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Erie Insurance Group SWOT Analysis / Matrix
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SWOT analysis is a vital strategic planning tool that can be used by Erie Insurance Group managers to do a situational analysis of the firm . It is an important technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Erie Insurance Group is facing in its current business environment.
The Erie Insurance Group is one of the leading companies in its industry. Erie Insurance Group maintains its prominent position in market by critically analyzing and reviewing the SWOT analysis. SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the company 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 known as SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the Erie Insurance Group to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The primary purpose of SWOT matrix is to identify the strategies that a firm can utilize to exploit external opportunities, counter threats, and build on & protect Erie Insurance Group strengths, and eradicate its weaknesses.
Step by Step Guide to Erie Insurance Group SWOT Analysis
Strengths of Erie Insurance Group – Internal Strategic Factors
As one of the leading companies in its industry, Erie Insurance Group has numerous strengths that enable 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 Erie Insurance Group are –
- Strong Brand Portfolio – Over the years Erie Insurance Group has invested in building a strong brand portfolio. The SWOT analysis of Erie Insurance Group just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Superb Performance in New Markets – Erie Insurance Group has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
- 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.
- Successful track record of developing new products – product innovation.
- 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 Erie Insurance Group has built a reliable distribution network that can reach majority of its potential market.
- Strong Free Cash Flow – Erie Insurance Group has strong free cash flows that provide resources in the hand of the company to expand into new projects.
Weakness of Erie Insurance Group – Internal Strategic Factors
Weakness are the areas where Erie Insurance Group can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
- 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.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Erie 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 Erie Insurance Group are below the industry average.
- 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. Erie Insurance Group has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- 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 Erie Insurance Group is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
Opportunities for Erie Insurance Group – External Strategic Factors
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Erie Insurance Group to capture new customers and increase its 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 Erie 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 Erie Insurance Group products by the state as well as federal government contractors.
- The market development will lead to dilution of competitor’s advantage and enable Erie 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.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Erie Insurance Group an opportunity to enter a new emerging market.
- Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Erie Insurance Group in other product categories.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Erie 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.
Threats Erie Insurance Group Facing - External Strategic Factors
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
- Liability laws in different countries are different and Erie Insurance Group may be exposed to various liability claims given change in policies in those markets.
- 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.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- Imitation of the counterfeit and low quality product is also a threat to Erie Insurance Group’s product especially in the emerging markets and low income markets.
- 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 Erie 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 Erie 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 Erie 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 Erie 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 Erie 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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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)
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