First American (FAF) SWOT Analysis / TOWS Matrix / MBA Resources
Insurance (Prop. & Casualty)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for First American (United States)
Based on various researches at Oak Spring University , First American is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, there is increasing trade war between United States & China, increasing household debt because of falling income levels, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing commodity prices, challanges to central banks by blockchain based private currencies,
increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that First American can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the First American, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which First American 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 First American can be done for the following purposes –
1. Strategic planning of First American
2. Improving business portfolio management of First American
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 First American
Strengths of First American | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of First American are -
Superior customer experience
– The customer experience strategy of First American in Insurance (Prop. & Casualty) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Low bargaining power of suppliers
– Suppliers of First American in the Financial sector have low bargaining power. First American has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps First American to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Insurance (Prop. & Casualty) industry
– First American has clearly differentiated products in the market place. This has enabled First American to fetch slight price premium compare to the competitors in the Insurance (Prop. & Casualty) industry. The sustainable margins have also helped First American to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– First American 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.
High brand equity
– First American has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled First American to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Insurance (Prop. & Casualty)
– First American 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 First American in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- First American 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 First American is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at First American emphasize – knowledge, initiative, and innovation.
Analytics focus
– First American 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.
High switching costs
– The high switching costs that First American 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.
Highly skilled collaborators
– First American 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 First American have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– First American has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – First American 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.
Organizational Resilience of First American
– The covid-19 pandemic has put organizational resilience at the centre of everthing First American does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses of First American | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of First American are -
High dependence on First American ‘s star products
– The top 2 products and services of First American 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 First American has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, First American 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 First American lucrative customers.
Interest costs
– Compare to the competition, First American 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 First American strategy
– From the outside it seems that the employees of First American 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.
Workers concerns about automation
– As automation is fast increasing in the Insurance (Prop. & Casualty) industry, First American 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.
Skills based hiring in Insurance (Prop. & Casualty) industry
– The stress on hiring functional specialists at First American 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.
High cash cycle compare to competitors
First American has a high cash cycle compare to other players in the Insurance (Prop. & Casualty) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Compensation and incentives
– The revenue per employee of First American is just above the Insurance (Prop. & Casualty) 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.
No frontier risks strategy
– From the 10K / annual statement of First American, 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.
Low market penetration in new markets
– Outside its home market of United States, First American needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Aligning sales with marketing
– From the outside it seems that First American needs to have more collaboration between its sales team and marketing team. Sales professionals in the Insurance (Prop. & Casualty) industry have deep experience in developing customer relationships. Marketing department at First American can leverage the sales team experience to cultivate customer relationships as First American is planning to shift buying processes online.
First American Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of First American are -
Better consumer reach
– The expansion of the 5G network will help First American to increase its market reach. First American 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.
Loyalty marketing
– First American 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.
Learning at scale
– Online learning technologies has now opened space for First American 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, First American 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.
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 First American 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Insurance (Prop. & Casualty) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. First American 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. First American 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects First American can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of First American has opened avenues for new revenue streams for the organization in Insurance (Prop. & Casualty) industry. This can help First American to build a more holistic ecosystem for First American 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 First American 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, First American is facing challenges because of the dominance of functional experts in the organization. First American 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.
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. First American can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, First American can use these opportunities to build new business models that can help the communities that First American operates in. Secondly it can use opportunities from government spending in Insurance (Prop. & Casualty) sector.
Leveraging digital technologies
– First American 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.
Threats First American External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of First American are -
Consumer confidence and its impact on First American 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 (Prop. & Casualty) industry and other sectors.
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. First American needs to understand the core reasons impacting the Insurance (Prop. & Casualty) industry. This will help it in building a better workplace.
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.
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 First American in the Insurance (Prop. & Casualty) sector and impact the bottomline of the organization.
Regulatory challenges
– First American 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 First American
– 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 First American.
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 First American business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– First American 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, First American 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 First American prominent markets.
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 First American.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Insurance (Prop. & Casualty) industry are lowering. It can presents First American 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, First American 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.
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. First American 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.
Weighted SWOT Analysis of First American Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at First American 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 First American 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 First American 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 First American 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 First American needs to make to build a sustainable competitive advantage.
