State Farm Insurance Company SWOT Analysis

State Farm Insurance Company SWOT Analysis

State Farm Insurance is a leading company in the property, casualty insurance, auto-insurance industry. The 98-year-old Illinois-based company ranks in the 36th in the 2020 fortune 500 list that ranks companies by revenue. A SWOT analysis is a useful tool in strategic management that can assist in helping the company maintain its positive outlook. It is a framework for an in-depth analysis of the company’s competitive edge if any. A SWOT analysis of State Farm looks into the Company’s Strengths and Weaknesses within its internal business environment as well as external Opportunities and Threats. Conducting a SWOT analysis for a company like State Farm is aimed at developing the requisite strategies it can deploy to leverage on its strengths, minimize its weaknesses, capitalizing on its opportunities, and addressing external threats (Phadermrod et al., 2019).

State Farms SWOT Analysis Diagram

Figure 1 in the appendix shows State Farm Insurance SWOT analysis Diagram

 

State Farm’s Strengths

These are internal factors the company can rely on to address its weakness and fend off competition. They include:

  • Large Distribution Network and Strong Brand Name – The Company’s presence is felt across the country due to its large number of outlets. Consumers can therefore access their products more readily because of this robust distribution.
  • Strong Dealer Relationships – Strong relationships between the company and its dealers contribute to the efficient promotion and distribution of its various insurance services. The company employs the services of captive agents who exclusively deal in State Farms products.
  • Investment in Human Resource – Start farm has a highly skilled workforce courtesy of the company’s investment in learning and training programs for its staff. These career development opportunities motivate workers to achieve high results for State Farm.
  • Market Penetration – State Farm has perfected the art of successfully entering new markets. This has played a large part in bolstering the company’s revenue stream and lowering its risks.
  • Automated Processes – State Farm’s automation of various processes facilitates cost reduction through efficiencies in resource utilization. Automation also has the added advantage of improving and standardizing the quality of service.

State Farms Weaknesses

These are factors within the company’s internal environment which have a limiting effect on the company’s capabilities. The SWOT analysis is useful in strategic management as it enables determining the company’s weaknesses and putting in place measures to mitigate adverse effects. State Farms Weaknesses are as follows:

  1. Rent Expenses – State Farm incurs a lot of expenses in rent since they do not own most of their business premises.
  2. Research and Development – The Company allocates finances to research and development but there’s room for improvement to reach the same level as its competitors.
  3. Current Ratio – It is a measure of a company’s liquidity and resource capacity to pay for its financial obligations in the short-term. This means that the company’s current assets are lower than its current liabilities. State Farms has a lower current ratio relative to competitors in the industry implying potential future liquidity problems.
  4. High Employee Turnover and Attrition – The implication of this is that the company has to incur extra expenditure relative to its competitors in developing and training new employees each year.
  5. Technology Investment – The Company needs to allocate more financial resources to technology as they expand into different markets and locations. This investment would go towards integrating processes across its various outlets.

State Farm Opportunities

These are factors within the company’s external environment that can contribute to its growth and development or lack thereof (Ibrahim & Harrison, 2019). They include:

  • E-commerce – State Farm can consider expanding its market outreach through the use of e-commerce to allow users to access its services online.
  • The internet – There’s still room for the company to grow its presence on the internet to match the growing number of internet users globally.
  • Technology – State Farm can leverage the power of technology to deploy automation in many of its processes, hence reducing costs and collection of processing of customers data to facilitate targeted marketing campaigns.
  • Social Media – Social media platforms like Twitter and Facebook present an opportunity for the company to gather feedback from its customers as well as promote new services through easier access with customers.
  • Household Income – the period before the pandemic saw an increase in average household income. If this trend continues post the pandemic, there will likely be a corresponding increase in consumer spending resulting in an expansion of State Farms consumer base and increased revenue.
  • Population Growth – The continued growth of the US population means the number of people to insure will continue to increase in the future.
  • Low-Interest Rates – The rate of inflation has been relatively low and is projected to continue reducing (Kiernan & Chaney, 2019). This allows State Farm to finance its projects using loans borrowed at low-interest rates.
  • Green Government Drive – Initiatives by the federal government to replace their vehicles with electric cars presents an opportunity for State Farm to secure lucrative contracts from the government.
  • Tax Policy – The US government through the Tax Cuts and Jobs Act set corporate tax at 21%. This was and still is beneficial to State Farm as it lowered expenses related to the company’s tax obligations.
  • Expansion of the Transport Industry – The continued growth of the transport industry presents an opportunity for State Farms’ continued growth in the future. Road Safety measures have also lowered claims from motor vehicle accidents to the benefit of the company.

State Farms Threats

  1. Natural Disasters – State Farm’s biggest threat is from natural disasters. A hurricane or large storm can result in numerous claims to the tune of billions of dollars. This calls for proactivity in loss-controlling their risk, in terms of coverage exclusions and secondary deductibles to cushion them against losses related to natural disasters.
  2. Stiff Competition – Competing insurers have taken to heavy online and television-based advertising. This has the potential of steering away younger clients from the company. . Competition also causes price reduction due to an increase in supply leading to reduced revenue for the company. The company can mitigate against this by tailoring its advertising based on the medium of advertisement and demographics
  3. Technology – Uptake of new technology by competing firms threatens State Farm’s competitive advantage and reducing its market share. This coupled with new entrants into the insurance industry poses a formidable threat to the company.
  4. Climate Change and Global Warming – Concerns relating to climate change and global warming leading to families resorting to using only one car to reduce their carbon footprint, preference for public transport pose a threat to the company.

Conclusion

State Farm Insurance operates in an environment marred with challenges such as stiff competition, social trends, and the potential for a catastrophic natural disaster. The company can wade off competition by investing in research and development to come with new products that appeal to new younger consumers. The company should continue to leverage the power of its brand through creative branding, community development, and marketing strategies as a means of sustaining profitability.

References

Ibrahim, E. B., & Harrison, T. (2019). The impact of internal, external, and competitor factors on marketing strategy performance. Journal of Strategic Marketing28(7), 639-658. https://doi.org/10.1080/0965254x.2019.1609571

Kiernan, P., & Chaney, S. (2019, September 27). U.S. inflation decelerated in August. The Wall Street Journal. https://www.wsj.com/articles/u-s-inflationdecelerated-in-august-11569590738

Phadermrod, B., Crowder, R. M., & Wills, G. B. (2019). Importance-performance analysis based SWOT analysis. International Journal of Information Management44, 194-203. https://doi.org/10.1016/j.ijinfomgt.2016.03.009

Figures

Figure 1

State Farm Insurance SWOT Analysis Diagram

State Farm Insurance SWOT Analysis Diagram

Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more