Liberty Mutual Insurance Group SWOT Analysis / Matrix

Essays, Term Papers & Research Papers

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

The Liberty Mutual Insurance Group is one of the leading companies in its industry. Liberty Mutual 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 firm such as – marketing, finance, operations, management information systems and strategic planning.

The SWOT Analysis framework enables 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 enables the managers of the Liberty Mutual 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 company can use to exploit external opportunities, counter threats, and build on & protect Liberty Mutual Insurance Group strengths, and eradicate its weaknesses.

Step by Step Guide to Liberty Mutual Insurance Group SWOT Analysis

Strengths of Liberty Mutual Insurance Group – Internal Strategic Factors

As one of the leading companies in its industry, Liberty Mutual 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 Liberty Mutual Insurance Group are –

• Strong distribution network – Over the years Liberty Mutual Insurance Group has built a reliable distribution network that can reach majority of its potential market.
• 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.
• Highly skilled workforce through successful training and learning programs. Liberty Mutual Insurance Group is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
• 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.
• Strong Free Cash Flow – Liberty Mutual Insurance Group has strong free cash flows that provide resources in the hand of the company to expand into new projects.
• Superb Performance in New Markets – Liberty Mutual 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.
• Highly successful at Go To Market strategies for its products.

Weakness of Liberty Mutual Insurance Group – Internal Strategic Factors

Weakness are the areas where Liberty Mutual 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.

• Not highly successful at integrating firms with different work culture. As mentioned earlier even though Liberty Mutual Insurance Group is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
• Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Liberty Mutual Insurance Group
• Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
• Limited success outside core business – Even though Liberty Mutual Insurance Group is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
• 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 Liberty Mutual 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. Liberty Mutual Insurance Group has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
• Investment in Research and Development is below the fastest growing players in the industry. Even though Liberty Mutual Insurance Group is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.

Opportunities for Liberty Mutual Insurance Group – External Strategic Factors

• 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.
• 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 Liberty Mutual 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.
• Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Liberty Mutual Insurance Group.
• Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Liberty Mutual Insurance Group to capture new customers and increase its market share.
• Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Liberty Mutual Insurance Group an opportunity to enter a new emerging market.
• New trends in the consumer behavior can open up new market for the Liberty Mutual Insurance Group . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
• Government green drive also opens an opportunity for procurement of Liberty Mutual Insurance Group products by the state as well as federal government contractors.
• 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 Liberty Mutual Insurance Group to drive home its advantage in new technology and gain market share in the new product category.

Threats Liberty Mutual Insurance Group Facing - External Strategic Factors

• New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
• Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
• Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Liberty Mutual Insurance Group   in those markets.
• Imitation of the counterfeit and low quality product is also a threat to Liberty Mutual Insurance Group’s product especially in the emerging markets and low income markets.
• The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards 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 Liberty Mutual Insurance Group
• Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
• 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.

Limitations of SWOT Analysis for Liberty Mutual 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 Liberty Mutual 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 Liberty Mutual 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 Liberty Mutual 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 Liberty Mutual 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)