Company external environment can be characterized by societal and task characteristics. In the societal environment the insurance industry continue to suffer low growth and pessimistic projections in terms of the level of sales. Therefore, major insurance companies in Europe and in the U.S.A. try to expand its operations into emerging countries, where the industry is less mature and markets are not yet fully saturated (Ernst & Young). In particular, Asia-Pacific promises lucrative opportunities, as their economies continue to expand and the middle-class is growing. While American and European consumers reduce their spending, domestic markets in emerging countries are growing with more people purchasing cars and houses that are complemented by insurance products. According to Ernst&Young, some customers start demanding insurance products outside of established channels, hence companies need to adjust their offering using more flexible channels, such as Internet and mobile phones (Ernst & Young). These conditions do not favour State Farm as the company is neither a leader in the provision of online insurance services, nor does it operate in the emerging markets, where the demand for insurance products is expected to be strong in the upcoming years.
According to Hoover’s the main competitors of State Farm are the Allstate Corporation, Berkshire Hathaway and Progressive Corporation (Hoovers). Allstate is the second largest U.S. insurer and the main rival of State Farm. It offers a diversified portfolio of products to its customers and actively promotes its brand through investing in advertising and by supporting sports, such as college football. Unlike State Farm and Allstate Corporation Berkshire Hathaway is present worldwide, which gives the company an advantage during the periods of low growth in the mature U.S. economy. Moreover, Berkshire Hathaway is a conglomerate and operates in a variety of businesses including clothing, retail and utilities. This structure helps the organization to diversify and to mitigate the negative effect of low growth in the insurance segment. Progressive Corporation is more focused than its rivals and it is mostly present in property-casualty insurance segment and in the U.S. and in Australia. In order to remain competitive Progressive Corporation invests in advertising and innovation. Thus, it was the first company to offer car insurance to its clients online and over the phone.
Sustainability Issues are especially important for State Farm as the company operates in the segment closely related to uncertainty of the environment. Natural environment sustainability is addressed through a number of initiatives, including paperless communication, recycling and energy efficiency enhancement. State Farm operates the third largest non-governmental fleet in the U.S. that is using alternative fuel. The sustainability of growth and community relationship building is conducted through several programs, including education grants, charity and neighbourhood safety initiatives (StateFarm).
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