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AIG Insurance - Essay Example

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The Chinese market had a serious drawback for the entrance of insurance companies. Insurance companies were required to have formed joint ventures when applying for the selling of insurance and insurance-related products. This institutional void in China meant that there were no foreign insurance companies in the Chinese market until the year 1992…
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Download file to see previous pages Though the company had to endure seventeen long years in the wait, the breakthrough came when AIG had already owned twelve subsidiaries in China allowing it to apply for an insurance license. The group had access to the Chinese market through its subsidiaries and by getting licenses to sell various insurance products in multiple cities, AUIG was able to break into the institutional void of the Chinese market. The manner in which AIG tailored its products to suit the Chinese market was another way in which the company ensured that its preciously procured licenses were not wasted away. The institutional void in the Chinese market was filled not only by AIG but later on by the Italian insurance giant too. However, AIG had the benefit of being the first in the market. The framework developed by Khanna regarding strategic policies and planning of an insurance company provides set guidelines that can be adopted by firms entering newer markets. The emphasis of companies should be to develop global policies and strategic standards in homogenous markets. However, the Chinese market was not comparable to any previous market that AIG had operated in - the key was to use Khanna's framework and adopt the insurance products in order to suit the Chinese market.
AIG trans...
It is obvious that there was no lying on part of AIG, however, the emphasis of the marketing program was to project the life insurance policies as savings schemes so that the Chinese market would pay attention to the products. The FSA's developed by AIG in the markets provided it the advantage that it needed in the Chinese market. It allowed AIG to target the Chinese population and attract it to products that had not been there in the market earlier due to the institutional voids. However, AIG was not able to reap the complete benefits of the first mover's advantage due to the other companies getting licenses for insurance in the Chinese market soon after. This led to a reduction in the effectiveness of the program that AIG had initialized and in spite of the fact that it had invested in training and agents earlier, the company was unable to create a huge mark in its profits due to the benefit is had procured so preciously.
Question 4
AIG was able to thrive in the market as the leader for several years because of its operational effectiveness. However, the FSAs developed in the Chinese market shield it from competition. The competition in the market was inevitable for AIG and thus the overtaking of AIG was evident once the Chinese market was open to further foreign insurance companies. The question was always a matter of time: the duration that AIG spent as the market leader was critical for it and was the best time for it to make profits from operations.
The Italian invasion of the market proved to be fatal fgor AIG as it never recovered. Profitability was not the central goal of AIG; it needed something beyond that. Its first mover advantage got eroded once the Italians got hold of ...Download file to see next pagesRead More
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