what business defintions should Indian General Insurance Ltd follow while capitalizing on its strengths and why use example and scientific references on strategic management

Size matters. Or does it$?$ That was the dilemma facing Suhas Nair and his team.

The issue under discussion was the restructuring of Indian General Insurance

Ltd$.($IGIL$),$ the largest, state$-$owned, non$-$life firm in the country. Nair had a

personal stake too. His tenure as chairman and Managing Director of IGIL was

to end in two years. And he was keen on hanging up his boots on a high note.

Nair opened the meeting: "Should we merge the four subsidiaries of IGIL into a

single outfit that would give us the advantage of size?$"$Or should we delink

them into learner, autonomous, and agile unit?$$

"Just to provide a perspective,$$ said Rajiv Parasnis, Director $($Management

Services$),$ "consolidation is the global trend. Look at Japan. The top six insurers

are in merger$-$talks.$$ "Out context is different,$$ said Anup Sinha, Director

$($Personnel$).$ "First, the insurance markets where consolidation is taking place

are mature, making it easier to diversify into other financial services, invest in

technology, and expand our operations. A merger will also help integrate our

business.$$

"Let us look at the numbers,$$ said Abhinav Saran, Director $($Finance$),$ punching

some keys on his laptop. "A merger will bring in $85,000$ employees one roof.

We will have a total of $80$ regional offices, $1,200$ divisional offices, and $2,920$

branch offices. Out combined free services would be Rs$.6,450$ crore, net worth

Rs$.7,360$ crore, investment income Rs$.2,350$ crore, and total investment Rs$.$

$19,000$ crore. And all this on a modest equity of Rs$\mathrm{.}375$ crore! We can leverage

this enormous clout to attract new business. We will also be able to reduce

overhead costs. Like the rent outflow, for example. A merger prevents

duplications of branches resulting in huge savings. And that is just one

example.$$

"But, Abhinav,$$ chipped in Suresh Talwar, the newly$-$appointed Director $($IT$),"$a

merger will pose problems of integration. This becomes a time$-$consuming

activity for senior managers, overriding their business concerns. True, each of

our subsidiaries is financially strong. However, each segment of non$-$life

insurance has different parameters of performance. There is simply no parity.

That is why it is best to set up an autonomous unit for each activity of non$-$life

business.$$

"Talwar has a point$,$ remarked Vijay Santoor, Director $($Operations$).$ "A merger

downplays all the inherent weaknesses in the system. Take, for example, our

motor portfolio. It represents over $30\%$ of the total premium. But is a

loss$-$making line in all our subsidiaries mainly because of laxity in underwriting

and claims control? Once you spin it off, you ensure discipline. Of course, you

need to move of the current pattern of cross$-$holding among subsidiaries and

make each of them truly independent.$$

"Both approaches have their merits,$$ said Nair. "There is also the growing

business of reinsurance. If we decide on a break$-$up$,$ it makes sense to convert

IGIL from a holding company to a national reinsurer. If we merge, we may be

able to live up to our corporate vision of being among the world's majors in

non$-$life by $2015.$ Still, given the right focus, there is no reason why some of our

sectoral businesses cannot reach a global scale