Situation

You work for Viljoen, the South African insurance company. Your head office is in Vereeniging, Transvaal, and you have offices all over South Africa.

You are in serious financial trouble. All your lines of business – vehicle, life, property, health insurance and personal pensions – have been losing money for the last two years.

You have made major efforts to remedy this situation. Amongst other things you have:

— increased the number of sales staff, given them training in new sales methods, and increased their sales commission

— greatly increased productivity, with organizational changes, and new investment in information technology

— worked very hard to improve total quality management

— extended the range of products at the same time as simplifying policies and speeding up the settlement of claims

These efforts have unfortunately led to no increase in sales or reduction in your losses. Competition from other insurance companies is simply too strong. Last year, you reduced many of your prices, but this led to no increase in sales and merely reduced your income still further. You also considered raising your prices, but realized that this would lead to a loss of business.

Now, your financial advisers have recommended that, to save the company from closure or from being taken over by a competitor, you should sell off part of the business. This would give you money to cover your losses and to continue investing, and enable the remaining lines of business to survive until the market improves, or competitors go out of business.

You are meeting today to consider the financial advisers’ recommendation. You must consider the degree of integration of different lines of business, and how easy and profitable it would be to sell off any one of them.

2. You must decide:

• if it is possible to sell off one of your lines of business

• and if it is, which line you should sell

Fact sheet (figures 1-3)

ROLES:

Role A: The Chief Executive

Chairing the meeting: You chair the meeting and make sure everyone participates. Organize the meeting in the following way:

1. First get everyone’s opinion as to whether selling off a line of business is possible.

2. Then, if you agree it is possible, discuss which line to sell. Write on the board the ‘candidates’ for sale, and reasons for and against the sale of each.

3. Finally, decide together which line of business to sell.

Your own point of view: You think you have no choice but to sell off a line of business. You cannot risk the company going bankrupt. The best line to sell off would be personal pensions, because it would be the easiest to separate from the rest of the company. It is an almost autonomous entity, and the business is relatively different from the other lines. It is not likely to be profitable in the long run because of the ageing population – the number of people who are retired and drawing their pension is going to increase, whereas the number of people working and making contributions is going to fall.