Aig Case – College Essay Example

this contributed to the development of the relationship between State Council members and AIG and between deputy prime minister and AIG. 3. Product markets – AIG introduced the agency distribution system to China, it learned about the market and the culture, and it tailored its products to the Chinese market. 4. Labor markets – ‘AIG made substantial investments in training its agents’ 3. What were AIG’s FSAs developed in China?

AIG developed a couple of FSAs in China. The FSAs it developed consisted mainly of downstream knowledge and reputation. We believe that one of the FSAs that AIG developed in China is trust of Chinese politicians, which led to favorable government relationships. AIG gained this trust by putting a lot of effort in building it. Greenman (AIG’s CEO) visited China several times, AIG made a big investment in the Shanghai Center Office-Residental Complex and brought a missing relic back to China by buying it.

The latter also contributed to the development of AIG’s second FSA in China: a good reputation. Not only the politicians found this a nice gesture, but also the general public at large. Another FSA AIG developed in China was its ability to adapt their products to the Chinese market. “As many Chinese customers view life insurance as bringing bad luck, AIG designed endowment policies (.. ) and marketed these policies as savings instruments rather than insurance policies. Due to the big investments in training its workers and a commission-based compensation system AIG developed a skilled and motivated workforce. And the final FSA: with help of AIG’s history (knowledge), the Joint Venture and other partnerships AIG was able to understand the local market and

culture. What non-location-bound FSAs had been transferred to China? The non-location-bound FSAs AIG transferred to China were its expertise (know-how) in insurance that includes its ability to train insurance agents.

This was what AIG did in China. It also already had international experience in expanding to other countries, they for instance also did it in Asia. Another non-location-bound FSA transferred to China was AIG’s human resource: Maurice Greenberg. He has played a huge role in building relationships in China and AIG has benefited grandly from him. What first-mover advantages did AIG reap in China? AIG reaped several first-mover advantages in China: It was able to develop favorable government relationships, as mentioned above. •It was able to dominate niche markets, because there was no fierce competition at that time. It could also “apply so-called grand-fathering provisions to protect its existing rights” which gave AIG permission to set up wholly owned subsidiaries. •It was able to reach a minimum efficient size ? lower costs than competitors ? high profit margin. 4. How did AIG combine the use of its location-bound FSAs and non-location-bound FSAs in China?

AIG has the knowledge about how to run a successful insurance business and it developed a strategy, which consisted of five rules, how to get into new upcoming markets. These are transferable FSAs, but AIG needed location bound FSAs in order to be able to make use of the non-location-bound FSAs. Because, if AIG did not have the relationships and reputation it had in China (location-bound FSA) it would not be able to use their transferable FSAs, the knowledge about how to run a successful insurance company, as they would not have been

able to set up a company in the Chinese market.

The other way around proves that AIG needed the transferable FSAs as well. Because, if AIG did have the relationships needed to set up a company, but it did not have to knowledge about how to run a successful business, the business would go bankrupt within a short period of time. Therefore, AIG combined its location-bound FSAs with the non-location-bound FSAs in order to create a successful business.