State Farm Insurance "Fire Building" in downtown Bloomington, Illinois.

Business Strategy

The business strategy used by State Farm is differentiation. The way they differentiate from another companies such as Geico, Progressive, and Allstate is that State Farm in addition to have car insurance, life insurance, home insurance also  have mutual fund that allow you to invest and bank loan. State Farm offers a total of 100 products and services.

Porter’s Five Forces Model

Buyer Power:
The power of buyers is high, because they force to a company and its competitors to compete on price, what make diversities of insurance companies the customer can chose. However, State Farm satisfied customers need providing nearly 100 products and services and having more than 17,000 agent agencies, leading to have approximately 35,000 claims per day. In addition, 68,000 employees, and account throughout the US and Canada. Most customers are loyal to state Farm due to customers’ satisfaction, and because the affordability in price. For instance, it allows to customer to save $489 on your car insurance, increasing the buyer power.

Supply Power:
Supply power in this industry is low, because there are variety of insurance companies that customers can feel free to prefer.

Threat of Substitute product:
Even though there are a lot companies that offer the same service car insurance, home insurance, life insurance and so on, none of these services provide the price you want and the coverage you want. In another word the threat of substitute product is low.

Threat of New Entrants:
Threat of new entrant is low due to the variety of selection in the industry.

Rivalry Among Existing Competitors:
The number of competitors is large but only a few firms dominate the industry. One of State Farm larger competitor is Geico.  The competitors only focus on insurance service but not in loans and banking as State Farm. In fiscal year 2009 State Farm reported a total revenue of 570 million dollar.

State Farm Business Initiatives
State Farm is currently using a digital technology witch allow the clients to get details and details of information daily, weekly, monthly, or even hourly, and being served 24/7.

The type of website that state Farm has is Ebusiness. State Farm uses B2C (Business to customers) e-commerce, and The electronic method for B2B (Business to business) administrators to manage user accounts on behalf of their business. 
The Business-to-Business Portal (B2B) is a website portal for businesses to conduct business with State Farm electronically. As the central point for State Farm E-Commerce applications, external businesses (trading partners) conduct business through the website, saving time and resources for both the businesses and State Farm.
Any process, which involves the exchange of information, products and services with other businesses, is a candidate for the B2B Portal.
Electronic Data Interchange (EDI) is the transmission of data in a nationally approved format. Electronic Funds Transfer (EFT) is the exchange of funds and information about the funds to a bank account. These are a couple other examples of electronic communication our area offers; this section focuses on the B2B Portal.

The portal is primarily used to
Publish information for businesses working with or wanting to begin working with State Farm.
Display and capture forms information, replacing processing of paper forms.
Automate B2B transactions with State Farm B2B partners. 

Internet technologies used at State Farm include: HTML, Java, Java Script, JSPs, JSFs, EJBs, portal, and portlets. Applications are developed for State Farm's Internet and intranet (SFnet), with most major departments developing SFnet applications – including reference information and interactive.
Network/Web Computing is the Enterprise direction, with the evolution to network computing being implemented project by project – based on business priorities. New applications are built using Internet technologies. State Farm-developed functions are delivered to users via browsers, allowing integration with legacy systems, purchased software, e-mail, etc., at the desktop.
Integration with legacy applications uses the following technologies: MQ Series, JDBC to DBs, JCA to 3GL legacy systems, SMTP, RMI, and SOAP.
State Farm locations are connected through an extended backbone network that includes: agents, Agency Field Offices, Claim Litigation Offices, Claim Service Offices, Customer Response Centers, Insurance Support Centers, Zone Operations Centers, and Corporate locations.

State Farm Marketing Mix               
In the next video, Social Media Examiner’s Michael Stelzner interviews Kelly Thul, Director of Communication Services at State Farm Insurance.  Thul shares his insights about how they communicate with their 17,000 agents, their Facebook and Twitter strategies, and their very successful YouTube channel.
You’ll learn how State Farm leveraged a partnership three years ago to get started in social media and learn about the environment, as well as some useful tips for your corporate social media strategy.