The current posting includes a practical strategic planning application, targeting Progressive Corporation (NYSE: PGR). Thompson, Peteraf, Gamble, and Strickland (2016) described the strategic planning and management as a process containing a few steps:
1. Developing a strategic vision
2. Setting objectives
3. Crafting a strategy (strategic plan)
4. Executing the chosen strategy
5. Monitoring developments, evaluating performance, and initiating corrective adjustments.
Porter (1996) brought clarifications to the business strategy and planning theory, differentiating between operational effectiveness and strategy. As well, Porter stated that a solid strategy requires tradeoffs by the company, limiting what the company produces, on what market competes, and in what locations it competes. These tradeoffs give the company the distinctiveness in the manner of doing business. As well, Porter showed that competitive advantage comes from a series of interlocked activities enforcing one another, built on the capabilities of the company. By doing so, the competitive advantage is extremely hard to imitate by the rival companies.
At the same time, Collis and Rukstad (2008) brought additions to the business strategy and planning theory by describing the deliverables of the strategic plan (strategy statement, value proposition chart, and system activity map). The steps presented earlier are just the backbone of strategy activities for an organization. The crafting of a strategic plan is a very complex process and involves usually a market analysis, an environmental analysis, a Porter forces analysis, a strategic map, a SWOT analysis, probably some strategy games and sessions to refine the means of meeting objectives (Thompson et al., 2016). The current posting shows only the base principles of building a company strategy.
Study Case of Strategic Planning: Progressive Corporation
Progressive Corporation is a Fortune 500 company offering mostly personal insurance services (home and auto insurance) and has a component of business insurance (commercial insurance). The company ranks 86 in Fortune 500.
Progressive Corporation’s vision statement is “to reduce the human trauma and economic costs associated with automobile accidents” (Progressive Corporation, 2020). The company’s mission statement is “We do this by providing our customers with services designed to help them get their lives back in order again as quickly as possible” (Progressive Corporation, 2020). The company’s core values are integrity, the golden rule, objectives, excellence, and profit (Progressive Corporation, 2020).
The appraisal of the company’s capability includes the performance of the SWOT analysis. Per “The progressive corporation (PGR)” (2015), among the strengths of the company are the broad product portfolio, strong distribution network, and strong financial performance. As for weaknesses, the study cited the high dependence on the US market. Notable threats are changing regulations and natural calamities. Opportunities are the expansion of the insurance market in the US to non-life insurance activities and the expansion of the auto industry in the US. Several studies have been done to determine the impact of natural disasters on the losses of insurance companies, inconclusive for the time being (Ruml & Tippins, 2016).
Per the form 10-K filing for the year 2015 (Progressive Corporation, 2017), the company shows that product, service, and business innovation are central to its strategy. In this regard, the company created in 2014 an innovation think-tank called the Business Garage Innovation (“Progressive’s Business Innovation Garage”, 2017). In 2015, the think-thank ranked 83rd among the top business technology innovators in the US (“Progressive Insurance’s Business Innovation Garage Recognized”, 2015). Tindall (2012) studied the application of telematics by Progressive as an innovative technological platform allowing Progressive to expand the base of customers between 2010 and 2012 from 250,000 to over 900,000. Progressive was the first company to introduce telematics in 1998. However, technology complexity and data privacy concerns prevented the company from taking advantage of the new platform until 2010, when new technologies and business innovation allowed the company to deploy telematics at the mainstream customer base.
In their strategic plan, the company started working towards overcoming weaknesses through expansion in international markets, namely Australia (Mergent Inc., 2017). As well, per the same study, the company diversified the portfolio of products and innovated the auto insurance activities to take advantage of opportunities.
The company did not make public any strategy monitoring or adjusting strategy. However, the results of the strategy are visible in the market reports of the company. Per Progressive Corporation (2020), the company had a revenue growth of 18.04% between 2018 and 2019, and a net profit margin of 9.1%, meeting the strategic objective for the year. Further information about Progressive’s strategy will appear as part of a larger analysis.
Progressive Corporation applies solid business strategic planning concepts, placing innovation at the center of their strategy. The strategic plan implemented a think-tank accelerating technological and business innovation inside the organization, expanded the portfolio of products offered by the company and expanded operations abroad. The company set strategic objectives for performance and the financial results show that the strategic objectives are met or exceeded and the organization takes over larger rivals and the industry in terms of sales growth and profit margin.
Dr. George Gafencu, DBA, PMP, DTM
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References for Strategic Planning
Collis, D. J., & Rukstad, M. G. (2008). Can you say what your strategy is? Harvard Business Review, 86(4), pp. 82-90.
Mergent Inc. (2020, May). The Progressive Corporation. Retrieved from the ProQuest Database
Porter, M. E. (1996, June). What Is Strategy? Harvard Business Review, 74(6), pp. 61-78.
Progressive Corporation. (2017). Form 10-K 2015. Retrieved from SEC EDGAR website http://www.sec.gov/edgar.shtml
Progressive Corporation. (2020). Form 10-K 2019. Retrieved from SEC EDGAR website http://www.sec.gov/edgar.shtml
Progressive Corporation. (2020, September). Vision, Strategy, and Values.
Progressive Insurance’s Business Innovation Garage Recognized on 2015 Information Week Elite 100 List (April 2015). Business Wire
Progressive’s Business Innovation Garage. The Digital Insurer. (2017). Retrieved from https://www.the-digital-insurer.com/dia/progressives-business-innovation-garage/
Ruml, D., & Tippins, S. (2016). A quantitative study of the effect of catastrophes on United States insurance company impairment. Franklin Business & Law Journal, 2016(3), pp. 36-66.
The Progressive Corporation (PGR): Company profile and SWOT analysis. (2015). London: Progressive Media Group. Retrieved from the ProQuest Database
Tindall, J. (2012). Developing insurance telematics. Journal of The Australian & New Zealand Institute of Insurance & Finance, 35(4), pp. 6-9.
Thompson, A., Peteraf, M., Gamble, J., & Strickland, A.J. (2016). Crafting & executing strategy [ebook]. New York, NY: The McGraw-Hill Companies.