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Zurich insurance company was founded in the year 1872. It was originally introduced as the Versicherungs-Verein Insurance Association. Following a number of acquisitions, in the year 2000, it united to form the Zurich Financial Services. In the year 2012, it changed its name to Zurich Insurance Group Ltd (Mizgier et al. 2018). The organization is intended to provide specialized services to startups in terms of digital technology. It develops in-house solutions on the grounds of insights and experience. Zurich has its businesses segmented into three core categories that involve global insurance, Farmers and general insurance. It provides expert solutions to small businesses (Mizgier et al. 2018). The customers of Zurich insurance company are around 400 of the global companies among the fortune 500 companies. It has more than 1250 risk engineers located in around 40 countries. Its basic services involve helping the business with the stratagems. It creates value for its customers by making sure that the employees are given the full opportunity to work with the maximum potential.
It maintains a strong balance sheet and ensures that sustainable and attractive dividend is provided to the investors. It is listed in the ‘SIX Swiss Exchange’; under the ticker ZURN. The organization reported around 148300123 fully paid registered shares in the year 2012 (McCallum et al. 2019). The shareholders of the organization were reported to be 124847 shareholders in the same year. It has around 24.7 per cent of the shares are private individuals and 68.1 per cent are the legal entities (McCallum et al. 2019). This assessment envisages analyzing the organizational stratagems and hence, proposing a global expansion strategy for the international operations. The assessment analyses the organization in terms of its profitability and estimated size, the structure of each market, future developments in the market and implications in terms of foreign exchange and trade.
The market structure is imperative to comprehend so as to facilitate the global expansion. The market structure basically incorporates the degree and nature of competition sustaining within the market in terms of services and goods (Karnani 2017). It is determined by the nature of competition prevailing in a particular market segment. The market structure of Brazil is a free market economy and is ninth largest in terms of nominal gross domestic product in the world and in terms of purchasing power parity; it is eighth largest in the world as of the year 2019. Purchasing power parity is basically the measurement of different countries that make use of specific goods compare an absolute purchasing power in terms of currencies, it produces inflation rate which is equivalent to the price of goods at a location in contrast to the price of goods at a different location. Its exchange rate is usually different in different market exchange rates because of poverty and transaction costs (Karnani 2017).
It follows a trend of evolution in terms of competitiveness as it has overcome Russia the first time and has partially closed the competitiveness gap with other countries like China and BRIC economics. In the year 2018, the purchasing power parity for the country was around 2.2 LCU per international dollars. The purchasing power parity of the country has substantially elevated from the year 1999 from about 0.7 to 2.2 which is quite appreciable (Karnani 2017). For the expansion of Zurich insurance company, the high purchasing power parity of the Brazilian market will hold better as the movement of price levels will be helpful in overwhelming any relative price changes. Similar to the structure of the Brazil market, then France's economy also follows the free market structure which is relied on the developed economy in terms of services.
It is about 66.1 per cent free and is twenty-sixth in terms of the freest European countries. It is highly developed and free-market-oriented and is the seventh-largest economy in the world in terms of nominal figures as of the year 2019 (Lane et al. 2018). The purchasing power parity in France in terms of GDP was estimated to be around $2.856 trillion in the year 2017 and the same was $2.791 trillion in the year 2016. The budget surplus or deficit in Brazil is 2.4 per cent of the GDP and that in France is -4.9 per cent of the GDP. In South Korea, the structural shift from the overreliance on the export-led-growth model (Cho et al. 2019). Also, the market is export-oriented in terms of its economic structure which is centred on a large number of organisations and businesses in the process of pursuing growth with insufficient resources and capital. The GDP per capita purchasing power parity has inflated to 24434.21 USD from the year 1990 till 2018. The market structure of these countries clearly laid prominence on the effective market structure of Brazil in terms of global expansion for Zurich Insurance Company.
The inflation CPI of Brazil is 3.6 per cent as of the year 2020, however the same of the year 2018 was around 3.75 per cent. Exchange rate system also called as a current system basically establishes the tactics in which the exchange rate is recognised. Choosing a particular current system is a critical component of the economic policy adhered to by the government of a country. The exchange rate system incorporated in the economy of Brazil is a floating exchange rate regime which is consistent with inflation targeting regime. The intervention of BCB in the FX market for determining the exchange rate level is minimal (Karnani 2017).
