AIG (AIG) SWOT Analysis / TOWS Matrix / MBA Resources
Insurance (Prop. & Casualty)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for AIG (Germany)
Based on various researches at Oak Spring University , AIG is operating in a macro-environment that has been destablized by – wage bills are increasing, technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, challanges to central banks by blockchain based private currencies, geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion,
supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that AIG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the AIG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which AIG 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 AIG can be done for the following purposes –
1. Strategic planning of AIG
2. Improving business portfolio management of AIG
3. Assessing feasibility of the new initiative in Germany
4. Making a Insurance (Prop. & Casualty) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of AIG
Strengths of AIG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of AIG are -
Ability to lead change in Insurance (Prop. & Casualty)
– AIG is one of the leading players in the Insurance (Prop. & Casualty) industry in Germany. Over the years it has not only transformed the business landscape in the Insurance (Prop. & Casualty) industry in Germany but also across the existing markets. The ability to lead change has enabled AIG in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of AIG in the Financial sector have low bargaining power. AIG has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps AIG to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy of AIG comprises – understanding the underlying the factors in the Insurance (Prop. & Casualty) 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.
Digital Transformation in Insurance (Prop. & Casualty) industry
- digital transformation varies from industry to industry. For AIG digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. AIG 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
– AIG is present in almost all the verticals within the Insurance (Prop. & Casualty) industry. This has provided AIG 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.
Effective Research and Development (R&D)
– AIG has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – AIG 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.
Superior customer experience
– The customer experience strategy of AIG in Insurance (Prop. & Casualty) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- AIG 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 AIG is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at AIG emphasize – knowledge, initiative, and innovation.
Analytics focus
– AIG 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 Germany 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.
Successful track record of launching new products
– AIG has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. AIG 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.
Cross disciplinary teams
– Horizontal connected teams at the AIG 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.
Organizational Resilience of AIG
– The covid-19 pandemic has put organizational resilience at the centre of everthing AIG does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses of AIG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of AIG are -
Capital Spending Reduction
– Even during the low interest decade, AIG 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 (Prop. & Casualty) industry using digital technology.
Compensation and incentives
– The revenue per employee of AIG 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.
Low market penetration in new markets
– Outside its home market of Germany, AIG needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Ability to respond to the competition
– As the decision making is very deliberative at AIG, in the dynamic environment of Insurance (Prop. & Casualty) industry it has struggled to respond to the nimble upstart competition. AIG has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Aligning sales with marketing
– From the outside it seems that AIG 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 AIG can leverage the sales team experience to cultivate customer relationships as AIG is planning to shift buying processes online.
Products dominated business model
– Even though AIG has some of the most successful models in the Insurance (Prop. & Casualty) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. AIG should strive to include more intangible value offerings along with its core products and services.
High operating costs
– Compare to the competitors, AIG 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 AIG lucrative customers.
Lack of clear differentiation of AIG products
– To increase the profitability and margins on the products, AIG needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
AIG 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.
Workers concerns about automation
– As automation is fast increasing in the Insurance (Prop. & Casualty) industry, AIG 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.
Employees’ less understanding of AIG strategy
– From the outside it seems that the employees of AIG 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.
AIG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of AIG are -
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 AIG 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.
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. AIG can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– AIG 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.
Leveraging digital technologies
– AIG 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.
Creating value in data economy
– The success of analytics program of AIG has opened avenues for new revenue streams for the organization in Insurance (Prop. & Casualty) industry. This can help AIG to build a more holistic ecosystem for AIG products in the Insurance (Prop. & Casualty) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– AIG can use the latest technology developments to improve its manufacturing and designing process in Insurance (Prop. & Casualty) sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Redefining models of collaboration and team work
– As explained in the weaknesses section, AIG is facing challenges because of the dominance of functional experts in the organization. AIG 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.
Buying journey improvements
– AIG can improve the customer journey of consumers in the Insurance (Prop. & Casualty) industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Low interest rates
– Even though inflation is raising its head in most developed economies, AIG 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, AIG 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 AIG to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. AIG 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. AIG 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.
Using analytics as competitive advantage
– AIG has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Insurance (Prop. & Casualty) sector. This continuous investment in analytics has enabled AIG to build a competitive advantage using analytics. The analytics driven competitive advantage can help AIG to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– AIG can develop new processes and procedures in Insurance (Prop. & Casualty) 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.
Threats AIG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of AIG are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for AIG in Insurance (Prop. & Casualty) industry. The Insurance (Prop. & Casualty) industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
High dependence on third party suppliers
– AIG 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, AIG 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.
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. AIG needs to understand the core reasons impacting the Insurance (Prop. & Casualty) industry. This will help it in building a better workplace.
Regulatory challenges
– AIG 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.
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 AIG business can come under increasing regulations regarding data privacy, data security, etc.
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 AIG.
Increasing wage structure of AIG
– 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 AIG.
Easy access to finance
– Easy access to finance in Insurance (Prop. & Casualty) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. AIG can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, AIG 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 AIG prominent markets.
Environmental challenges
– AIG 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. AIG can take advantage of this fund but it will also bring new competitors in the Insurance (Prop. & Casualty) industry.
Technology acceleration in Forth Industrial Revolution
– AIG has witnessed rapid integration of technology during Covid-19 in the Insurance (Prop. & Casualty) industry. As one of the leading players in the industry, AIG needs to keep up with the evolution of technology in the Insurance (Prop. & Casualty) sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
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 AIG Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at AIG 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 AIG 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 AIG 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 AIG 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 AIG needs to make to build a sustainable competitive advantage.