assistance with university projects? research...

www.assignmentstudio.net

[email protected] Mob +61424295050 [email protected]

1

Assistance with University Projects? Research Reports? Writing Skills?

We’ve got you covered!

www.assignmentstudio.net WhatsApp: +61-424-295050

Toll Free: 1-800-794-425 Email: [email protected]

Follow us on Social Media Facebook:

https://www.facebook.com/AssignmentStudio

Twitter: https://twitter.com/AssignmentStudi

LinkedIn: https://au.linkedin.com/company/assignment-studio

Pinterest: http://pinterest.com/assignmentstudi

Assignment Studio © Copyright

http://www.assignmentstudio.net/

mailto:[email protected]



https://au.linkedin.com/company/assignment-studio

http://pinterest.com/assignmentstudi



2

Executive Summary





3

Table of Contents

Introduction ......................................................................................................... 4

Country / Market Attractiveness ........................................................................... 4

Current Environment of Mexican Insurance Market .............................................. 5 PEST Analysis ...................................................................................................................................................... 5

Political ..................................................................................................................................................................... 5 Economic .................................................................................................................................................................. 5 Social .......................................................................................................................................................................... 6 Technological ......................................................................................................................................................... 6

Competitive Market Analysis ................................................................................ 6 Local Service Providers in Mexico ................................................................................................................ 7 Already Existed international Firms ........................................................................................................... 8

Why BT funds would be successful in Mexico ........................................................ 9 Complexity of Mexican Market ................................................................................................................. 10

Market Entry Strategy ......................................................................................... 11 Joint Ventures .................................................................................................................................................. 13 Strategic Alliance ........................................................................................................................................... 13

The difference between joint ventures and strategic alliances: ................................................... 14

Marketing Plan Highlights ................................................................................... 14 Marketing Objectives ................................................................................................................................... 14 Financial Objectives ...................................................................................................................................... 14 Target Market .................................................................................................................................................. 14 Positioning ........................................................................................................................................................ 14 Strategy Pyramids ......................................................................................................................................... 14 Marketing MIX................................................................................................................................................. 15 Customer Service ........................................................................................................................................... 16 Expense Forecast ........................................................................................................................................... 16 Marketing Expense Budget “Assumption” .......................................................................................... 16

Additional Research Required ............................................................................. 17

Conclusions......................................................................................................... 17

Recommendations .............................................................................................. 18

References .................................................................. Error! Bookmark not defined.





4

Introduction

The main purpose of this report is to highlight the advantages for BT Funds to expand

its services in Mexico, based on the market attractiveness.

With the help of technological advancements and growing demand of services

worldwide, many organizations are going global and they are getting themselves

involve in international business.

Despite the size and the nature of the company it is important to have proper

strategies and plans before expanding business internationally. This report will

highlight the market attractiveness of Mexico based on the facts and figures of

Mexican insurance market. A proper PESTEL analysis is included in the report,

giving a clear view of the Mexican market.

Country / Market Attractiveness

Despite the global economic environment, the overall Mexican insurance market

continued to enjoy the benefits from the unexploited market. Due to the increase in

crime rates, several earthquakes and relatively low penetration in the market have

forced the locals to consider the need for insurance protection (Jones. D, 2013).

The overall Mexican Insurance Industry has been rated as a stable insurance market

by a rating agency Fitch (Fitch-Mexican Insurance Outlook). With Mexican fast

growing affluent population, easing credit conditions and overall rising awareness of

catastrophic loss potential the overall insurance industry of Mexico experienced

growth over the past 8 months. According to the top 4 insurance companies in

Mexico, saw a total growth of 17% in their total written premiums (Jones. D, 2013).

The Fitch special report, entitled 2013 outlook: Mexican insurance industry,

improving operating environment, gives the market a stable outlook because of the

combination of its appetite for growth, conservative reserving, and increasing

experience in catastrophe management.





5

The Mexican insurance market totaled at $16.3bn in Premium at the end of the third

quarter of 2012, rating as the second biggest insurance market in Latin America after

Brazil (Fitch-Mexican Insurance Outlook).

