American Family Insurance Group SWOT Analysis / Matrix

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SWOT analysis is a vital strategic planning tool that can be used by American Family Insurance Group managers to do a situational analysis of the organization . It is a handy technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) American Family Insurance Group is facing in its current business environment.

The American Family Insurance Group is one of the leading organizatations in its industry. American Family Insurance Group maintains its prominent position in market by critically analyzing and reviewing the SWOT analysis.  SWOT analysis a highly interactive process and requires effective coordination among various departments within the organization such as – marketing, finance, operations, management information systems and strategic planning.

The SWOT Analysis framework facilitates an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the American Family Insurance Group to develop four types of strategies:

  • SO (strengths-opportunities) Strategies
  • WO (weaknesses-opportunities) Strategies
  • ST (strengths-threats) Strategies
  •  WT (weaknesses-threats) Strategies
American Family Insurance Group swot analysis / matrix

SWOT Matrix Strategies Objective

The primary purpose of SWOT matrix is to identify the strategies that a firm can use to exploit external opportunities, counter threats, and build on & protect American Family Insurance Group strengths, and eradicate its weaknesses.

Step by Step Guide to American Family Insurance Group SWOT Analysis

Strengths of American Family Insurance Group – Internal Strategic Factors

As one of the leading organizations in its industry, American Family Insurance Group has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of American Family Insurance Group are –

  • Good Returns on Capital Expenditure – American Family Insurance Group is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
  • Strong Brand Portfolio – Over the years American Family Insurance Group has invested in building a strong brand portfolio. The SWOT analysis of American Family Insurance Group just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
  • Strong Free Cash Flow – American Family Insurance Group has strong free cash flows that provide resources in the hand of the company to expand into new projects.
  • Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
  • Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
  • Strong distribution network – Over the years American Family Insurance Group has built a reliable distribution network that can reach majority of its potential market.
  • Automation of activities brought consistency of quality to American Family Insurance Group products and has enabled the company to scale up and scale down based on the demand conditions in the market.
  • Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.

Weakness of American Family Insurance Group – Internal Strategic Factors

Weakness are the areas where American Family Insurance Group can improve upon. Strategy is about making choices and weakness are the areas where a firm can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

  • Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
  • Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that American Family Insurance Group is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
  • The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. American Family Insurance Group has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
  • Not highly successful at integrating firms with different work culture. As mentioned earlier even though American Family Insurance Group is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
  • The profitability ratio and Net Contribution % of American Family Insurance Group are below the industry average.
  • Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
  • High attrition rate in work force – compare to other organizations in the industry American Family Insurance Group has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.

Opportunities for American Family Insurance Group – External Strategic Factors

  • New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for American Family Insurance Group. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
  • The market development will lead to dilution of competitor’s advantage and enable American Family Insurance Group to increase its competitiveness compare to the other competitors.
  • Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
  • The new technology provides an opportunity to American Family Insurance Group to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
  • Decreasing cost of transportation because of lower shipping prices can also bring down the cost of American Family Insurance Group’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
  • New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for American Family Insurance Group to drive home its advantage in new technology and gain market share in the new product category.
  • Government green drive also opens an opportunity for procurement of American Family Insurance Group products by the state as well as federal government contractors.
  • The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as American Family Insurance Group to increase its profitability.

Threats American Family Insurance Group Facing - External Strategic Factors

  • The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
  • New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
  • As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
  • Imitation of the counterfeit and low quality product is also a threat to American Family Insurance Group’s product especially in the emerging markets and low income markets.
  • New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
  • Liability laws in different countries are different and American Family Insurance Group may be exposed to various liability claims given change in policies in those markets.
  • Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of American Family Insurance Group
  • Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.

Limitations of SWOT Analysis for American Family Insurance Group

Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.

  • Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
  • SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
  • The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of American Family Insurance Group
  • SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
  • SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.

Weighted SWOT Analysis of American Family Insurance Group

In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.

This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis American Family Insurance Group managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.

Limitation of Weighted SWOT analysis of American Family Insurance Group

This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.

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Example of Weighted SWOT Analysis

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SWOT Worksheet & Template

If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.

References / Citations & Bibliography

  • M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
  • A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
  • O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
  • L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
  • R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)