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 – supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, increasing household debt because of falling income levels, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs,
geopolitical disruptions, cloud computing is disrupting traditional business models, 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 -
Ability to recruit top talent
– Principal Financial is one of the leading players in the Insurance (Accident & Health) industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
Training and development
– Principal Financial 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.
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.
Operational resilience
– The operational resilience strategy of Principal Financial comprises – understanding the underlying the factors in the Insurance (Accident & Health) industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
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.
Ability to lead change in Insurance (Accident & Health)
– Principal Financial is one of the leading players in the Insurance (Accident & Health) industry in United States. Over the years it has not only transformed the business landscape in the Insurance (Accident & Health) industry in United States but also across the existing markets. The ability to lead change has enabled Principal Financial in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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.
Successful track record of launching new products
– Principal Financial has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Principal 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.
Weaknesses of Principal Financial | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Principal Financial are -
Products dominated business model
– Even though Principal Financial has some of the most successful models in the Insurance (Accident & Health) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Principal Financial should strive to include more intangible value offerings along with its core products and services.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Principal Financial is slow explore the new channels of communication. These new channels of communication can help Principal Financial to provide better information regarding Insurance (Accident & Health) products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative at Principal Financial, in the dynamic environment of Insurance (Accident & Health) industry it has struggled to respond to the nimble upstart competition. Principal Financial has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of United States, Principal Financial needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
Need for greater diversity
– Principal Financial has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
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.
Aligning sales with marketing
– From the outside it seems that Principal Financial needs to have more collaboration between its sales team and marketing team. Sales professionals in the Insurance (Accident & Health) industry have deep experience in developing customer relationships. Marketing department at Principal Financial can leverage the sales team experience to cultivate customer relationships as Principal Financial is planning to shift buying processes online.
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.
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.
Principal Financial Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Principal Financial are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Principal Financial 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 Principal Financial to hire the very best people irrespective of their geographical location.
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.
Better consumer reach
– The expansion of the 5G network will help Principal Financial to increase its market reach. Principal Financial 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.
Learning at scale
– Online learning technologies has now opened space for Principal Financial 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Insurance (Accident & Health) industry, but it has also influenced the consumer preferences. Principal Financial can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
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.
Leveraging digital technologies
– Principal 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.
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.
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.
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.
Manufacturing automation
– Principal Financial can use the latest technology developments to improve its manufacturing and designing process in Insurance (Accident & Health) sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Threats Principal Financial External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Principal Financial are -
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.
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.
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.
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.
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.
Easy access to finance
– Easy access to finance in Insurance (Accident & Health) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Principal Financial can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
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.
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.
Stagnating economy with rate increase
– Principal 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 (Accident & Health) industry.
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.
Increasing wage structure of Principal 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 Principal Financial.
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.