The profitability of market encompasses different financial factors that are responsible for making a market capable of diminishing the overhead costs (Peres et al. 2019). The key fundamentals of the insurance and banking industry in Brazil ensure to translate the optimum levels of profitability and diversified products into elevated performance. The Brazilian National insurance System has introduced different partial reforms composed of National Council of Private Insurance (NCPI) for the authorised brokers. The price and taxation rules to determine the probability of the insurance companies in Brazil is determined due to the asymmetrical indexation of the expenditures and the revenues (Peres et al. 2019). In terms of size, the French insurance market generated revenue of €211.6 bn in the year 2017 (Kim et al. 2017). The casualty insurance and growth in property has made sure to drive the growth of this market. The profitability can be inferred from the revenue rise of the market which sustained +2.3 per cent in terms of protection insurance record. The size of the South Korean market is contingent from the USD104 billion rises in the insurance sector. The profitability can be justified from the penetration rate of around 7.4 per cent (Peres et al. 2019).
Domestic live business in South Korea is quite concentrated with the top players having 23 per cent of the market share. The new solvency Regulation and accounting standards have further added to the unfavourable conditions in the economic environment of the Korean insurance industry. These changes will significantly pose an influence on the asset management, marketing and risk management of the insurance companies. The profitability of the insurance companies in South Korea have failed by about 0.2 per cent in the year 2018 as a result of the short decline in the savings insurance for the 27 per cent depreciation was witnessed in the life insurance premiums (Sam 2017). The key reason behind this downfall was stagnation in the whole life insurance market and the unremitting downfall in the general Insurance long term depreciation, known Life Insurance premiums and decrease in the long term savings.
Potential Foreign direct investment is used by the firms to ideally invest in the new facilities for providing services in a foreign country and hence, capturing the market. It involves different types such as acquisitions and mergers or Greenfield investments (Gondim et al. 2017). Foreign direct investment plays a cardinal role in the economic, sustainable and global capital allocation. It is of significant approach as it supports global insurance and also facilitates foreign direct investment with holistic risk management stratagem. Zurich Insurance Company must acknowledge the fact that the investment is important for supporting risk management as well as for providing homogeneous protection across different MNEs. Its imperative role is in input in the capital investment into a vertical country and ensuring that the shareholders, employees and investors are secure (Gondim et al. 2017).
For expansion in Brazil, Zurich must take into account the foreign direct investment policies of the country. Obstacles in engaging with and commencing MNE in Brazil are high level of regulatory risks. The infrastructure in Brazil is insufficiently developed hence, resulting in high inflation and elevated costs of production. Furthermore, investments are also strict in the Insurance sector. Despite these factors, Brazil is an attractive market for international investors due to the availability of the exploitable raw materials and a highly diversified economy which is less vulnerable to the crisis on a global level (Gondim et al. 2017). Entrance in the foreign direct investment is particularly headed towards the financial and insurance activity and the manufacturing industry. The country is strengthened in terms of establishing and MNE, its resources and development education and infrastructure.
However, the key risks incurred by the company are growing inequalities, high employment rate which was depreciated by 9.4 per cent in the year 2017, high cost of labour, heaviness in the work regions and taxation and the intricate corporate taxes as compared to the other countries. Foreign direct investment has decreased in South Korea by about 19 per cent by the end of the year 2018 which has reached about 14.5 USD billion (Soni 2017). This is possibly due to the depreciation in inter-company loans. The government encourages the foreign investment regulation to review different sectors especially the private sector and encourage investments and enlarge Brazilian companies. However, it is statically preferential towards the technology-intensive industrial sector and for strict regulations towards the foreign MNEs. Furthermore, the threshold in the foreign investment controls is also less stringent for the European investors in France (Magnier-Watanabe and Lemaire 2018). The government is trying to do its best in terms of preventing the national economic flagship by making use of foreign investment control.
The Republic of South Korea has made tremendous economic gains. These alterations have been made so as to transform the recipient of foreign assistance. It has required the regulators to provide the clear written guidelines and punishment is not to be imposed on the companies that provide the oral guidelines (Soni 2017). The FDI regulations are enhanced by ROK are intended to improve the investment climate, however, the opaqueness in the interior regulation in the process of decision making is still a vital issue which also involves the ‘window guidance' (Soni 2017).
The compound annual growth of the Brazilian market is growing and the customers are increasing digital channels and businesses are preparing for redesigning development in terms of insurance and other sectors of the economy (Chung et al. 2016). Global standardization strategy is basically the capability for employing the standard marketing on an international level. It is the ability of a firm to use the same marketing tactics from one country to another across different cultures. (Chung et al. 2016) The education system of Australia and Brazil is quite similar to each other which in turn reflect upon the market as well. The global standardization strategy can be implemented by Zurich Insurance Company in Brazil to conduct its operations. The franchises in Brazil are on the path towards ensuring the standardization of the marketing mix. The key dimensions of their GMS are the integration of the competitive movements, coordination and concentration of the marketing activities and participation in the global market. This clearly brings forward a portrait of markets' potential future (Gondim et al. 2017). It can further also be assessed from the commitment of MNEs in the country.
