American Financial (AFG) SWOT Analysis / TOWS Matrix / 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 – increasing government debt because of Covid-19 spendings, there is backlash against globalization, supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, technology disruption, talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, etc

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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.

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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

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Strengths of American Financial | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of American Financial are -

Organizational Resilience of American Financial

– The covid-19 pandemic has put organizational resilience at the centre of everthing American Financial does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

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.

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.

Highly skilled collaborators

– American Financial has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Insurance (Prop. & Casualty) industry. Secondly the value chain collaborators of American Financial have helped the firm to develop new products and bring them quickly to the marketplace.

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.

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.

High brand equity

– American Financial has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled American Financial to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

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.

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.

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.

Diverse revenue streams

– American Financial is present in almost all the verticals within the Insurance (Prop. & Casualty) industry. This has provided American Financial 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 American Financial in Insurance (Prop. & Casualty) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

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Weaknesses of American Financial | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of American Financial are -

Employees’ less understanding of American Financial strategy

– From the outside it seems that the employees of American Financial don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.

Need for greater diversity

– 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.

Low market penetration in new markets

– Outside its home market of United States, American Financial needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

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.

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.

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.

High operating costs

– Compare to the competitors, American Financial has high operating costs in the Insurance (Prop. & Casualty) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract American Financial lucrative customers.

Capital Spending Reduction

– Even during the low interest decade, American Financial 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 (Prop. & Casualty) industry using digital technology.

Slow decision making process

– As mentioned earlier in the report, American Financial 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 (Prop. & Casualty) industry over the last five years. American Financial 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.

Compensation and incentives

– The revenue per employee of American Financial is just above the Insurance (Prop. & Casualty) 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.

High dependence on American Financial ‘s star products

– The top 2 products and services of American Financial still accounts for major business revenue. This dependence on star products in Insurance (Prop. & Casualty) industry has resulted into insufficient focus on developing new products, even though American Financial has relatively successful track record of launching new products.

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American Financial Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of American Financial are -

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.

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.

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.

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. American Financial can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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.

Use of Bitcoin and other crypto currencies for transactions in Insurance (Prop. & Casualty) industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for American Financial in the Insurance (Prop. & Casualty) industry. Now American Financial can target international markets with far fewer capital restrictions requirements than the existing system.

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.

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.

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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Insurance (Prop. & Casualty) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. American Financial 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 Financial 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.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Insurance (Prop. & Casualty) industry, but it has also influenced the consumer preferences. American Financial can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Developing new processes and practices

– American Financial can develop new processes and procedures in Insurance (Prop. & Casualty) 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.

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Threats American Financial External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of American Financial are -

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 Financial in the Insurance (Prop. & Casualty) sector and impact the bottomline of the organization.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for American Financial in Insurance (Prop. & Casualty) industry. The Insurance (Prop. & Casualty) industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.

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.

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.

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 American Financial.

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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Insurance (Prop. & Casualty) industry are lowering. It can presents American Financial with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Insurance (Prop. & Casualty) sector.

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.

Regulatory challenges

– American Financial 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 (Prop. & Casualty) industry regulations.

Stagnating economy with rate increase

– American Financial 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 Insurance (Prop. & Casualty) industry.

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 Financial business can come under increasing regulations regarding data privacy, data security, etc.

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 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.

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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.

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