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 commodity prices, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation, technology disruption, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google,
challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings, 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.
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.
High switching costs
– The high switching costs that American Financial Group AFGE has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Superior customer experience
– The customer experience strategy of American Financial Group AFGE in industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– American Financial Group AFGE has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive industry. Secondly the value chain collaborators of American Financial Group AFGE have helped the firm to develop new products and bring them quickly to the marketplace.
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.
Analytics focus
– American Financial Group AFGE 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 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.
Innovation driven organization
– American Financial Group AFGE is one of the most innovative firm in sector.
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.
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.
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.
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.
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 -
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.
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.
High operating costs
– Compare to the competitors, American Financial Group AFGE has high operating costs in the industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract American Financial Group AFGE lucrative customers.
Increasing silos among functional specialists
– The organizational structure of American Financial Group AFGE is dominated by functional specialists. It is not different from other players in the industry, but American Financial Group AFGE needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help American Financial Group AFGE to focus more on services in the industry rather than just following the product oriented approach.
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.
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.
No frontier risks strategy
– From the 10K / annual statement of American Financial Group AFGE, it seems that company is thinking out the frontier risks that can impact industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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.
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.
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.
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.
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 -
Using analytics as competitive advantage
– American Financial Group AFGE has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in sector. This continuous investment in analytics has enabled American Financial Group AFGE to build a competitive advantage using analytics. The analytics driven competitive advantage can help American Financial Group AFGE to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, American Financial Group AFGE is facing challenges because of the dominance of functional experts in the organization. American Financial Group AFGE can utilize new technology in the field of industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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.
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.
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.
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.
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.
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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for American Financial Group AFGE 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.
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 -
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.
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, American Financial Group AFGE 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 Group AFGE prominent markets.
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.
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.
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.
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.
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.
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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for American Financial Group AFGE in industry. The 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.
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.
