SWOT Analysis / TOWS Matrix for Cincinnati Financial (United States)
Based on various researches at Oak Spring University , Cincinnati Financial is operating in a macro-environment that has been destablized by – competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, increasing energy prices, wage bills are increasing,
increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of Cincinnati Financial
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Cincinnati Financial can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Cincinnati Financial, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Cincinnati Financial 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 Cincinnati Financial can be done for the following purposes –
1. Strategic planning of Cincinnati Financial
2. Improving business portfolio management of Cincinnati Financial
3. Assessing feasibility of the new initiative in United States
4. Making a Insurance (Prop. & Casualty) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Cincinnati Financial
Strengths of Cincinnati Financial | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Cincinnati Financial are -
Learning organization
- Cincinnati Financial 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 Cincinnati Financial is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Cincinnati Financial emphasize – knowledge, initiative, and innovation.
Digital Transformation in Insurance (Prop. & Casualty) industry
- digital transformation varies from industry to industry. For Cincinnati Financial digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Cincinnati Financial 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.
Successful track record of launching new products
– Cincinnati Financial has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Cincinnati Financial 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.
Highly skilled collaborators
– Cincinnati Financial has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Insurance (Prop. & Casualty) industry. Secondly the value chain collaborators of Cincinnati Financial have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management in the Insurance (Prop. & Casualty) industry
– Cincinnati Financial is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Cincinnati Financial is one of the most innovative firm in Insurance (Prop. & Casualty) sector.
Low bargaining power of suppliers
– Suppliers of Cincinnati Financial in the Financial sector have low bargaining power. Cincinnati Financial has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Cincinnati Financial to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Cincinnati Financial is present in almost all the verticals within the Insurance (Prop. & Casualty) industry. This has provided Cincinnati Financial 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.
Superior customer experience
– The customer experience strategy of Cincinnati Financial in Insurance (Prop. & Casualty) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Sustainable margins compare to other players in Insurance (Prop. & Casualty) industry
– Cincinnati Financial has clearly differentiated products in the market place. This has enabled Cincinnati Financial to fetch slight price premium compare to the competitors in the Insurance (Prop. & Casualty) industry. The sustainable margins have also helped Cincinnati Financial to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Cincinnati Financial 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.
Effective Research and Development (R&D)
– Cincinnati Financial has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Cincinnati Financial staying ahead in the Insurance (Prop. & Casualty) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses of Cincinnati Financial | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Cincinnati Financial are -
Interest costs
– Compare to the competition, Cincinnati Financial 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.
Slow to strategic competitive environment developments
– As Cincinnati Financial is one of the leading players in the Insurance (Prop. & Casualty) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Insurance (Prop. & Casualty) industry in last five years.
Capital Spending Reduction
– Even during the low interest decade, Cincinnati Financial 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 (Prop. & Casualty) industry using digital technology.
Employees’ less understanding of Cincinnati Financial strategy
– From the outside it seems that the employees of Cincinnati Financial 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 decision making process
– As mentioned earlier in the report, Cincinnati Financial 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 (Prop. & Casualty) industry over the last five years. Cincinnati Financial 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.
Lack of clear differentiation of Cincinnati Financial products
– To increase the profitability and margins on the products, Cincinnati Financial needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners in Insurance (Prop. & Casualty) industry
– because of the regulatory requirements in United States, Cincinnati Financial is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Insurance (Prop. & Casualty) industry.
Workers concerns about automation
– As automation is fast increasing in the Insurance (Prop. & Casualty) industry, Cincinnati Financial 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.
Products dominated business model
– Even though Cincinnati Financial has some of the most successful models in the Insurance (Prop. & Casualty) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Cincinnati Financial should strive to include more intangible value offerings along with its core products and services.
High dependence on Cincinnati Financial ‘s star products
– The top 2 products and services of Cincinnati Financial still accounts for major business revenue. This dependence on star products in Insurance (Prop. & Casualty) industry has resulted into insufficient focus on developing new products, even though Cincinnati Financial has relatively successful track record of launching new products.
No frontier risks strategy
– From the 10K / annual statement of Cincinnati Financial, it seems that company is thinking out the frontier risks that can impact Insurance (Prop. & Casualty) 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.
Cincinnati Financial Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Cincinnati Financial are -
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. Cincinnati Financial can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Cincinnati Financial 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, Cincinnati Financial 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.
Manufacturing automation
– Cincinnati Financial can use the latest technology developments to improve its manufacturing and designing process in Insurance (Prop. & Casualty) 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.
Building a culture of innovation
– managers at Cincinnati Financial 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 (Prop. & Casualty) industry.
Leveraging digital technologies
– Cincinnati Financial 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
– Cincinnati Financial can develop new processes and procedures in Insurance (Prop. & Casualty) 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Cincinnati Financial 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 Cincinnati Financial to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Cincinnati Financial has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Insurance (Prop. & Casualty) sector. This continuous investment in analytics has enabled Cincinnati Financial to build a competitive advantage using analytics. The analytics driven competitive advantage can help Cincinnati Financial to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Cincinnati Financial can improve the customer journey of consumers in the Insurance (Prop. & Casualty) 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Cincinnati Financial can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Cincinnati Financial can use these opportunities to build new business models that can help the communities that Cincinnati Financial operates in. Secondly it can use opportunities from government spending in Insurance (Prop. & Casualty) sector.
Creating value in data economy
– The success of analytics program of Cincinnati Financial has opened avenues for new revenue streams for the organization in Insurance (Prop. & Casualty) industry. This can help Cincinnati Financial to build a more holistic ecosystem for Cincinnati Financial products in the Insurance (Prop. & Casualty) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Threats Cincinnati Financial External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Cincinnati Financial 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. Cincinnati Financial needs to understand the core reasons impacting the Insurance (Prop. & Casualty) industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– Cincinnati Financial 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 (Prop. & Casualty) industry.
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 Cincinnati Financial
– 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 Cincinnati Financial.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Cincinnati Financial in Insurance (Prop. & Casualty) industry. The Insurance (Prop. & Casualty) 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Insurance (Prop. & Casualty) industry are lowering. It can presents Cincinnati Financial with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Insurance (Prop. & Casualty) sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Cincinnati Financial may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Insurance (Prop. & Casualty) sector.
Easy access to finance
– Easy access to finance in Insurance (Prop. & Casualty) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Cincinnati Financial can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Cincinnati Financial 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.
Environmental challenges
– Cincinnati Financial 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. Cincinnati Financial can take advantage of this fund but it will also bring new competitors in the Insurance (Prop. & Casualty) industry.
Regulatory challenges
– Cincinnati Financial 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 (Prop. & Casualty) industry regulations.
Shortening product life cycle
– it is one of the major threat that Cincinnati Financial is facing in Insurance (Prop. & Casualty) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Cincinnati Financial in the Insurance (Prop. & Casualty) sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Cincinnati Financial Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Cincinnati Financial 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 Cincinnati Financial 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 Cincinnati Financial 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 Cincinnati Financial 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 Cincinnati Financial needs to make to build a sustainable competitive advantage.