Marketing Analysis Report: An Insurance Company Expanding to China (Essay Sample)

Marketing Analysis Report: An Insurance Company Expanding to China
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Introduction
Entering new markets can be a good strategic move for any business, though it comes with some challenges that need to be addressed. To leverage this opportunity, there is need for the business to analyze the new market and select an effective entry strategy. Hence, the paper aims an conducting a market analysis of China as a potential destination of an insurance company.
1.0 Analysis of A Potential New Market
1.1 Business Environment-China
China represents one of the largest insurance markets globally which is both closed and under-served. Notably, the country has more than 20% of the entire population of the world and a high level of domestic savings implying that the company is a perfect destination for an insurance company that intends to venture in international market (Wang, 2018). Notably, the Chinese Regulatory Authorities have been easing restrictions previously imposed on foreign firms. For instance, there were only nine foreign companies licensed to operate insurance business between 1992-1999 with operations being confined to Shanghai only (Wang, 2018).
1.2 Advantages of Entering China
Stability of Doing Business in China
Political, economic and social stability has greatly enhanced growth of China in all spheres for the last few decades (Quer, Claver & Rienda, 2010). Essentially, the country has been very stable which is a critical element for the success of any business. Hence, the insurance company entering this market will be able to strategize and predict the future with certainty.
Favorable Policies
The government has remained proactive in instituting supportive measures for business. For instance, some punitive insurance measures that were initially in force have been revised favorably. For instance, a company was required to have operated for over 30 years before being allowed to establish insurance business in China, but this has been scrapped (Quer, Claver & Rienda, 2010).
Great Infrastructure
China is one of the countries with great infrastructure owing to the heavy investment (Quer, Claver & Rienda, 2010). This implies that the country is a great destination to set up a company since transportation is perfect. Moreover, offering services is easy since the providers can move easily through road, air, water, and railway.
Skilled Talent
China has a huge population of young professionals that are highly competent and talented. The local tertiary institutions are constantly producing skilled personnel every year (Quer, Claver & Rienda, 2010). Additionally, China has made it easy for international students and skilled foreigners to work in the country. This will enhance the success of the company.
1.3 Subsidies Offered by China to Boost Transnational Insurance Firms
The Chinese government offers various subsidies to attract foreign investors. Firstly, the government imposes low taxes for companies investing in inland China compared to those in major cities. Secondly, the government has relaxed restrictions on the market entry of foreign investment for insurance companies as an incentive to attract investment.
1.4 Strategies Used to Secure Government Deals
Market Segmentation and Looking for Partners as A Strategy to Secure Government Deals
It is critical for the company to source for partners which will be essential for the firm to secure government deals. This is because the Chinese insurance regulatory authorities seem to give priority to companies with Chinese partners. However, foreign firms should not consider that they are making a necessary compromise but consider it as making a critical investment decision in acquiring a mentor who will aid them navigate the market they wish to enter. This will be critical in ensuring the company succeeds in this area.
2.0 Competitive Environment of the New Market
2.1 The Nature of The Competition
There is a rapid growth of the insurance market of China. Notably, it was 21% as at 2017 which was the highest in the entire world (Zhang, 2020). Additionally, the sector is booming in China while dwindling in the developed countries. The rapid growth in the sector has attracted many players both locally and internationally. The sector has various major players comprising of the local and foreign companies. Major local players include, China Life Insurance (Group) Company-large state-owned Ping an Insurance (Group) of China Ltd,-large private company, China Pacific Insurance (Group) Company Ltd.- large state owned, People's Insurance Company of China Group- large state owned , New China Life Insurance-large private company (Zhang, 2020). Conversely, major foreign players comprise of American International Assurance Company Ltd-large private owned, AIU Insurance Company- large private owned.
2.2 Porters Five Forces Model
Potential New Market Entrants.
The Chinese government supports local companies and creates hurdles for foreign players. The primary intention of the intervention is to maintain a favorable situation for local firms (simsree, 2015). Notably, the strict regulations of fraud and corruption inhibit new entrants as it is difficult for any corporation to comply with the authorized requirements. However, the exponential expansion of the market convinces investors to strive to comply with the regulatory requirements to penetrate the market. Hence, the threat of new entrants in the Chinese insurance industry is moderate. The company can navigate through this challenge through various interventions. These include, Innovating new products and services, establishing economies of scale, and establishing capacities and investing in research and development
Bargaining of Suppliers
The professionals of the insurance sector and the premiums paid by the clients are the most critical supplies of insurance sector. The clients already understand the worth of money they pay and they bargain with strength. Since people are always looking for jobs as the economy grows, companies hire experts or less experienced and train them which does not consume a huge budget of companies. Hence, bargaining power of supplier is moderate. The company can navigate through establishing well-organized supply chain of many suppliers, testing with product designs, and developing dedicated suppliers whose business depends on the company
Bargaining Power of Buyers
There exist various options for buyers when deciding on which insurance to buy. Accordingly, China has at least 25 significant insurers according to a report by S&P Global (2018). Despite the high number of buyers, they can easily switch due to many options available and barging strongly with insurance companies. This translates to a high barging power. It will be addressed through, building large customer base, innovation, and introduction of new products
Threat of Substitutes
There has been an increase in the trend of insurance services especially in developing nations like China as shown by the 21% increase(Porter’s Five Forces Analysis (Porter Model) of China Life Insurance-Porter Analysis, 2019). The decrease of insurance uptake in developed regions does not emanate from availability of substitutes but the penetration of the insurance services in the last 3-4 decades (Porter’s Five Forces Analysis (Porter Model) of China Life Insurance-Porter Analysis, 2019). There is no likely substitute for insurance services which increases the attractiveness of the industry implying that the threat of substitutes is lower. This will be enhanced by shifting to service orientation rather than product orientation, understanding the core needs of Chinese clients, and increasing switching costs
2.3 Strategies to Navigate Competition
There exist various approaches of handling competition and attracting customers. These include differentiation, low-cost focus and cost leadership among others (Abel & Marire, 2021). Accordingly, differentiation is the approach of having unique products and services which have an edge over competitors in terms of features. Conversely, low-cost focus is a strategy that aims at reducing the operational costs through implementation of lean methods of management which lead to reduction of the overall business costs (Abel & Marire, 2021). Finally, cost leadership entails the establishment of pricing concepts that are copied by the entire players in the sector (Abel & Marire, 2021). Hence, application of any of the above or a hybrid will aid the company in penetrating into China and gaining a fair share of the customer base.
3.0 Issues and Challenges In The Emerging Market
PESTEL analysis is a method that is widely applied in strategic planning and management. It is a short-form of political, economic, social, technological, environmental and legal concentration (Mazzuto et al., 2018). Notably, Chinese insurance sector is complex and dynamic implying the need for the company to conduct the PESTEL analysis before expanding to China.
【I have highlighted both risks and opportunities and I feel it is correct. 】
3.1 Political Factors
Political elements have a tremendous impact on the lasting sustainability and profitability of the business. The company’s existence at the global stage expands its sensitivity to changes in the political events of China (Mazzuto et al., 2018). Ideally, it provides the company with an opportunity to diversify the systema...