Aflac (AFL) SWOT Analysis / TOWS Matrix / MBA Resources
Insurance (Accident & Health)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Aflac (United States)
Based on various researches at Oak Spring University , Aflac is operating in a macro-environment that has been destablized by – competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy,
cloud computing is disrupting traditional business models, geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Aflac can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Aflac, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Aflac 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 Aflac can be done for the following purposes –
1. Strategic planning of Aflac
2. Improving business portfolio management of Aflac
3. Assessing feasibility of the new initiative in United States
4. Making a Insurance (Accident & Health) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Aflac
Strengths of Aflac | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Aflac are -
Ability to lead change in Insurance (Accident & Health)
– Aflac is one of the leading players in the Insurance (Accident & Health) industry in United States. Over the years it has not only transformed the business landscape in the Insurance (Accident & Health) industry in United States but also across the existing markets. The ability to lead change has enabled Aflac in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Aflac is one of the leading players in the Insurance (Accident & Health) 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.
Learning organization
- Aflac 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 Aflac is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Aflac emphasize – knowledge, initiative, and innovation.
Training and development
– Aflac has one of the best training and development program in Financial 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.
Cross disciplinary teams
– Horizontal connected teams at the Aflac 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.
Superior customer experience
– The customer experience strategy of Aflac in Insurance (Accident & Health) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Aflac
– The covid-19 pandemic has put organizational resilience at the centre of everthing Aflac does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of Aflac in the Financial sector have low bargaining power. Aflac has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Aflac to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management in the Insurance (Accident & Health) industry
– Aflac is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy of Aflac comprises – understanding the underlying the factors in the Insurance (Accident & Health) 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.
Effective Research and Development (R&D)
– Aflac has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Aflac staying ahead in the Insurance (Accident & Health) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Insurance (Accident & Health) industry
– Aflac has clearly differentiated products in the market place. This has enabled Aflac to fetch slight price premium compare to the competitors in the Insurance (Accident & Health) industry. The sustainable margins have also helped Aflac to invest into research and development (R&D) and innovation.
Weaknesses of Aflac | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Aflac are -
Skills based hiring in Insurance (Accident & Health) industry
– The stress on hiring functional specialists at Aflac 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.
Employees’ less understanding of Aflac strategy
– From the outside it seems that the employees of Aflac 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.
Aligning sales with marketing
– From the outside it seems that Aflac needs to have more collaboration between its sales team and marketing team. Sales professionals in the Insurance (Accident & Health) industry have deep experience in developing customer relationships. Marketing department at Aflac can leverage the sales team experience to cultivate customer relationships as Aflac is planning to shift buying processes online.
High operating costs
– Compare to the competitors, Aflac has high operating costs in the Insurance (Accident & Health) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Aflac lucrative customers.
High dependence on Aflac ‘s star products
– The top 2 products and services of Aflac still accounts for major business revenue. This dependence on star products in Insurance (Accident & Health) industry has resulted into insufficient focus on developing new products, even though Aflac has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, Aflac 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 (Accident & Health) industry using digital technology.
Lack of clear differentiation of Aflac products
– To increase the profitability and margins on the products, Aflac needs to provide more differentiated products than what it is currently offering in the marketplace.
Workers concerns about automation
– As automation is fast increasing in the Insurance (Accident & Health) industry, Aflac needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Ability to respond to the competition
– As the decision making is very deliberative at Aflac, in the dynamic environment of Insurance (Accident & Health) industry it has struggled to respond to the nimble upstart competition. Aflac has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As Aflac is one of the leading players in the Insurance (Accident & Health) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Insurance (Accident & Health) industry in last five years.
High cash cycle compare to competitors
Aflac has a high cash cycle compare to other players in the Insurance (Accident & Health) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Aflac Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Aflac are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Aflac 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 Aflac to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Aflac can use these opportunities to build new business models that can help the communities that Aflac operates in. Secondly it can use opportunities from government spending in Insurance (Accident & Health) sector.
Learning at scale
– Online learning technologies has now opened space for Aflac 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Aflac 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Aflac 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 Aflac to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Aflac 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.
Manufacturing automation
– Aflac can use the latest technology developments to improve its manufacturing and designing process in Insurance (Accident & Health) 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Aflac 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 (Accident & Health) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Aflac in the Insurance (Accident & Health) industry. Now Aflac can target international markets with far fewer capital restrictions requirements than the existing system.
Building a culture of innovation
– managers at Aflac 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 (Accident & Health) industry.
Developing new processes and practices
– Aflac can develop new processes and procedures in Insurance (Accident & Health) 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.
Creating value in data economy
– The success of analytics program of Aflac has opened avenues for new revenue streams for the organization in Insurance (Accident & Health) industry. This can help Aflac to build a more holistic ecosystem for Aflac products in the Insurance (Accident & Health) 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 Insurance (Accident & Health) industry, but it has also influenced the consumer preferences. Aflac can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Aflac External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Aflac are -
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.
Increasing wage structure of Aflac
– 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 Aflac.
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 Aflac in the Insurance (Accident & Health) sector and impact the bottomline of the organization.
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 Aflac business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Aflac 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 Aflac prominent markets.
Shortening product life cycle
– it is one of the major threat that Aflac is facing in Insurance (Accident & Health) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Aflac has witnessed rapid integration of technology during Covid-19 in the Insurance (Accident & Health) industry. As one of the leading players in the industry, Aflac needs to keep up with the evolution of technology in the Insurance (Accident & Health) 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.
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. Aflac 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Insurance (Accident & Health) industry are lowering. It can presents Aflac with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Insurance (Accident & Health) sector.
High dependence on third party suppliers
– Aflac 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.
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. Aflac needs to understand the core reasons impacting the Insurance (Accident & Health) industry. This will help it in building a better workplace.
Environmental challenges
– Aflac 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. Aflac can take advantage of this fund but it will also bring new competitors in the Insurance (Accident & Health) industry.
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 Aflac.
Weighted SWOT Analysis of Aflac Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Aflac 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 Aflac 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 Aflac 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 Aflac 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 Aflac needs to make to build a sustainable competitive advantage.
