1. Overview

USAA was a Fortune 500 insurance and financial services firm with over $27 billion in annual sales in 2017. The company was founded in 1922 by 25 Army officers who decided to insure each other's vehicles. It continues to limit membership to active-duty and retired military members, officer candidates, adult children, and spouses of USAA members. The company has received numerous accolades, including on Fortune's list of the World's Most Admired Companies from 2014 to 2018 and the list of the 100 Best Companies to Work For from 2010 to 2018. Forrester Research ranked USAA as the number one Bank, Credit Card, and Insurance Company from 2013 to 2017. On www.usaa.com, you can read more about the company's history and strategy.

In the banking industry, USAA stands alone. It dominates most satisfaction studies and brand benchmarks in the financial industry. In 2018, USAA's Net Promoter Score (NPS) was more than four times higher than the average score among banking providers, and for the past eight years, they have had the highest NPS in the financial industry. USAA is the gold standard for financial institutions seeking to increase customer loyalty and maintain more relationships. They reported in a report that various metrics could be used to measure loyalty, such as a person's willingness to recommend their financial institution to friends and family and their intention to give an institution additional business.

After evaluating which financial institutions have the most support, the financial analysts were able to identify seven of the most influential contributors to USAA's customer loyalty and competitive strategy:

Create original products and services

Provide the most advanced account access technology

Provide prompt and effective service.

Provide customers with the products and services they want and need

Ensure account opening is simple (hint: think digital)

Be generally easy to do business with.

Apply reasonable service fees.

USAA places customer retention at the forefront of its competitive strategy, and cross-selling them additional services is a highly efficient and profitable way to achieve growth objectives. In numerous studies conducted over the past few decades, it has been estimated that it costs six to ten times as much to attract, acquire, and onboard a new customer as it does to cross-sell to an existing customer. To gain additional insight into USAA's successful strategies, USAA customers asked them to rate their essential service elements, customer service experience, and how well USAA performed for these criteria relative to other financial institutions. The resulting data was fed into their proprietary model to determine distinguishing factors. Ten of USAA's thirteen differentiators are related to employee and service quality. "accuracy" and "problem resolution" ranked first and second, respectively, with "fair service charges" and "products/services that meet needs" also scoring highly. As part of their competitive strategy, developing a superior customer experience requires a commitment to excellence in hiring, training, and coaching, as well as providing the necessary data and technology tools to enable employees to quickly resolve customer issues via whichever channel the customer prefers.

Questions:

1. How would you characterize USAAs competitive strategy? Should it be classified as a low-cost provider strategy ? A differentiation strategy ? A best-cost strategy? Why? (In-depth discussions are expected, not a simple answer or a simple list)

2. Has the company chosen to focus on a narrow piece of the market, or does it appear to pursue a broad market approach? Explain your answer fully.

3. How do the discussions help you, the future business manager?

Food for Thought

In his book, Competitive Advantage, in 1985, Michael Porter conceptualized the concept of competitive advantage, by looking at two key aspects. Industry attractiveness, and the company's strategic positioning. The latter, according to Porter, can be achieved either via cost leadership, differentiation, or focus.

Porter's Generic Strategies In A Nutshell According to Michael Porter, a competitive advantage - in a given industry - could be pursued in two key ways: low cost (cost leadership), or differentiation. A third generic strategy is focus (cost focus, differentiation focus). According to Porter a failure to do so would end up "stuck in the middle scenario," where the company will not retain a long-term competitive advantage. Porter's Generic Strategies \begin{tabular}{|c|c|c|c|} \hline \begin{tabular}{c} Cost \\ Leadership \end{tabular} & Differentiation & Cost Focus & \begin{tabular}{c} Differentiation \\ Focus \end{tabular} \\ \hline \begin{tabular}{l} 1) Targets a broad market \\ but offer product or \\ service at a very low price \\ 2) Reduce the selling price \\ to maximize cost \\ leadership \end{tabular} & \begin{tabular}{l} 1) Offering products or \\ services as unique as \\ possible compared to the \\ competitors \\ 2) Needs to have a robust \\ R\&D for implementation \end{tabular} & \begin{tabular}{l} 1) Targets a niche market \\ and offers products or \\ services at lowest price \\ 2) Has to be very clear \\ about cost-sensitive \\ requirements of market \end{tabular} & \begin{tabular}{l} 1) Focuses on a niche market \\ but offers a product or \\ service that is nnique \\ 2) Focus remains on features \\ rather than cost \end{tabular} \\ \hline \begin{tabular}{l} Example \\ Southwest Airlines and \\ Wal-Mart \end{tabular} & \begin{tabular}{c} Example \\ Apple, Harley-Davidson, \\ LEGO, and Starbucks \end{tabular} & \begin{tabular}{l} Example \\ Claire's and Home Depot \end{tabular} & \begin{tabular}{l} Example \\ Rolls Royce, the cax \\ company, and Omega \end{tabular} \\ \hline \end{tabular} Steps to Choose Right Generic Strategy Conduct SWOT Analysis Use Five Forces Analysis Compare results of SWOT Analysis \& Five Forces Analysis