International Business - Multinational Chinese vs US Firms in Insurance Branch - Essay Example

International Business Policy - Multinational Firm Chinese/K Vs Us Firms In Insurance Industry And Vice Versa Question In order to enter the United States Market, it is essential for a firm like China Life Insurance to observe several concepts. First of all, it is extremely crucial that the firm establishes itself through its line of product. CLF does deal with providing life insurance as well as annuity products. Subsequently, it is vital that the CFL management be aware of similar markets in the U.S. This will assist management in identifying the perfect sites which the business can be established and to succeed. Evidently, the strategy of establishing similar organizations and companies within one area should be avoided. Consequently, another factor, which should be, considered is the daily output of the insurance company in China and contrasts the output of firms in the United States. For example, since China Life Insurance became a public unlimited company, its market capitalization is valued at about USD$ 850 billion with over 5 million subscribers. On the other hand, an insurance company in the United States is valued at about USD$ 999 billion with over 6 million subscribers. As such, it is apparently clear that, under an efficient and effective management, the CLF can essentially enter the US market and perform incredibly well as noted by Hellmann (18). Advantages over U.S firms Such a firm as CLF is not controlled or rather managed by several managers as compared to the United States insurance firm. The US firm is virtually managed by two masters. Significantly, the levels of management in the United States firm are due to the large capital costs, protection and bypass protectionism. The large capital costs and the daily output costs are normally too vast for one single organization to handle individually, therefore, the division of the top managerial posts while, in China, the output costs are normally not too large, and, therefore, manageable by one management team. Considering protection, there are some governments that do close their territories to foreign but similar companies. As such, one finds that the United States does not allow some foreign nations to invest in their country: therefore, this denies the United States insurance firms the ability to expand their business prospects. For example, the aspect of diversity and earning from foreign investments are denied in the insurance company in the United States as opposed to an insurance company like CLF which does enjoy unlimited foreign earnings, as well as the general growth of a diversified culture. Consequently, there are several benefits of a diversified culture. For example, the organization of CLF does learn new concepts, which apparently, are applied in its daily practices. Another advantage is the increase of subscribers which is relative to the daily costs generated. Considering the bypass protectionism, this does occur when the government of the U.S does limited its products or rather services to U.S citizens only as opposed to the insurance company which offers its services to all nationals provided one does the right documents (Mattes 21). In addition to gaining more customers, another advantage is the attracting of potential investors in the country and, therefore, earning the country foreign revenue. Disadvantages There are several challenges faced by the insurance companies in China in comparison to the United States insurance company. For example, CLF is normally taxed a higher rate as opposed to the United States despite the fact there are more subscribers in the American insurance company. Apparently, the tax policy does charge more on countries with multiple jurisdictions. As such, the companies must essentially pay a small percentage of all partner members. Furthermore, another disadvantage experienced by CLF is the low-capital costs, as opposed to the high profits enjoyed by the United States insurance company. Apparently, despite the United States limiting its services to its citizens only, they normally charge a higher premium rate and with less tax to pay, they normally enjoy higher profits. The difference between the US purely domestic and multinational entity is that the pure domestic market is normally restricted to local boundaries. In essence, a domestic firm does concentrate more on the home market with no intentions or ambitions of expanding internationally. However, such markets do occasionally receive orders from abroad, but since they are home-based, most of them do ignore these orders. The revenue collected, and the capital is moderate, and it does sustain them in a pure way within “home.” Considering the multinational entities, they are described as globally profiting maximization corporations with numerous heads or rather management teams mainly from several countries. However, in most situations, the headquarters of such multinational entities are normally in the home countries which in this case are the United States of America. Furthermore, the policies governing these multinational organizations are home-oriented (Ziegler 14). Contrary to popular beliefs, the multinational entities, are not owned by one person like the ownership of most entities does not matter in comparison to the business conducted. Question 2 Considering the competitive position of AIG, one finds that it is as a result of an appropriate yet efficient plan by highly qualified corporate managers. The investment does flow from anticipated low generating areas to the regions which do have high returns. Considering the growth prospect, the management of AIG did reach a plateau curve in the competitive market. As such, this means that AIG delivers services which are satisfying the domestic markets, and, therefore, searching for new markets internationally. Apparently, as a way of protecting its investments, AIG has incorporated foreign investment as a way to expand, therefore, bypassing its protective authority established in the US. Furthermore, the management of AIG has realized the most effective way of staying online is through numerous foreign investments (Taylor 17) Another way has been incorporating the cost reduction aspect while also providing available customer services. Considering the provision of cheap labor, AIG management did realize that labor costs do vary across the different nations. As such, it is apparently clear that the one of the key components of success is the initial studying of the market which one will invest in. In china, the local multinational, in firms are described as home-based companies that do take orders internationally while the domestic companies are viewed as the companies which are based locally and as such do not take orders abroad. Ultimately, the distinction between the initial from the subsequent question is the fact that the initial question is referring to the general insurance companies while the second question is dealing with a known insurance company (AIG). The second question is also trying to analyze the various success strategies incorporated by AIG as its management that it is an intensely competitive world. Works Cited Hellmann, Rainer. Transnational control of multinational corporations. Michigan: Praeger. Print. 2011. Mattes, Jannika. Innovation in Multinational Companies: Organizational, International and Regional. Quebec: Peter Lang, Print. 2010. Taylor, Peter. World city network: a global urban analysis: New York: Routledge. Print. 2004. Ziegler, Andreas. Trade and environmental law in the European Community: California: Oxford University Press, 1996 Read More