Essent Group Ltd (ESNT) SWOT Analysis / TOWS Matrix / MBA Resources
Insurance (Prop. & Casualty)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Essent Group Ltd (United States)
Based on various researches at Oak Spring University , Essent Group Ltd is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, technology disruption, increasing household debt because of falling income levels,
talent flight as more people leaving formal jobs, geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Essent Group Ltd can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Essent Group Ltd, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Essent Group Ltd 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 Essent Group Ltd can be done for the following purposes –
1. Strategic planning of Essent Group Ltd
2. Improving business portfolio management of Essent Group Ltd
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 Essent Group Ltd
Strengths of Essent Group Ltd | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Essent Group Ltd are -
High brand equity
– Essent Group Ltd has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Essent Group Ltd to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Essent Group Ltd 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 Essent Group Ltd is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Essent Group Ltd emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Essent Group Ltd 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.
Ability to lead change in Insurance (Prop. & Casualty)
– Essent Group Ltd is one of the leading players in the Insurance (Prop. & Casualty) industry in United States. Over the years it has not only transformed the business landscape in the Insurance (Prop. & Casualty) industry in United States but also across the existing markets. The ability to lead change has enabled Essent Group Ltd in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management in the Insurance (Prop. & Casualty) industry
– Essent Group Ltd is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Essent Group Ltd has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Essent Group Ltd 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.
Analytics focus
– Essent Group Ltd 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 Insurance (Prop. & Casualty) 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.
Diverse revenue streams
– Essent Group Ltd is present in almost all the verticals within the Insurance (Prop. & Casualty) industry. This has provided Essent Group Ltd 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.
Highly skilled collaborators
– Essent Group Ltd 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 Essent Group Ltd have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Essent Group Ltd in the Financial sector have low bargaining power. Essent Group Ltd has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Essent Group Ltd to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Essent Group Ltd 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.
Ability to recruit top talent
– Essent Group Ltd is one of the leading players in the Insurance (Prop. & Casualty) 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.
Weaknesses of Essent Group Ltd | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Essent Group Ltd are -
High dependence on Essent Group Ltd ‘s star products
– The top 2 products and services of Essent Group Ltd 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 Essent Group Ltd has relatively successful track record of launching new products.
Products dominated business model
– Even though Essent Group Ltd 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. Essent Group Ltd should strive to include more intangible value offerings along with its core products and services.
High operating costs
– Compare to the competitors, Essent Group Ltd has high operating costs in the Insurance (Prop. & Casualty) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Essent Group Ltd lucrative 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 Essent Group Ltd supply chain. Even after few cautionary changes, Essent Group Ltd is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Essent Group Ltd vulnerable to further global disruptions in South East Asia.
Slow to strategic competitive environment developments
– As Essent Group Ltd 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.
High bargaining power of channel partners in Insurance (Prop. & Casualty) industry
– because of the regulatory requirements in United States, Essent Group Ltd 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.
Ability to respond to the competition
– As the decision making is very deliberative at Essent Group Ltd, in the dynamic environment of Insurance (Prop. & Casualty) industry it has struggled to respond to the nimble upstart competition. Essent Group Ltd has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow decision making process
– As mentioned earlier in the report, Essent Group Ltd 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. Essent Group Ltd 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.
Increasing silos among functional specialists
– The organizational structure of Essent Group Ltd is dominated by functional specialists. It is not different from other players in the Insurance (Prop. & Casualty) industry, but Essent Group Ltd needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Essent Group Ltd to focus more on services in the Insurance (Prop. & Casualty) industry rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Essent Group Ltd 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.
Employees’ less understanding of Essent Group Ltd strategy
– From the outside it seems that the employees of Essent Group Ltd 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.
Essent Group Ltd Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Essent Group Ltd are -
Learning at scale
– Online learning technologies has now opened space for Essent Group Ltd 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, Essent Group Ltd 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 Essent Group Ltd has opened avenues for new revenue streams for the organization in Insurance (Prop. & Casualty) industry. This can help Essent Group Ltd to build a more holistic ecosystem for Essent Group Ltd products in the Insurance (Prop. & Casualty) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Essent Group Ltd 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 (Prop. & Casualty) industry, and it will provide faster access to the consumers.
Manufacturing automation
– Essent Group Ltd 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Essent Group Ltd 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 Essent Group Ltd to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Essent Group Ltd 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.
Building a culture of innovation
– managers at Essent Group Ltd 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.
Better consumer reach
– The expansion of the 5G network will help Essent Group Ltd to increase its market reach. Essent Group Ltd 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Insurance (Prop. & Casualty) industry, but it has also influenced the consumer preferences. Essent Group Ltd can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Buying journey improvements
– Essent Group Ltd 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.
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 Essent Group Ltd 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Essent Group Ltd is facing challenges because of the dominance of functional experts in the organization. Essent Group Ltd can utilize new technology in the field of Insurance (Prop. & Casualty) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Threats Essent Group Ltd External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Essent Group Ltd are -
Shortening product life cycle
– it is one of the major threat that Essent Group Ltd is facing in Insurance (Prop. & Casualty) 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. Essent Group Ltd needs to understand the core reasons impacting the Insurance (Prop. & Casualty) 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 Essent Group Ltd.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Insurance (Prop. & Casualty) industry are lowering. It can presents Essent Group Ltd 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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Essent Group Ltd 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.
Technology acceleration in Forth Industrial Revolution
– Essent Group Ltd has witnessed rapid integration of technology during Covid-19 in the Insurance (Prop. & Casualty) industry. As one of the leading players in the industry, Essent Group Ltd needs to keep up with the evolution of technology in the Insurance (Prop. & Casualty) 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.
Stagnating economy with rate increase
– Essent Group Ltd 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.
Regulatory challenges
– Essent Group Ltd 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.
Increasing wage structure of Essent Group Ltd
– 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 Essent Group Ltd.
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. Essent Group Ltd 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. Essent Group Ltd 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.
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 Essent Group Ltd Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Essent Group Ltd 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 Essent Group Ltd 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 Essent Group Ltd 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 Essent Group Ltd 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 Essent Group Ltd needs to make to build a sustainable competitive advantage.