Essay

Case Study: State Farm Bank

Business Topics: Planning, Strategy and Competitive Advantage

Teaching Objective: To emphasize the importance of planning and understand the value of diversity and differentiation

strategy.

Summary: State Farm Bank resulted from the insurance company’s plan to diversify into the financial services sector. With

more than 16,000 agents selling insurance products nationwide, moving into banking services was a natural fit, though not a

simple transition. Now when State Farm agents talk to customers about homeowner or auto insurance, they can also discuss

financing options. State Farm Bank presents tremendous growth opportunities for State Farm.

Source: Jones and George. Essentials of Contemporary Management, 6 th Edition. New York, NY: McGraw-Hill Education.

ISBN: 978-0-07-786253-4 (Supplemental Features)

State Farm Bank

Even organizations as large and successful as State Farm Insurance have to plan for the future. Without planning, strategies

can become obsolete as the environment changes, and organizations can miss opportunities for growth. In short, an

organization without adequate planning has no sense of direction or purpose and risks becoming mired in the present or the

past. For State Farm, planning involved helping customers plan for their future.

State Farm has been a leader in the highly competitive insurance industry for more than 80 years. The company, proclaimed

in its ads as being “like a good neighbor,” has been at the forefront of insuring customer liabilities. With 16,000 exclusive

insurance agents across the United States, State Farm management believed it had a perfect opportunity to add more

financial services. The deregulation of the banking industry in 1999 and the explosion of the Internet paved the way to

achieving this goal. Today, State Farm Bank offers traditional services like loans and deposit accounts, but without actual bank

buildings and at lower fees. Clients can do every typical banking...