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 – technology disruption, digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, increasing government debt because of Covid-19 spendings,
increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, 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 -
High switching costs
– The high switching costs that AIG 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.
Innovation driven organization
– AIG is one of the most innovative firm in Insurance (Prop. & Casualty) sector.
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.
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.
Training and development
– AIG 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.
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.
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.
Strong track record of project management in the Insurance (Prop. & Casualty) industry
– AIG is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
High brand equity
– AIG has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled AIG to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
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.
Weaknesses of AIG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of AIG are -
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 AIG supply chain. Even after few cautionary changes, AIG is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left AIG vulnerable to further global disruptions in South East Asia.
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.
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.
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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, AIG is slow explore the new channels of communication. These new channels of communication can help AIG to provide better information regarding Insurance (Prop. & Casualty) products and services. It can also build an online community to further reach out to potential customers.
Need for greater diversity
– AIG 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.
Interest costs
– Compare to the competition, AIG 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.
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.
Slow to strategic competitive environment developments
– As AIG is one of the leading players in the Insurance (Prop. & Casualty) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Insurance (Prop. & Casualty) industry in last five years.
Slow decision making process
– As mentioned earlier in the report, AIG has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Insurance (Prop. & Casualty) industry over the last five years. AIG even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
AIG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of AIG are -
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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for AIG 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.
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.
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. AIG can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
Use of Bitcoin and other crypto currencies for transactions in Insurance (Prop. & Casualty) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for AIG in the Insurance (Prop. & Casualty) industry. Now AIG can target international markets with far fewer capital restrictions requirements than the existing system.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, AIG can use these opportunities to build new business models that can help the communities that AIG operates in. Secondly it can use opportunities from government spending in Insurance (Prop. & Casualty) sector.
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.
Threats AIG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of AIG are -
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.
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.
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.
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 AIG in the Insurance (Prop. & Casualty) sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that AIG is facing in Insurance (Prop. & Casualty) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
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. AIG 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.
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.
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.
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 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.
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.
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.