Question

Fifteen years ago, most Americans had never heard of AFLAC, a $26-billion insurance company based in Columbus, Georgia. Thanks to AFLAC’s mascot, this is no longer the case. The company’s attention-grabbing advertising campaign, which began in 2000, features a helpful but frustrated duck that fails to get people to acknowledge his presence or the company’s name. Nonetheless, the duck’s efforts appear to be paying off. According to advertising surveys, 94 percent of Americans are now aware of the AFLAC brand; more importantly, policies in force have risen more than 50 percent and annual premiums have more than doubled since the duck commercials began in the United States. And the AFLAC duck has done more than simply increase the company’s American sales. AFLAC now sells the duck on its website and donates the proceeds to a children’s cancer center in Atlanta. During the Christmas season, AFLAC teams up with a major department store chain to sell special-edition AFLAC holiday ducks. To date, $3 million has been donated to 40 children’s hospitals around the country from their sale.

Despite the duck’s efforts, AFLAC is still a small player in the U.S. market. Its $5.6 billion of revenue in the United States is dwarfed by such insurers as AIG, Prudential, or MetLife. Such is not the case in Japan, where an estimated 25 percent of the populace has purchased AFLAC insurance. AFLAC does more than 75 percent of its business in Japan. Its assets in Japan are huge—$114 billion—compared to only $17 billion in the United States. Thus, AFLAC is a rar- ity among U.S. multinational corporations—its dominant market is Japan, not the United States.

AFLAC specializes in supplemental insurance— insurance that covers specific types of problems, such as cancer, disability, or accidents. The company was founded on a shoestring in 1955 as the American Family Life Assurance Company. The three founding brothers—Paul, Bill, and John Amos—scraped together $40,000 to launch the enterprise. In its early years the company struggled through many crises; once the Amos brothers were so short of cash they had to sell off the office furniture.

AFLAC’s big break came when John visited the Osaka World’s Fair in 1970. He noticed that many Japanese walked around in surgical masks to reduce the spread of respiratory infections. Amos believed that such health-conscious consumers would be prime candidates for supplemental insurance. Entering the Japanese market was no picnic, however. It took AFLAC four years to receive regulatory clearance to begin marketing its products there.

AFLAC initially focused on selling cancer life insur- ance in Japan. As its knowledge of the market grew, it added accident, nursing care, medical, and other spe- cialty policies to its product line. It has enjoyed continual growth in the years it has operated in Japan. AFLAC’s competitive strength lies in its distribution network. Its products are sold by an army of licensed sales associates, some 125,000 strong, working through 18,400 indepen- dent insurance agencies. Ninety-one percent of the com- panies listed on the Tokyo Stock Exchange offer AFLAC products to their employees through payroll deduction programs.

AFLAC strives to deliver high-quality service to its cus- tomers. In 2010, the average claim was settled by AFLAC in four business days. The company has also adapted its oper- ating procedures to the needs of the local market. Consider its human resource practices. When the company first ventured into Japan, it copied the lifetime employment and seniority-based pay and promotion policies then current in Japan. In the past several years, some Japanese companies have switched to job-based reward systems, in which sala- ries are based on the skill requirements and difficulties of the job. So too has AFLAC.

AFLAC has added some “made in U.S.A.” features to its Japanese operations. Nearly half of its Japanese employees have been granted stock options, reinforcintg their commitment to the company’s future. It has funded AFLAC Parents’ House in Tokyo, providing a place to stay for families whose children have been sent to Tokyo to receive medical treatment for pediatric cancer and other life-threatening diseases. AFLAC also funds college scholarships for Japanese high school students who have lost a parent to cancer.

AFLAC is the largest provider of supplemental insurance in Japan. Its Japanese revenues reached $20 billion in 2012. Given the graying of the Japanese market— older folks tend to buy more insurance—the high profit margins of its product line, and an overburdened Japanese healthcare system that is shifting costs to consumers, AFLAC believes that the profitability of its Japanese opera- tions will continue to grow.

