American Financial (AFG) SWOT Analysis / TOWS Matrix / MBA Resources
Insurance (Prop. & Casualty)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for American Financial (United States)
Based on various researches at Oak Spring University , American Financial is operating in a macro-environment that has been destablized by – there is backlash against globalization, supply chains are disrupted by pandemic , geopolitical disruptions, increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies,
increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, etc
Introduction to SWOT Analysis of American Financial
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that American Financial can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the American Financial, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which American Financial 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 Financial can be done for the following purposes –
1. Strategic planning of American Financial
2. Improving business portfolio management of American Financial
3. Assessing feasibility of the new initiative in United States
4. Making a Insurance (Prop. & Casualty) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of American Financial
Strengths of American Financial | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of American Financial are -
Operational resilience
– The operational resilience strategy of American Financial comprises – understanding the underlying the factors in the Insurance (Prop. & Casualty) 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.
Innovation driven organization
– American Financial is one of the most innovative firm in Insurance (Prop. & Casualty) sector.
Ability to recruit top talent
– American Financial is one of the leading players in the Insurance (Prop. & Casualty) 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.
High switching costs
– The high switching costs that American Financial 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.
Effective Research and Development (R&D)
– American Financial has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – American Financial staying ahead in the Insurance (Prop. & Casualty) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- American Financial 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 American Financial is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at American Financial emphasize – knowledge, initiative, and innovation.
Analytics focus
– American Financial 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 Insurance (Prop. & Casualty) industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Ability to lead change in Insurance (Prop. & Casualty)
– American Financial is one of the leading players in the Insurance (Prop. & Casualty) industry in United States. Over the years it has not only transformed the business landscape in the Insurance (Prop. & Casualty) industry in United States but also across the existing markets. The ability to lead change has enabled American Financial in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Insurance (Prop. & Casualty) industry
– American Financial has clearly differentiated products in the market place. This has enabled American Financial to fetch slight price premium compare to the competitors in the Insurance (Prop. & Casualty) industry. The sustainable margins have also helped American Financial to invest into research and development (R&D) and innovation.
Strong track record of project management in the Insurance (Prop. & Casualty) industry
– American Financial is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Successful track record of launching new products
– American Financial has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. American Financial 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.
Cross disciplinary teams
– Horizontal connected teams at the American Financial 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.
Weaknesses of American Financial | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of American Financial are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, American Financial is slow explore the new channels of communication. These new channels of communication can help American Financial to provide better information regarding Insurance (Prop. & Casualty) products and services. It can also build an online community to further reach out to potential customers.
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 Financial supply chain. Even after few cautionary changes, American Financial is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left American Financial vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– American Financial 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, American Financial 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.
Slow to strategic competitive environment developments
– As American Financial is one of the leading players in the Insurance (Prop. & Casualty) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Insurance (Prop. & Casualty) industry in last five years.
High bargaining power of channel partners in Insurance (Prop. & Casualty) industry
– because of the regulatory requirements in United States, American Financial 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 (Prop. & Casualty) industry.
Aligning sales with marketing
– From the outside it seems that American Financial needs to have more collaboration between its sales team and marketing team. Sales professionals in the Insurance (Prop. & Casualty) industry have deep experience in developing customer relationships. Marketing department at American Financial can leverage the sales team experience to cultivate customer relationships as American Financial is planning to shift buying processes online.
Lack of clear differentiation of American Financial products
– To increase the profitability and margins on the products, American Financial needs to provide more differentiated products than what it is currently offering in the marketplace.
Workers concerns about automation
– As automation is fast increasing in the Insurance (Prop. & Casualty) industry, American Financial 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.
Ability to respond to the competition
– As the decision making is very deliberative at American Financial, in the dynamic environment of Insurance (Prop. & Casualty) industry it has struggled to respond to the nimble upstart competition. American Financial has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though American Financial has some of the most successful models in the Insurance (Prop. & Casualty) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. American Financial should strive to include more intangible value offerings along with its core products and services.
American Financial Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of American Financial are -
Buying journey improvements
– American Financial can improve the customer journey of consumers in the Insurance (Prop. & Casualty) industry by using analytics and artificial intelligence. It 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.
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 Financial can use these opportunities to build new business models that can help the communities that American Financial operates in. Secondly it can use opportunities from government spending in Insurance (Prop. & Casualty) sector.
Learning at scale
– Online learning technologies has now opened space for American Financial 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.
Building a culture of innovation
– managers at American Financial 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 (Prop. & Casualty) industry.
Lowering marketing communication costs
– 5G expansion will open new opportunities for American Financial 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 (Prop. & Casualty) industry, and it will provide faster access to the consumers.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for American Financial 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 American Financial to hire the very best people irrespective of their geographical location.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects American Financial can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, American Financial 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.
Loyalty marketing
– American Financial 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, American Financial 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 American Financial to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of American Financial has opened avenues for new revenue streams for the organization in Insurance (Prop. & Casualty) industry. This can help American Financial to build a more holistic ecosystem for American Financial products in the Insurance (Prop. & Casualty) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– American Financial can use the latest technology developments to improve its manufacturing and designing process in Insurance (Prop. & Casualty) sector. 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
– American Financial has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Insurance (Prop. & Casualty) sector. This continuous investment in analytics has enabled American Financial to build a competitive advantage using analytics. The analytics driven competitive advantage can help American Financial to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats American Financial External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of American Financial are -
Environmental challenges
– American Financial 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 Financial can take advantage of this fund but it will also bring new competitors in the Insurance (Prop. & Casualty) industry.
Easy access to finance
– Easy access to finance in Insurance (Prop. & Casualty) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. American Financial can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Financial 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, American Financial 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 (Prop. & Casualty) sector.
Consumer confidence and its impact on American Financial 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 Insurance (Prop. & Casualty) industry and other sectors.
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.
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 Financial needs to understand the core reasons impacting the Insurance (Prop. & Casualty) industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, American Financial 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 Financial prominent markets.
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.
Shortening product life cycle
– it is one of the major threat that American Financial is facing in Insurance (Prop. & Casualty) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– American Financial has witnessed rapid integration of technology during Covid-19 in the Insurance (Prop. & Casualty) industry. As one of the leading players in the industry, American Financial needs to keep up with the evolution of technology in the Insurance (Prop. & Casualty) 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
– American Financial 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 wage structure of American Financial
– 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 American Financial.
Weighted SWOT Analysis of American Financial Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at American Financial 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 Financial 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 Financial 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 Financial 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 Financial needs to make to build a sustainable competitive advantage.