Principal Financial (PFG) SWOT Analysis / TOWS Matrix / MBA Resources
Insurance (Accident & Health)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Principal Financial (United States)
Based on various researches at Oak Spring University , Principal Financial is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, geopolitical disruptions, central banks are concerned over increasing inflation, increasing energy prices, increasing commodity prices, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings,
there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of Principal Financial
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Principal Financial can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Principal Financial, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Principal 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 Principal Financial can be done for the following purposes –
1. Strategic planning of Principal Financial
2. Improving business portfolio management of Principal Financial
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 Principal Financial
Strengths of Principal Financial | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Principal Financial are -
Superior customer experience
– The customer experience strategy of Principal Financial in Insurance (Accident & Health) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Principal 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 (Accident & Health) industry. Secondly the value chain collaborators of Principal Financial have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Principal Financial has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Principal Financial 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.
Learning organization
- Principal 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 Principal Financial is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Principal Financial emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Principal 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.
High brand equity
– Principal Financial has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Principal Financial to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Principal Financial in the Financial sector have low bargaining power. Principal Financial has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Principal Financial to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Principal Financial is one of the most innovative firm in Insurance (Accident & Health) sector.
Sustainable margins compare to other players in Insurance (Accident & Health) industry
– Principal Financial has clearly differentiated products in the market place. This has enabled Principal Financial to fetch slight price premium compare to the competitors in the Insurance (Accident & Health) industry. The sustainable margins have also helped Principal Financial to invest into research and development (R&D) and innovation.
Organizational Resilience of Principal Financial
– The covid-19 pandemic has put organizational resilience at the centre of everthing Principal Financial does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Insurance (Accident & Health) industry
- digital transformation varies from industry to industry. For Principal Financial digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Principal 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.
Diverse revenue streams
– Principal Financial is present in almost all the verticals within the Insurance (Accident & Health) industry. This has provided Principal 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.
Weaknesses of Principal Financial | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Principal Financial are -
Capital Spending Reduction
– Even during the low interest decade, Principal 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 (Accident & Health) industry using digital technology.
Lack of clear differentiation of Principal Financial products
– To increase the profitability and margins on the products, Principal Financial needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Principal Financial 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.
Slow to strategic competitive environment developments
– As Principal Financial 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 dependence on Principal Financial ‘s star products
– The top 2 products and services of Principal Financial 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 Principal Financial has relatively successful track record of launching new products.
Increasing silos among functional specialists
– The organizational structure of Principal Financial is dominated by functional specialists. It is not different from other players in the Insurance (Accident & Health) industry, but Principal Financial needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Principal Financial to focus more on services in the Insurance (Accident & Health) industry rather than just following the product oriented approach.
Skills based hiring in Insurance (Accident & Health) industry
– The stress on hiring functional specialists at Principal Financial 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.
No frontier risks strategy
– From the 10K / annual statement of Principal Financial, it seems that company is thinking out the frontier risks that can impact Insurance (Accident & Health) 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.
Compensation and incentives
– The revenue per employee of Principal Financial 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.
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 Principal Financial supply chain. Even after few cautionary changes, Principal Financial is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Principal Financial vulnerable to further global disruptions in South East Asia.
Workers concerns about automation
– As automation is fast increasing in the Insurance (Accident & Health) industry, Principal 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.
Principal Financial Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Principal Financial are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Principal Financial can use these opportunities to build new business models that can help the communities that Principal Financial operates in. Secondly it can use opportunities from government spending in Insurance (Accident & Health) sector.
Buying journey improvements
– Principal Financial can improve the customer journey of consumers in the Insurance (Accident & Health) 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.
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. Principal Financial 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. Principal Financial 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Principal Financial is facing challenges because of the dominance of functional experts in the organization. Principal Financial 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Principal 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Principal 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 Principal 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.
Building a culture of innovation
– managers at Principal 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 (Accident & Health) industry.
Developing new processes and practices
– Principal Financial 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.
Loyalty marketing
– Principal Financial 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.
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. Principal Financial can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Principal Financial has opened avenues for new revenue streams for the organization in Insurance (Accident & Health) industry. This can help Principal Financial to build a more holistic ecosystem for Principal Financial products in the Insurance (Accident & Health) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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 Principal 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.
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 Principal Financial in the Insurance (Accident & Health) industry. Now Principal Financial can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Principal Financial External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Principal Financial are -
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 Principal Financial business can come under increasing regulations regarding data privacy, data security, 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. Principal Financial needs to understand the core reasons impacting the Insurance (Accident & Health) industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Principal Financial 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.
Regulatory challenges
– Principal 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 (Accident & Health) industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Principal Financial 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.
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. Principal 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.
Shortening product life cycle
– it is one of the major threat that Principal Financial is facing in Insurance (Accident & Health) 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 Principal Financial in the Insurance (Accident & Health) sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Insurance (Accident & Health) industry are lowering. It can presents Principal Financial 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.
Environmental challenges
– Principal 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. Principal Financial can take advantage of this fund but it will also bring new competitors in the Insurance (Accident & Health) 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.
Technology acceleration in Forth Industrial Revolution
– Principal Financial has witnessed rapid integration of technology during Covid-19 in the Insurance (Accident & Health) industry. As one of the leading players in the industry, Principal Financial 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Principal 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 (Accident & Health) sector.
Weighted SWOT Analysis of Principal Financial Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Principal 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 Principal 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 Principal 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 Principal 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 Principal Financial needs to make to build a sustainable competitive advantage.