The transitional strategy is basically an array of different planned actions defined by particular business to have operations set across international borders (Wilkins 2017). It is applicable to all the methods and structures which allow the firms to commence and sustain the functions in the foreign countries at the same time and showing central coordination at one particular location. France is laying prominence on smart manufacturing and is trying to integrate technologies in two different industrial sectors for offering a wide array of growth opportunities. Industries have begun to align for supporting different sectors and businesses. The government also intervenes and ensures that international firms are supported by the proper amalgamation of technology and skills. France has played an integral role in the game-changing digital revolution and is also leading in terms of automating, data crunching predictive maintenance, internet of things, additive manufacturing, big data, the cloud and robotics (Magnier-Watanabe and Lemaire 2018). All of these facets are quite imperative for the growth of Zurich Insurance Company, henceforth; the transition strategy can allow it to perform its operations in an effective custom in France by improving its supportive technological advancements.
Localisation strategies is another business strategy which intends to address the purchasing habits, customer behaviour and differences in the general culture with a different country than a particular firm of operates (Wood et al. 2016). Since Zurich Insurance Company has the objective to increase the market share through the global expansion, hence, this strategy can be helpful in expanding in South Korea to improve the market share and the engagement in diverse clientele. The insurance industry of South Korea has already witnessed strategic localisation in the transitional insurance firms it has also witnessed strategic localisation of businesses like Tesco. Henceforth, it will be easier for Zurich Insurance Company to adopt this tactic and penetrate in the South Korean insurance industry. The growing importance of the South Korean market in the global economy and its ability to couple it's internationalisation and infrastructure has allowed it to persuade the MNCs to invest in the Korean market. The global data analytics also revealed that the insurance firms in South Korea have witnessed substantial growth in the last few years (Soni 2017).
Different currencies across the globe change with the consumer confidence, demand, values, supply and time. The foreign exchange rates keep hold over this currency float and convert the currency in a relevant one (Schaaper and Gao 2019). The foreign exchange market is basically a global network of the foreign exchange dealers, banks, electronic communicators and the brokers. The average value of the total global foreign exchange rate was around $4 trillion per day in the year 2010. On comparing the foreign exchange rate between Brazil and Australia, it is evident that 0.27 Australian dollar is equal to 1 Brazilian Real (Chamon et al. 2017). It is clearly evident that investing in the Brazilian market will definitely yield Zurich Insurance Company good results. When compared to France, the foreign exchange rate reveals that one euro is equal to 1.60 Australian dollars (Schaaper and Gao 2019).
The higher foreign exchange rate is beneficial for the home country as there is download pressure on inflation; furthermore, if the value of the exchange rate is high, the overall price of the imported finished goods is relatively low (Chamon et al. 2017). Considering the Insurance sector, the exchange rate will reduce the cost of production of the firms and will also result in the lower prices for the consumers. A lower exchange rate is also related to selling a particular currency. Henceforth, the foreign exchange rates between the two countries reveal that investment in France cannot be profitably beneficial for Zurich Insurance Company. When considering South Korea, 1 Australian dollar is equivalent to 836.71 South Korean won (Caporale et al. 2017). It may result in financial problems if the investment in South Korea is not managed in an effective manner as the currency gap is quite high.
The assessment has brought forward a clearer picture of the strategies that can be adopted by Zurich Insurance Company for its international operations. It is aimed to provide specialized services to startups in terms of digital technology. It develops in-house solutions on the grounds of insights and experience. The assessment has laid prominence on the structural differences in the different markets involving South Korea, France and Brazil. The assessment reveals that market structure of Brazil is a free market economy and is the ninth-largest in terms of nominal gross domestic product in the world and in terms of purchasing power parity; it is eighth largest in the world. It has inflation CPI of 3.6 per cent as of the year 2020. The market structure of France is also similar and it is highly developed and free-market-oriented and is the seventh-largest economy in the world. The purchasing power parity in France in terms of GDP was estimated to be around $2.856 trillion. The structure of South Korea is based on the structural shift from the overreliance on the export-led-growth model.
The assessment highlights that the price and taxation rules determine the probability of the insurance companies in Brazil is resolute due to the asymmetrical indexation of the expenditures and the revenues. It can be inferred from the assessment that in terms of structure and profitability, in comparison with the other two countries, Brazil is the most favourable one as it has effective growth in the insurance sector as well as the market is also acceptable towards a new insurance venture. Brazil is a striking market for international investors due to the easy accessibility of the utilizable raw materials and a highly diversified economy which is less susceptible to the crisis on a global level. Three different types of expansion strategies are discussed in the above-presented assessment that lay emphasis on the expansion stratagem that is required for investing in the considered different countries. The global expansion strategy is the most suitable for investing in Brazil considering the substantially growing market and foreign direct investment policies.
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