American Financial Group AFGE (AFGE) SWOT Analysis / TOWS Matrix / MBA Resources
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for American Financial Group AFGE (United States)
Based on various researches at Oak Spring University , American Financial Group AFGE is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, supply chains are disrupted by pandemic , increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings,
competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of American Financial Group AFGE
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that American Financial Group AFGE can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the American Financial Group AFGE, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which American Financial Group AFGE 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 Group AFGE can be done for the following purposes –
1. Strategic planning of American Financial Group AFGE
2. Improving business portfolio management of American Financial Group AFGE
3. Assessing feasibility of the new initiative in United States
4. Making a sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of American Financial Group AFGE
Strengths of American Financial Group AFGE | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of American Financial Group AFGE are -
Learning organization
- American Financial Group AFGE 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 Group AFGE is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at American Financial Group AFGE emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– American Financial Group AFGE is one of the leading players in the 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.
Sustainable margins compare to other players in industry
– American Financial Group AFGE has clearly differentiated products in the market place. This has enabled American Financial Group AFGE to fetch slight price premium compare to the competitors in the industry. The sustainable margins have also helped American Financial Group AFGE to invest into research and development (R&D) and innovation.
Diverse revenue streams
– American Financial Group AFGE is present in almost all the verticals within the industry. This has provided American Financial Group AFGE 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.
Low bargaining power of suppliers
– Suppliers of American Financial Group AFGE in the sector have low bargaining power. American Financial Group AFGE has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps American Financial Group AFGE to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in
– American Financial Group AFGE is one of the leading players in the industry in United States. Over the years it has not only transformed the business landscape in the industry in United States but also across the existing markets. The ability to lead change has enabled American Financial Group AFGE in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– American Financial Group AFGE has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled American Financial Group AFGE to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in industry
- digital transformation varies from industry to industry. For American Financial Group AFGE digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. American Financial Group AFGE 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.
Training and development
– American Financial Group AFGE has one of the best training and development program in 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.
Superior customer experience
– The customer experience strategy of American Financial Group AFGE in industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy of American Financial Group AFGE 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.
Innovation driven organization
– American Financial Group AFGE is one of the most innovative firm in sector.
Weaknesses of American Financial Group AFGE | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of American Financial Group AFGE are -
High dependence on American Financial Group AFGE ‘s star products
– The top 2 products and services of American Financial Group AFGE still accounts for major business revenue. This dependence on star products in industry has resulted into insufficient focus on developing new products, even though American Financial Group AFGE has relatively successful track record of launching new products.
Lack of clear differentiation of American Financial Group AFGE products
– To increase the profitability and margins on the products, American Financial Group AFGE needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, American Financial Group AFGE has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. American Financial Group AFGE 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.
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 Group AFGE supply chain. Even after few cautionary changes, American Financial Group AFGE is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left American Financial Group AFGE vulnerable to further global disruptions in South East Asia.
Low market penetration in new markets
– Outside its home market of United States, American Financial Group AFGE needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Aligning sales with marketing
– From the outside it seems that American Financial Group AFGE needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department at American Financial Group AFGE can leverage the sales team experience to cultivate customer relationships as American Financial Group AFGE is planning to shift buying processes online.
Interest costs
– Compare to the competition, American Financial Group AFGE 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.
Products dominated business model
– Even though American Financial Group AFGE has some of the most successful models in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. American Financial Group AFGE should strive to include more intangible value offerings along with its core products and services.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, American Financial Group AFGE is slow explore the new channels of communication. These new channels of communication can help American Financial Group AFGE to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Need for greater diversity
– American Financial Group AFGE 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.
Employees’ less understanding of American Financial Group AFGE strategy
– From the outside it seems that the employees of American Financial Group AFGE 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.
American Financial Group AFGE Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of American Financial Group AFGE are -
Use of Bitcoin and other crypto currencies for transactions in industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for American Financial Group AFGE in the industry. Now American Financial Group AFGE can target international markets with far fewer capital restrictions requirements than the existing system.
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 Financial Group AFGE 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in industry, but it has also influenced the consumer preferences. American Financial Group AFGE can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– American Financial Group AFGE can use the latest technology developments to improve its manufacturing and designing process in 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.
Buying journey improvements
– American Financial Group AFGE can improve the customer journey of consumers in the 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.
Better consumer reach
– The expansion of the 5G network will help American Financial Group AFGE to increase its market reach. American Financial Group AFGE 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for American Financial Group AFGE in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the industry, and it will provide faster access to the consumers.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, American Financial Group AFGE 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 Group AFGE to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– American Financial Group AFGE can develop new processes and procedures in 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.
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 Group AFGE can use these opportunities to build new business models that can help the communities that American Financial Group AFGE operates in. Secondly it can use opportunities from government spending in sector.
Building a culture of innovation
– managers at American Financial Group AFGE 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 industry.
Leveraging digital technologies
– American Financial Group AFGE 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.
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 Group AFGE can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats American Financial Group AFGE External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of American Financial Group AFGE are -
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 Group AFGE 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.
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.
Consumer confidence and its impact on American Financial Group AFGE 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 industry and other sectors.
Easy access to finance
– Easy access to finance in industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. American Financial Group AFGE can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Group AFGE needs to understand the core reasons impacting the industry. This will help it in building a better workplace.
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 Group AFGE business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– American Financial Group AFGE 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 industry.
Environmental challenges
– American Financial Group AFGE 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 Group AFGE can take advantage of this fund but it will also bring new competitors in the industry.
Shortening product life cycle
– it is one of the major threat that American Financial Group AFGE is facing in sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– American Financial Group AFGE 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 industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, American Financial Group AFGE may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of sector.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to industry are lowering. It can presents American Financial Group AFGE with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology acceleration in Forth Industrial Revolution
– American Financial Group AFGE has witnessed rapid integration of technology during Covid-19 in the industry. As one of the leading players in the industry, American Financial Group AFGE needs to keep up with the evolution of technology in the 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.
Weighted SWOT Analysis of American Financial Group AFGE Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at American Financial Group AFGE 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 Group AFGE 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 Group AFGE 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 Group AFGE 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 Group AFGE needs to make to build a sustainable competitive advantage.