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 – increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google,
challanges to central banks by blockchain based private currencies, increasing transportation and logistics costs, 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 -
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.
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.
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.
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.
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.
Successful track record of launching new products
– Aflac has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Aflac 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.
Digital Transformation in Insurance (Accident & Health) industry
- digital transformation varies from industry to industry. For Aflac digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Aflac 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.
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.
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.
Weaknesses of Aflac | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Aflac are -
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.
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.
Need for greater diversity
– Aflac 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.
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.
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.
Slow decision making process
– As mentioned earlier in the report, Aflac has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Insurance (Accident & Health) industry over the last five years. Aflac 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.
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.
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.
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.
Compensation and incentives
– The revenue per employee of Aflac is just above the Insurance (Accident & Health) industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
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.
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.
Leveraging digital technologies
– Aflac 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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Aflac in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Insurance (Accident & Health) industry, and it will provide faster access to the consumers.
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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Aflac to increase its market reach. Aflac 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Insurance (Accident & Health) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Aflac 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. Aflac 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.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Aflac is facing challenges because of the dominance of functional experts in the organization. Aflac can utilize new technology in the field of Insurance (Accident & Health) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Threats Aflac External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Aflac are -
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Aflac in Insurance (Accident & Health) industry. The Insurance (Accident & Health) 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.
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.
Stagnating economy with rate increase
– Aflac can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Insurance (Accident & Health) industry.
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.
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.
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.
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.
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.
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.
Regulatory challenges
– Aflac needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Insurance (Accident & Health) industry regulations.
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.
Consumer confidence and its impact on Aflac demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Insurance (Accident & Health) industry and other sectors.
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.