SWOT Analysis / TOWS Matrix for Prudential Financial (United States)
Based on various researches at Oak Spring University , Prudential Financial is operating in a macro-environment that has been destablized by – geopolitical disruptions, there is increasing trade war between United States & China, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization,
banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of Prudential Financial
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Prudential Financial can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Prudential Financial, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Prudential 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 Prudential Financial can be done for the following purposes –
1. Strategic planning of Prudential Financial
2. Improving business portfolio management of Prudential Financial
3. Assessing feasibility of the new initiative in United States
4. Making a Insurance (Life) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Prudential Financial
Strengths of Prudential Financial | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Prudential Financial are -
High switching costs
– The high switching costs that Prudential Financial 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.
Analytics focus
– Prudential Financial 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 (Life) 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.
Operational resilience
– The operational resilience strategy of Prudential Financial comprises – understanding the underlying the factors in the Insurance (Life) 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.
Superior customer experience
– The customer experience strategy of Prudential Financial in Insurance (Life) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Low bargaining power of suppliers
– Suppliers of Prudential Financial in the Financial sector have low bargaining power. Prudential Financial has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Prudential Financial to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Prudential Financial has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Prudential Financial to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Prudential 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.
Ability to lead change in Insurance (Life)
– Prudential Financial is one of the leading players in the Insurance (Life) industry in United States. Over the years it has not only transformed the business landscape in the Insurance (Life) industry in United States but also across the existing markets. The ability to lead change has enabled Prudential Financial in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– Prudential Financial has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Prudential Financial staying ahead in the Insurance (Life) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management in the Insurance (Life) industry
– Prudential Financial is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Successful track record of launching new products
– Prudential Financial has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Prudential 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.
Innovation driven organization
– Prudential Financial is one of the most innovative firm in Insurance (Life) sector.
Weaknesses of Prudential Financial | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Prudential Financial are -
Need for greater diversity
– Prudential 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.
Aligning sales with marketing
– From the outside it seems that Prudential Financial needs to have more collaboration between its sales team and marketing team. Sales professionals in the Insurance (Life) industry have deep experience in developing customer relationships. Marketing department at Prudential Financial can leverage the sales team experience to cultivate customer relationships as Prudential Financial is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative at Prudential Financial, in the dynamic environment of Insurance (Life) industry it has struggled to respond to the nimble upstart competition. Prudential Financial has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High operating costs
– Compare to the competitors, Prudential Financial has high operating costs in the Insurance (Life) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Prudential Financial lucrative customers.
Lack of clear differentiation of Prudential Financial products
– To increase the profitability and margins on the products, Prudential Financial needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ less understanding of Prudential Financial strategy
– From the outside it seems that the employees of Prudential Financial don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Compensation and incentives
– The revenue per employee of Prudential Financial is just above the Insurance (Life) 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.
Skills based hiring in Insurance (Life) industry
– The stress on hiring functional specialists at Prudential 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.
High cash cycle compare to competitors
Prudential Financial has a high cash cycle compare to other players in the Insurance (Life) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Interest costs
– Compare to the competition, Prudential Financial has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Low market penetration in new markets
– Outside its home market of United States, Prudential Financial needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Prudential Financial Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Prudential Financial are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Insurance (Life) industry, but it has also influenced the consumer preferences. Prudential Financial can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Developing new processes and practices
– Prudential Financial can develop new processes and procedures in Insurance (Life) 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Prudential 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, Prudential 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 Prudential 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.
Better consumer reach
– The expansion of the 5G network will help Prudential Financial to increase its market reach. Prudential 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 Prudential 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.
Buying journey improvements
– Prudential Financial can improve the customer journey of consumers in the Insurance (Life) 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Prudential Financial is facing challenges because of the dominance of functional experts in the organization. Prudential Financial can utilize new technology in the field of Insurance (Life) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Leveraging digital technologies
– Prudential 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.
Use of Bitcoin and other crypto currencies for transactions in Insurance (Life) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Prudential Financial in the Insurance (Life) industry. Now Prudential 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 Prudential 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Prudential 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 Prudential Financial to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Prudential Financial can use these opportunities to build new business models that can help the communities that Prudential Financial operates in. Secondly it can use opportunities from government spending in Insurance (Life) sector.
Threats Prudential Financial External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Prudential Financial are -
Shortening product life cycle
– it is one of the major threat that Prudential Financial is facing in Insurance (Life) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Prudential Financial business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Prudential Financial in Insurance (Life) industry. The Insurance (Life) 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.
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 Prudential Financial in the Insurance (Life) sector and impact the bottomline of the organization.
Regulatory challenges
– Prudential 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 (Life) industry regulations.
Easy access to finance
– Easy access to finance in Insurance (Life) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Prudential 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 dependence on third party suppliers
– Prudential 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Insurance (Life) industry are lowering. It can presents Prudential Financial with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Insurance (Life) sector.
Stagnating economy with rate increase
– Prudential 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 (Life) industry.
Technology acceleration in Forth Industrial Revolution
– Prudential Financial has witnessed rapid integration of technology during Covid-19 in the Insurance (Life) industry. As one of the leading players in the industry, Prudential Financial needs to keep up with the evolution of technology in the Insurance (Life) 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.
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. Prudential Financial needs to understand the core reasons impacting the Insurance (Life) industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Prudential Financial 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 Prudential Financial prominent markets.
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.
Weighted SWOT Analysis of Prudential Financial Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Prudential 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 Prudential 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 Prudential 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 Prudential 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 Prudential Financial needs to make to build a sustainable competitive advantage.