Current Environment of Mexican

Insurance Market

In an attempt to be able to gain some competitive advantages, few insurers reinvented

their strategies and services, focusing more on related pricing, commissions and

customer rights, the basic aim for reinventing their strategies is to position themselves

for growth and profitability in the local market (Jones. D, 2013).

Mexico, after Brazil in particular holds great promise for new entrants, who

understand the basic nuisance of such insurance market and are willing to use

technical innovation in order to be able to succeed (Leonardi. L, 2012).

PEST Analysis

With the help of Pestle Analysis of Mexico BT Funds will be able to identify various

issues that affect the country’s performance through the prism of current strengths,

various challenges along with future prospects and opportunities.

Political The overall political condition of Mexico seems to be stable at present, with various

new rules and regulation been implemented in last few years. The Institutional

Revolutionary Party, or PRI dominated Mexico politics for 70 years (IMF, 2013).

Economic In 2012 the GDP in Mexico was $1.16 Trillion, at $15,783 per capita, making it the

13th largest economy in the world. The economy retracted by 6% in 2009 as a result

of the global economic downturn; however, in subsequent years the economy has

made a gradual recovery recording average economic growth 4.9% over the past three

years (Heritage 2012).





6

Figure 2. GDP Mexico vs. Australia (World Bank 2013)

Social According to (Jaffary, 2009) Mexican culture is an amalgam of indigenous Mexico

and three centuries of Spanish colonialism. The Mexican life expectancy has risen

substantially in recent years. Mexicans are currently the longest in Latin America with

an average life expectancy of 76.7 years, 2.6 years higher than the regional average.

Technological The institute of Science and Technology was established in 2007, where the young

generation is very interested in creating and selling apps for smart phones. In last few

years the Mexican government has tried to put great emphasis on nanotechnology and

biotechnology (Freno. R, 2007).

Competitive Market Analysis

The overall Mexican market is very well capitalized, the market have attractive stable

returns over the last years and showing sound performance indicators. However, at

the same time insurance contribution to the financial sector remains very low and is

not growing. Due to the expanding middle class and rising disposable household

income continue to boost its demand for automotive, P& C and life insurance

products, as more and more people are seeking ways to safeguard their assets such as

cars, homes and other personal belongings (Jones. D, 2013).





7

Local Service Providers in Mexico

There are various local companies in Mexico who have already capitalized on the

growing demand of insurance services. Few companies to highlight are:

Grupo National Provincial – Grupo National Provincial SA is generally considered as

the largest local insurance company in Mexico on based of the gross premium returns.

GNP basically engages in life and non-life business, health and other automobile

coverage. GNP saw its total direct written premiums grow 51.1% over the previous

quarter to MEX$25.9 billion (US$2.03 billion), mainly due to the higher demand for

property and casualty, medical and personal accident insurance coverage

(EconomyWatch, 2010).

Another big company that holds a big market share in the Mexican insurance industry

is MetLife Mexico SA. Metlife is the larget insurer in Mexico with 13.3% share of the

Mexican insurance market in 2012.

In terms of life and non-life segments, Metlife written premiums were increased by

more than 50% from MEX$20 billion (US$1.57 billion) in the second quarter of 2012

to MEX$30.35 billion (US$2.38 billion) (ImF, 2013).

In 2012, both Brazilian and Mexican insurance companies continued to dominate the

overall Latin America insurance industry as a whole. In 2012, Porto Seguro SA

reported that its net written premiums, in terms of life and non-life segments grew

8.07% from R$8.56 billion (US$4.34 billion) in 2011 to R$9.63 billion (US$4.88

billion).





8

Another bank-affiliated insurance company Seguros Inbursa was the fifth largest

insurance company in Mexico in terms of total written premiums, with a 5.66% share

of the Mexican insurance market in 2012. Its net income grew by nearly 22.7% from

the second quarter of 2012 to MEX$1.01 billion (US$79.15 million) for the third

quarter of 2012, (Jones. D, 2013)

Already Existed international Firms

The Mexican market at present is dominated by 10 companies in the life sector and by

other 16 in the nonlife sector accounting for over 80 percent in both cases. The

dominance of the insurers with foreign capital is very strong in the life sector, where

only 12 percent market share corresponds to national insurers in the Mexican market.

