv. Life 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. American Equity Inv. Life can take advantage of this fund but it will also bring new competitors in the Insurance (Life) industry.
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 American Equity Inv. Life in the Insurance (Life) sector and impact the bottomline of the organization.
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. American Equity Inv. Life needs to understand the core reasons impacting the Insurance (Life) industry. This will help it in building a better workplace.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, American Equity Inv. Life may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Insurance (Life) sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, American Equity Inv. Life 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 American Equity Inv. Life prominent markets.
Easy access to finance
– Easy access to finance in Insurance (Life) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. American Equity Inv. Life can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– American Equity Inv. Life 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 Insurance (Life) industry regulations.
Weighted SWOT Analysis of American Equity Inv. Life Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at American Equity Inv. Life 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 American Equity Inv. Life 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 American Equity Inv. Life 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 Equity Inv. Life 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 American Equity Inv. Life needs to make to build a sustainable competitive advantage.