AFLAC does face numerous challenges, of course. For many years it benefited from the Japanese government’s restrictive regulation of the country’s financial services sector, which discouraged competition and price-cutting. To combat Japan’s decade-long economic slump, the government relaxed its regulation of financial services, a process known as the Regulatory Big Bang. In 2001, the Ministry of Finance allowed additional firms to begin selling supplemental insurance, including domestic giants like Tokio Marine & Fire and Nippon Life. To date, the increased competition has not dethroned AFLAC from its market-leading perch. Its operating costs are less than those of its rivals. To maintain this edge, AFLAC has streamlined its operations, allowing sales agents to submit policy applications online and introducing new online billing techniques. To bolster its sales position, AFLAC stepped up its recruitment and training of sales agents and developed new products for them to sell. It entered into a strategic alliance with Dai-ichi Mutual Life, the second- largest life insurance company in Japan. Dai-ichi Mutual’s 50,000-person sales force helps market AFLAC’s supple- mental policies to retail customers. In addition, AFLAC products are available at 372 Japanese banks and at 1,000 branches of Japan Post.

In 2001, AFLAC took another bold step—it brought the duck to Japan! The Japanese translation for “quack” is ga-ga, and Japanese consumers proved to be as “gaga” for the duck as Americans were. Surveys of Japanese consumers report that TV commercials featuring the AFLAC duck consistently rank first or second in popular- ity in the insurance category. In 2009, AFLAC tinkered with the duck’s design, blending it with the traditional maneki neko cat (the ceramic figurine of a cat with a raised paw) to create the maneki neko duck, which AFLAC now features in many of its advertisements for family-oriented insurance products. In other commercials, the familiar duck cavorts with a live-action version of the maneki neko cat. (You can see a sample of its Japanese ads by entering “AFLAC Japanese commercials” in You Tube’s search box. You will observe that they are more gentle and less “in your face” than the company’s U.S. commercials.)

*QUESTIONS:

1. AFLAC introduced the AFLAC duck in the U.S. market to build brand awareness there. However, AFLAC’s brand awareness is high in Japan. Should AFLAC use the same advertising campaign in Japan as it does in the United States? Is there any value to having identical advertising in both markets? Having introduced the maneki neko duck in Japan, should it now introduce it in the U.S. market as well?

2. How important is it for AFLAC to adapt its business practices to the Japanese way of doing things? Should AFLAC act more Japanese or more American in doing business in Japan?

3. AFLAC built its dominant position in the Japanese supplemental insurance market because Japanese regulators actively discouraged new entrants into this market. The Financial Big Bang policy now encourages new entrants into the supplemental insurance market. What has AFLAC done to protect

its market position? What else can AFLAC do?

4. AFLAC is a rarity among U.S. companies in as much as the Japanese market accounts for more than 75 percent of its business. Does this reliance on the Japanese market create any special challenges for AFLAC? Does it present any unique opportunities for the company?

Answer 1

1)Different markets around the world have different priorities or different way of seeing things . The way of seeing things is different in america compared to that of japan . Because there is a difference in culture and way of doing businesss and marketing in both japan and america. Even if the brand awarness in japan is already high we do have to do advertising campaign in japan it is because there are still people who is unware of the brand or the basic use of the insurance we have to make those people also buy these insurance then only we can say we have suceeded in implementing the brand . We shouldnt use the same advertising campaign as that of america in japan because japan is totally different from american view of perspective that is culture doing marketing and sometimes people will not be able to accept the same campaign we have used in america so according to the view and perspective of people we have to change the advertising campaign other wise it hurt peoples feelings. And same is the case in america we cant use the same advertising campaign we have used in japan to implement in america .

2)AFLAC should act more japaneese when doing business in japan because otherwise we wont be able to succed in japan . As i said in subquestion 1 we should not hurt peoples feeligs when doing buisness .

3)To protect our market position we have to stick to peoples needs and wants . We should never compromise our brand when there is a increased competition, so AFLAC must have stick to the brand and might have also introduced new stratergies to people and new policy so that our trusted customers will always stick with us no matter what . AFLAC can always implement new statergies or policy to its customers and also ahnge its way of doing business and always focus only on what customers wants

4) Yes it does provide new oppurtunities to the AFLAC because 75 % of people is trusting in AFLAC companty and if they work some more they can capture whole japaneese market in their hands .