The nonlife market share distribution is closer to a30 to 70 percent in favor of

foreign owned insurers (IMF, 2013).





9

Why BT funds would be successful in

Mexico

At present the BT – Financial group has $35.4 billion funds under management, the

present amount funds represents 1.3% of the $2.7 trillion dollar investment market.

By expanding the operations in Mexican market it will increase the level of total

funds managed by BT financial (BT- Financial 2012).

Figure 2. GDP Mexico vs. Australia (World Bank 2013)

Another important reason for expanding the BT operations in the Mexican market is

mainly because of the reason that Mexican banking sector is strong. IMF, (2013).

More and more foreign banks are entering the Mexican market mainly because of the

high profit rates and the growing demand of insurance policies. A notable example is

the recent acquisition of Banamex by Citigroup and the Spanish allied Bancomer.

Many foreign run affiliates are involved in retirement-fund administration and mutual

fund management (AEGON 2009, IMF 2013).

According to Fitch special report, entitled 2013 outlook: The Mexican insurance

industry provides a stable outlook to its market because of the combination of its

appetite for growth.

Mexican insurance industry totaled $16.3bn in premium at the end of the third

quarter of 2012, making it the second biggest market in Latin America after Brazil.

However the overall the insurance penetration in Mexican market is still low at

1.82%, that’s been indicated by Fitch as indicating room for ample growth.





10

Important factor to note is that in 2012 only 30% of the countries cars have insurance

and only 5% have some sort of property and casualty insurance protecting against

natural disasters. Premiums that were written across all lines of insurance grew an

aggregate 14.7% in nominal terms in the first three quarters of 2012, compared with

the same period in 2011.

Complexity of Mexican Market

In a country like Mexico, establishing foreign subsidiaries can only perform foreign

investment in insurance and surety businesses.

For any foreign insurer to be able to apply for a license to operate in Mexico has to

provide, among other information, a confirmation from the home supervisory

authority to the CNSF. Such confirmation should and must state that the insurer is

authorized by the government to carry out the lines of insurance business proposed.

In Mexico, insurance legislation clearly highlight the fact that the same institution

cannot acquire a license to perform both life and nonlife business lines. This

legislation has to be taken into consideration by BT Funds. For insurance

undertakings licensed prior to this legal provision (introduced in 2002), regulation

establishes that risks and accounting must be handled separately (IMF, 2013).





11

Market Entry Strategy

The decision of entering any foreign market is a very key decision for any

organization, regardless of the nature of the industry the business operating in, firms

face a very critical decision in choosing the best market entry mode. There are various

options available for any organization to consider entering in any foreign markets,

such as:

Direct and Indirect Exporting,

Franchising,

Licensing,

Mergers or Acquisition,

Strategic alliance.





12

With respect to the nature of the business and the industry BT Funds will be entering,

the best option available for BT Funds to enter in Mexican Insurance market would be

through cooperation strategies.

The overall activity of Merger and Acquisition in the Latin American region has

showed no signs of slowing down over the past 9 months, with the help of low market

penetration rate and a growing middle class population and most importantly an

increasing number of property and car buyers throughout the region the insurance

sector is at boom.

Jones. D, 2013 et al

Over the last few years many insurance and investors swooped in Latin America

insurance industry for acquisitions. Few of the examples to consider are

1- Australia's QBE (ASX: QBE), which completed its acquisition of HSBC's

Argentine Holdings SA in May 2012. This merger and acquisition deal

included a ten-year bancassurance agreement enabling QBE to become one of

the exclusive providers of general insurance products to HSBC customers in

Latin America region.

2- Another major example of merger can be considered of UK – based, RSA

insurance group Plc, the company completed the double acquisition of

Aseguradora de Creditos and El Comercio Compania, the price of such

merger is not disclosed yet. The major reason for such deal is to be able to

attempt to generate opportunities and improve efficiencies and profitability.

