The plan to venture into overseas markets represents strategic goals and missions that an organization has for its future. With the current economic down surge, most companies are not able to make investment decisions for fear of uncertainties that are likely to befall them. In these situations, investors are ever skeptical about the market and risk assessment becomes a critical activity in the entire organization. In the dynamic economic environment, successful are firms that take advantage of such prevailing circumstances to invest their funds with an expectation of good returns while many players remain unwilling.
By taking a considerable amount of risks in different portfolios, a firm is likely to benefit most. Depending on the investors’ confidence and market perception, risk accepting organizations stand a better chance to yield a high required rate of return to their shareholders both institutional and individual than risk aversive organizations. This article, therefore, tries to demonstrate the qualities of good financial investors. China life is a large insurance group with the capacity to trade at both international and domestic levels. With an ambition to expand into external markets through acquisitions especially now when most economies seem to be in the recess, the company stands to benefit in two ways;
Financial advantages: these include acquiring most entities at less than their market values. This is likely to offer an organization a splendorous economic opportunity to position itself in new markets. The organization can invest at a lower cost than if the economy was vibrant. This adds to additional investment income to the shareholders as well as the management. The general interest rates are down and that an organization can utilize this opportunity to secure a loan from a financial institution to finance its long-term investment. Though is considered aggressive financing, if its managed well contingent benefits are likely to materialize. Another advantage is to expand in market share. By using the available funds to invest in overseas markets the organization is secretly expanding into those regions which with time may turn into large market niches. With the current increasing competition in the domestic markets organizations are shifting their attention to international markets. This is to take advantage of the untapped opportunities and potentials.
In my opinion, I fully support this decision purely on economic grounds. it is obvious that the company is going to gain tremendously this is because most troubled organizations are likely to sell their assets at less than market values to remedy their liquidity positions. By undertaking to sell these assets at less than market values the acquirer stands a golden moment to gain. Secondly, foreign investment is one of the strategies of venturing into overseas market niches. The company could one day expand to those markets when domestic pressure becomes uncontrollable.
The rationale behind this article should be to provide the reader with knowledge on investment policies. I can therefore say that this is instrumental to me by expanding my knowledge on making investment decisions. However, some factors should be considered before these decisions are made. These are important questions that may trigger off the actual investment process or lead to the abandonment of these investment decisions. the internal situation including domestic lending and borrowing rates, the general interest rates, the existing environment in the domestic market, and the prevailing political, economic, environmental conditions in the chosen foreign country. These are some of these questions (Geoff & Patti, 2008).
Work cited
Geoff Dyer & Patti Waldmeir. China Life plots overseas insurance buys. 2008