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 – increasing government debt because of Covid-19 spendings, technology disruption, there is backlash against globalization, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, increasing household debt because of falling income levels,
there is increasing trade war between United States & China, increasing transportation and logistics costs, 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 -
Innovation driven organization
– American Financial Group AFGE is one of the most innovative firm in sector.
Successful track record of launching new products
– American Financial Group AFGE has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. American Financial Group AFGE 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.
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.
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.
Strong track record of project management in the industry
– American Financial Group AFGE is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Low bargaining power of suppliers
– Suppliers of 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.
Cross disciplinary teams
– Horizontal connected teams at the American Financial Group AFGE 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.
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.
Effective Research and Development (R&D)
– American Financial Group AFGE has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – American Financial Group AFGE staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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 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.
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.
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 -
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.
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.
Slow to strategic competitive environment developments
– As American Financial Group AFGE is one of the leading players in the industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High cash cycle compare to competitors
American Financial Group AFGE has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Workers concerns about automation
– As automation is fast increasing in the industry, American Financial Group AFGE 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.
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.
Skills based hiring in industry
– The stress on hiring functional specialists at American Financial Group AFGE has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Capital Spending Reduction
– Even during the low interest decade, American Financial Group AFGE has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
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.
Ability to respond to the competition
– As the decision making is very deliberative at American Financial Group AFGE, in the dynamic environment of industry it has struggled to respond to the nimble upstart competition. American Financial Group AFGE has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
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 -
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.
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.
Loyalty marketing
– American Financial Group AFGE 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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for American Financial Group AFGE 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 Group AFGE to hire the very best people irrespective of their geographical location.
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.
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.
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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. American Financial Group AFGE 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 Group AFGE 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.
Creating value in data economy
– The success of analytics program of American Financial Group AFGE has opened avenues for new revenue streams for the organization in industry. This can help American Financial Group AFGE to build a more holistic ecosystem for American Financial Group AFGE products in the industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects American Financial Group AFGE 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 Group AFGE 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 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.
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 -
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.
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 Group AFGE in the sector and impact the bottomline of the organization.
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.
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.
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.
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.
High dependence on third party suppliers
– American Financial Group AFGE 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.
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.
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 Group AFGE.
Increasing wage structure of American Financial Group AFGE
– 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 Group AFGE.
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.
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.
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.
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.