Strategic Plan for State Farm Insurance

Strategic Plan for State Farm Insurance

State Farm is regarded as one of the largest providers of property, casualty, and auto insurance in the United States based in Bloomington, Illinois. The Company was founded to provide automobile insurance by George J. Mecherle in 1922, specializing in the provision of auto insurance mostly for farmers. Our Insurance portfolio later expanded to include insurance coverage for homeowners, life assurance, banking, and related financial services. State Farm’s expansion into banking and mutual funds began in 1999 when State Farm Financial Services, FSB first opened as a subsidiary of State Farm Mutual Automobile Insurance Co. The bank offers standard banking services such as savings and checking accounts as well as money market accounts. This strategic plan incorporates the company’s mission and vision in chatting the way forward for the future. It serves to coordinate the operations of the organization allowing accountability and transparency to all stakeholders. The success of this plan requires its integration into the company’s short term planning and decision-making processes. Figure 1 in the appendix shows the strategic planning process for State Farm.

Mission, Vision, Values For State Farm Insurance

This strategic plan reaffirms the vision and mission of the organization, prioritizes the accomplishment of its mission, and reiterates the company’s values (Stallworth Williams, 2008).

Mission

This is the foundation of the company’s existence, purpose, and targeted objectives. State firm’s mission is:

To help people manage the risks of everyday life, recover from the unexpected, and realize their dreams

This mission statement is a reflection of the organization’s intent to prioritize the needs of its customers by managing their daily risks. Continued focus on this mission in strategic management decisions will be a vital component for business growth.

 Vision Statement

This is a statement of State Farm’s future aspirations. The company’s vision for the future is:

To be the customer’s first and best choice in the products and services we provide.

The organization vision for the future is to rely on the support of its loyal customer base to transform it into a trailblazer in the insurance and financial services industry

Values

State Farm’s success is founded on its values of quality service and relationships, mutual trust, integrity, and financial strength.

Company Analysis

The company’s main business objective is the provision of automobile, property, and casualty insurance services. State Farm was ranked 39th in the Fortune 500 list of companies, 2020. Our chief competitors include American International Group and American Family Insurance Group. The company has over 19000 agents with over 58000 employees.

Internal Environment

A SWOT analysis reveals the dynamics of State Farms internal business environments as follows:

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 with State Farms products (Zevnik, 2004).
  • 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 (Zain & Kassim, 2012). 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.

External Environment

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

State Farm Opportunities

  • 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.

Strategic Objectives

  • This strategic plan outlines the following objectives for the Company:
  • Capitalize on the firm’s strong brand image to increase the sales of our insurance and financial services.
  • Intensify marketing strategies to exploit the company’s potential for expansion into new markets in Asia and Europe.
  • Continue to develop new products tailored to a diverse variety of customers in the insurance industry such as young adults.
  • Develop more outlines throughout the globe and rely on technology to address the unique needs of our customers.

Strategic Goals

The SWOT analysis determined State Farm to have multiple strengths including a wide distribution network and strong brand equity. It also revealed stiff competition to be a key threat to the organization’s continued profitability with new entrants incorporating technology in business models. The company’s strategic goals, therefore, have to facilitate its long term profitability and continue to enhance its brand as follows:

Customizing Products and Services

State Farm has to customize its insurance and financial services to the needs of consumers. This can be achieved through customer participation in the form of focus groups in the research and development process. The company can rely on online and social media communication to obtain feedback from customers in this regard.

Expansion into International Markets

State Farm should explore the international market as a growth and profitability strategy. The organization needs to open outlets in overseas markets in Europe and Asia. This will function to expand the company’s customer base and obtain a competitive advantage.

Corporate Social Responsibility

State Farm has to intensify its corporate social responsibility by addressing all stakeholder concerns as it focuses on its mission of enabling customers to “recover from the unexpected”. It has to stay true to its tagline of “like a good neighbor, State Farm is there”. The organization has to have a robust CSR department that enables the company to champion socially conscious efforts (Goel & Ramanathan, 2014).  This will have the desired effect of strengthening the organization’s brand through philanthropic efforts that engage both its employees and diverse members of the community.

Performance Indicators

  • Profitability – The success of this strategic plan will be measured by the profitability status of the company following its full implementation
  • Customer Base – This plan aims to grow the company’s customer base and fosters continuous development of leads
  • Customer Satisfaction – Customer satisfaction will ensure the growth of the customer base. This plan aims to ensure the satisfaction of all of State Farm’s customer needs.
  • Employee Satisfaction – This strategic plan aims to foster a conducive environment that provides the company’s staff with the requisite resources to facilitate job satisfaction.

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. This strategic plan aims at channeling the company’s strategic decisions toward warding 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

Goel, M., & Ramanathan, M. P. (2014). Business ethics and corporate social responsibility – Is there a dividing line? Procedia Economics and Finance11, 49-59. https://doi.org/10.1016/s2212-5671(14)00175-0

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

Stallworth Williams, L. (2008). The mission statement: A corporate reporting tool with a past, present, and future. Journal of Business Communication45(2), 94-119. https://doi.org/10.1177/0021943607313989

Zain, M., & Kassim, N. M. (2012). The influence of internal environment and continuous improvements on firms competitiveness and performance. Procedia – Social and Behavioral Sciences65, 26-32. https://doi.org/10.1016/j.sbspro.2012.11.086

Zevnik, R. W. (2004). The complete book of insurance: Understand the coverage you really need (1st ed.). SphinxLegal.

 

 

State Farms Strategic Planning Process

 

 

Figures

Figure 1

State Farms Strategic Planning Process

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