BBDM3133 International Business Management

Tutorial 4
Case Discussion
Quacking up a Storm of Business
The closing case examines AFLAC (an American insurance company that specializes in
supplemental insurance) operations in the United States and Japan. espite !eing an
American "irm# AFLAC is much larger and more success"ul in Japan than it has !een in the
United States. The case discusses recent mo$es !y AFLAC as it %or&s to maintain its
dominance in Japan despite a more open regulatory en$ironment.
'ey (oints)
AFLAC# despite signi"icant gro%th in the U.S. o$er the last * years# is still relati$ely
small (+,., !illion in sales) compared to other insurance companies such as A-.#
(rudential# or /etLi"e.
AFLAC0s assets in Japan are %orth more than +*,.1 !illion. 2* percent o" the
Japanese population is estimated to ha$e purchased AFLAC insurance. 32 percent
o" all o" AFLAC0s !usiness in done in Japan.
AFLAC0s strength in Japan is largely attri!uted to its distri!ution net%or& comprised
o" 144#444 licensed sales associates and 15#,44 independent insurance agencies.
AFLAC is a high67uality ser$ice pro$ider (settling claims# on a$erage# in less than
t%o days) and has adapted its Japanese operations to "it local customs and
practices.
AFLAC has also added U.S.6style inno$ations to its Japanese operations# such as
gi$ing stoc& options to its Japanese employees.
Changes in the Japanese regulatory en$ironment (the regulatory 8ig 8ang in 2441) 9
no% allo%ing greater competition in the insurance !usiness 9 threaten AFLAC0s
once6protected dominant position.
-n response to the regulatory changes# AFLAC has entered into a strategic alliance
%ith ai6ichi /utual (the second largest insurance company in Japan) and has
introduced its "amous duc& to the Japanese mar&et %here the translation "or :7uac&;
is :gaga.;
Case Questions
1. AFLAC introduced the AFLAC duck in the U.S. market to build brand awareness
there. However, AFLACs brand awareness is very hih in !a"an. Should AFLAC use
the same advertisin cam"ain in !a"an as it does in the United States# $s there any
value to havin identical advertisin in both markets#
.i$en the increased competition resulting "rom the regulatory 8ig 8ang in 2441# it
may no% !e more important "or AFLAC to esta!lish a distincti$e identity in the
Japanese mar&et. The duc& may help in this e""ort. Further# i" AFLAC is considering
expanding into other countries !esides the United States and Japan# the duc& could
!e associated %ith esta!lishing a glo!al identity<!rand "or the "irm. (L= ,.2> AACS8)
Analytic S&ills> Learning =utcome) ?xplain ho% di""erences in culture a""ect the
international !usiness en$ironment)
%. How im"ortant is it &or AFLAC to ada"t its business "ractices to the !a"anese way o&
doin thins# Should AFLAC act more !a"anese or more American in doin
business in !a"an#
The distri!ution system has !een and %ill continue to !e critical to AFLAC0s success
in Japan. The strategic alliance %ith ai6ichi /utual "urther strengthens AFLAC0s
distri!ution system. AFLAC should continue to distri!ute its product the :Japanese;
%ay. 8y and large# AFLAC0s !usiness practices appear to !e appropriately tailored
to the Japanese en$ironment. AFLAC should continue to "ocus on deli$ering high6
7uality ser$ices to its customer (e.g.# prompt settlements) in a %ay that com!ines the
!est o" U.S. and Japanese practices. .i$en its long history in Japan# it may !e
ad$antageous "or AFLAC to capitalize on its :Japanese6ness; in the "ace o" ne%
competition. AFLAC0s long6time presence in the Japanese mar&et can !e used to
distinguish it "rom the ne% entrants. (L= ,.2> AACS8) Analytic S&ills> Learning
=utcome) ?xplain ho% di""erences in culture a""ect the international !usiness
en$ironment)
'. AFLAC built its dominant "osition in the !a"anese su""lemental insurance market
because !a"anese reulators actively discouraed new entrants into this market.
(he &inancial )i )an "olicy now encouraes new entrants into the su""lemental
insurance market. *hat has AFLAC done to "rotect its market "osition# *hat else
can AFLAC do#
The ai6ichi strategic alliance and the ne% mar&eting campaign are t%o steps
AFLAC has already ta&en. As suggested in the ans%er to @uestion 2# AFLAC0s
longtime presence in Japan can !e used to its ad$antage as it see&s to di""erentiate
itsel" "rom ne% competitors entering the mar&et (%hether they are Japanese or
"oreign). (L= ,.2 and ,.3> AACS8) Analytic S&ills> Learning =utcome) ?xplain ho%
di""erences in culture a""ect the international !usiness en$ironment)
+. AFLAC is a rarity amon U.S. com"anies inasmuch as the !a"anese market
accounts &or more than ,- "ercent o& its business. .oes this reliance on the
!a"anese market create any s"ecial challenes &or AFLAC# .oes it "resent any
uni/ue o""ortunities &or the com"any#
-t can easily !e argued that AFLAC su""ers "rom an o$erreliance on a single mar&et.
.reater geographic di$ersi"ication is pro!a!ly in the company0s long6term !est
interest. AFLAC is particularly $ulnera!le to changes in Japan0s economic and
regulatory conditions. =n the other hand# their size in Japan ma&es them a
"ormida!le opponent to ne% "irms attempting to capture part o" the Japanese mar&et.
-t %ould appear that AFLAC could capitalize on its presence in Japan to ser$e the
su!sidiaries o" Japanese "irms operating in the United States and other countries#
there!y increasing their geographic di$ersi"ication and glo!al presence. (L= ,.2 and
,.3> AACS8) Analytic S&ills> Learning =utcome) ?xplain ho% di""erences in culture
a""ect the international !usiness en$ironment)
Essay Questions
0. .escribe the di&&erence between hih1conte2t and low1conte2t cultures.
-n lo%6context cultures# such as the United States and .ermany# a spea&er0s %ords explicitly
con$ey his or her message to the listener# %hereas in high6context cultures such as Japan# the
context in %hich the con$ersation ta&es place and accompanying cultural clues are Aust as
important as the actual %ords.
3. *hat are indi$idualism and collecti$ism# How do they di&&er#
-ndi$idualism is the cultural !elie" that the person comes "irst and collecti$ism is the !elie" that
the group comes "irst. -ndi$iduals "rom indi$idualistic cultures typically possess a high degree o"
sel"6respect and independence# %hile those "rom collecti$istic cultures tend to put the good o"
the group ahead o" their o%n personal interests.
,. How can international business"eo"le avoid relyin on the sel&1re&erence criterion when
dealin with "eo"le &rom other cultures#
Beliance on the sel"6re"erence criterion re"ers to the unconscious use o" one0s o%n culture to
help assess ne% surroundings. -nternational !usinesspeople %ho rely on their sel"6re"erence
criterion %hen dealing %ith people "rom other cultures run the ris& o" creating ill %ill. -t is
important "or an indi$idual doing !usiness in another country to remem!er that he or she is the
"oreigner and must adapt to the culture o" the other country. =ne should attempt to achie$e
cross6cultural literacy and !ecome "amiliar %ith the other culture either directly through personal
experience or indirectly $ia training programs and pu!lications.