AIG Case Study

1923 Words 8 Pages
Register to read the introduction… What were AIG’s FSAs developed in China? What non -location bound FSAs had been transferred to
China? What first-mover advantages did AIG reap in China?
One of the key FSAs AIG has developed in China was a strong relationship and network with key persons in
China such as State Council members and deputy prime ministers. A said in part 4 of this case, the Chinese government protected domestic economic activities, including insurance activities, by introducing new laws.
But because these regulations were rudimentary, and enforced patchy, a good relationship with key players was crucial for doing business in China. With the opening of an infrastru cture fund AIG showed commitment to
Chinese regulators, and by bringing back some important Chinese relics from Paris, AIG showed that they were willing to invest in China. This resulted in a 1992 with a license for AIG to enter China. Because this process had taken 17 years of AIG’s CEO Greenberg, this FSA almost impossible for other foreign firms to copy in the short term, giving AIG a strong first-mover advantage.
Second, competition in these markets was less fierce than in the US or Europe, so AIG cou ld dominate
…show more content…
For example, other foreign insurance companies were required by the Chinese government to set up joint ventures with local Chinese firms, but AIG was given permission to set up two new wholly owned branches.

Page 4 van 5
Strategy & International Process
Assignment 4: Case 12.1 & 13.1 | 12 October 2012

Third, AIG was able to reach a minimum efficient size quickly and then compete with latecomers from that lowcost position. With low overhead costs in these markets and low operating costs through a centralized command system, AIG was able to reach its minimum efficient size quickly.
AIG also brought a non-location bound FSA to the Chinese market by introducing the agency distribution system to China. AIG only paid commission to its agents, not a basic salary. In this way, AIG realized not only a strong commitment of its agents to sell, nut also huge savings.
Word count: 1581
Verbeke, A. (2009) International Business Strategy, 151-173, Cambridge, UK: Cambridge University Press

Page 5 van 5
Strategy & International Process
Assignment 5: Case 11.1 & 14.1 | 15 October

Related Documents