Though there are examples of mergers activities taking place in the Latin America

Insurance industry, still for BT – Funds the suggested opinion would be through

cooperation strategies.





13

Cooperative Arrangement

A cooperative arrangement is a partnership collaboration based on a contractual

agreement that is generally based by a mutual balance of interest.

Joint Ventures Cateora and Graham (2002) define a joint venture as “a partnership between of two or

more participating companies that have joined forces to create a separate legal

entity”(p. 336). Joint ventures generally base on two attributes; cooperation and

autonomy. Another important factor to consider, that will favour joint venture entry,

is the existence of oligopolistic competition. Insurance industry are usually

characterised by a small number of competitors, it is because of this reason that the

foreign companies may find it difficult to enter the market on their own due to the

high entry barriers.

Strategic Alliance For global managers, strategic alliances are mainly considered as tools. Strategic

alliances are termed as a wide range of cooperative partnerships and joint ventures

between local and international firms.

They have three defining characteristics:

1. Various entities are united in order to pursue a set of important and agreed

goals.

2. Both the partners share benefits of the alliance and their control on the

performance of assigned tasks, during the period of their agreed

partnership.

3. Both partners contribute in one or more key strategic areas.

According to Hollenson (1998) cross-border alliances may take various forms and

may also become one of the most popular method of internationalisation.





14

The difference between joint ventures and strategic alliances: “The formal difference between a joint venture and a strategic alliance is that

a strategic alliance is typically a non-equity cooperation, meaning that the

partners do not commit equity into or invest in the alliance” (Hollenson, 1998,

p. 247).

Marketing Plan Highlights

BT Funds mission is to provide the finest level of insurance services in Mexico, by

providing exceptional services.

Marketing Objectives To capture market share by 1% per quarter

Reinforce a market image as the finest service provider in the Mexican

insurance industry.

Financial Objectives To be able to increase profits by 2% a quarter

Maintain customer acquisition cost at the same level

Target Market According to World Bank (2013) statistics only 52% of the Mexican market is

currently using a retirement savings vehicle, this clearly indicates that 48% market of

Mexico is still not been targeted and at the same time the existing 52% population can

be targeted as well by offering them better options at lower prices.

Positioning BT Funds will position itself as a comprehensive, personal insurance broker that will

serve clients through exceptional customer service. BT Funds will serve all of small

towns that are widely dispersed.

Strategy Pyramids The main focus of BT- Funds marketing plan is to establish BT Funds as a premier

insurance service provider in the Mexican market. The overall marketing strategy will





15

seek to continually develop customer awareness related to the various services

offered, by developing long lasting customer relationship.

Marketing MIX BT Funds insurance marketing Mix will be based on the following approaches –

pricing, distribution, advertising and promotion. In Mexico, people are very sensitive

to value they get, for this reason BT Funds has to make sure that their price and

services are perceived to be good value.

Mexicans prefer direct communication such as telephone calls or face-to-face

meetings. However, e-mail is widely used, for this reason direct marketing of

insurance services has to take place (Bain. B, 2012).

Insurance will mainly be sold through agents by developing initial development of

alternative channels. Insurance intermediation is carried out by licensed agents

(individuals), brokers (entities) and other legal entities (IMF, 2013).





16

Customer Service One reality of the insurance brokerage industry is that the client’s demands

exceptional customer service from companies, especially in countries like Mexico

Expense Forecast The overall marketing expenses are to be budgeted accordingly, so that they are

higher during the parts of the year when people need more insurance services. Since

the Mexican market has witnessed tremendous growth in insurance industry, the

marketing budget has to be set accordingly.

Marketing Expense Budget “Assumption”

FY 2013 FY 2014 FY 2015

Advertisements $6775 $7544 $8012

Printed Material $800 $800 $800

Other $810 $900 $940

Total Sales and

Marketing

Expense

$8385 $9244 $9752

% of Sales %1.82 %1.9 %0. 39

With the help of proper marketing plan, following areas will be monitored





17

Revenue- monthly and annual Expenses- monthly and annual Customer satisfaction New customers as a percent of overall revenue

Additional Research Required

Mexican home loans grew by 10.1 percent in the 12 months through September to

443 billion pesos, according to the banking and securities regulator. In Brazil,

outstanding housing loans jumped 39 percent to 256.4 billion reais ($122.1 billion)

over the same period (Bain. B, 2012)

Mexico has a total population of 112.7 million inhabitants, out of which 51.2 percent

are women. In Mexico the largest segment of its population is the 12-29 age group,

accounting for 31.9 percent of the total; followed by the 30-49 group, 26.3 percent;

children 11 and under, 22.9 percent; and people over 50, 18.8 percent.

The average Mexican household was composed of 3.9 people in 2010, down from

four people two years earlier, while the head of household had an average age of 48.3

last year, about the same as in 2008 (Foxnews.com)

Conclusions

Mexican insurance market is without any doubt the second largest market in

Latin America after Brazil. Because of high potential of the Mexican insurance

industry many large international insurance service providers are willing to

enter the market and capitalize on it.

Half of the Mexican population still not being targeted for any insurance plans

and at the same time 70% - 80% of public cars and properties still don’t have any

insurance.

The local public of Mexico are now concerned with their insurance policies and

looking for various options that might be available for them. Considering such





18

scope and potential of the Mexican market, BT Funds can capitalize on it, as it has

years of experience and potential to achieve it.

Recommendations

To enter Mexico the best mode of entry would be cooperative arrangement, as

it won’t require large amount of investments. With such arrangements BT

Funds won’t face any cultural or language issues in targeting the locals of

Mexico.

BT Funds has to target the Mexican market by keeping its prices competitive.

By focusing on Customer service, BT Funds will be able to capitalize the

market share.

Mexican companies are extremely price conscious, seek financing options,

tend to desire exclusive agreements, and value outstanding service and

flexibility.





19

References

1. Jones. D, 2013, ‘ Country Profiles’, Latin America

2. Fitch – Mexican Insurance Outlook, Feb 2013 <

http://www.reactionsnet.com>

3. Leonardi. L, 2012, ‘Brazil, Mexico and Argentina: What Will New Insurance

4. Market Entrants See’, viewed on 9th May 2013

<http://www.towerswatson.com/enAU/Insights/Newsletters/Global/emphasis/

2012/brazil-mexico-and-argentina-what-will-new-insurance-market-entrants-

see >

5. IMF (2013) A detailed assessment of Markets – Mexico

http://www.imf.org/external/pubs/ft/scr/2012/cr1267.pdf

6. Affery, N, Osowski, E, & Porter, S. (2009). Mexican History, Primary Source,

New York.

7. Freno, R. (2007). An analysis of Mexican Culture and History: Then and

Now, Journal of Latin American Studies, 34

8. Economy Wathc, 2010, ‘Mexico Insurance Company, List of Mexican

Insurance Companies’, viewed on 9th May 2013

<http://www.economywatch.com/insurance/mexico-insurance-

companies.html>

9. Cateora, P. R., and Graham, J. L. (2002) International Marketing. 11th

Edition, New York, McGraw-Hill

10. Raffee, H. & Eisele, J. (1994) Joint ventures, Harvard Business Manager,

16(3) pp. 17-22

11. Hollensen, S. (1998) Global Marketing- A market-responsive Approach. UK,

Prentice Hall, Ltd.

12. Bain. B, 2012, ‘Mexico’s Banks Target Wealthy in Booming Home Market:

Mortgages’, viewed on 10th May 2013

<http://www.bloomberg.com/news/2012-11-23/mexico-s-banks-target-

wealthy-in-booming-home-market-mortgages.html>

13. Foxnews.com, ‘Mexican household income falls 12 pct between 2008 and

2010’, viewed on

<http://latino.foxnews.com/latino/espanol/2011/07/15/mexican-household-

income-falls-12-pct-between-2008-and-2010/>



http://www.reactionsnet.com/

assistance with university projects? research...

Documents