Topic

BSC MANAGEMENT 2010/ 2012 BATCH -14

GROUP MEMBERSNAME NIBM INDEX UCD STUDENT ID EMAIL

Ms. L K Jayawardhana BSCI14-075 10295445 lakshij1@gmail.com

Ms. K S P Perera BSCI14-119 10296972 spriyadarshinip@gmail.com

Ms. S J K De S Gunasekara BSCI14-062 10295437 janitha_gunesekara@hotmail.com

Mr. T D Weerawardana BSCI14-174 10295666 thrakaweerawardana@yahoo.com

Mr. M R Razlan Aaqib BSCI14-001 10295607 razlanaaqib@hotmail.com

Mr. M A M Abdullah BSCI14-002 10296301 aaboobucker@gmail.com

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GROUP ASSIGNMENT

Select an organization that has gone for a re- orientation change in the

recent past. Study the change management process and describe it in

detail. Identity the most critical aspects of the change done and

evaluate the effectiveness of the management’s efforts of dealing with

each aspect. Come up with proposal to avoid the difficulties faced by

the management in the said effort, in future similar situations. Length

of your answer should be a minimum of 20 pages. Please note that the

lecturer comment from and the plagiarism test result test sheet should

be attached to the assignment.

Module : Managing Change - BMGT2001L

Lecturer : Mr. Kolitha Ranawaka.

Submission Date : 27th December, 2010

Group Members

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STATEMENT OF AUTHORSHIP

“We declare that all materials included in this report are the end result of our own

work and that due acknowledgement has been given in the bibliography and

references to ALL sources be they printed, electronic or personal.”

Name of the Group Member Signature

Ms. L K Jayawardhana ……………………………..

Ms. K S P Perera ……………………………..

Ms. S J K De S Gunasekara ……………………………..

Mr. T D Weerawardana ……………………………..

Mr. M R Razlan Aaqib ……………………………..

Mr. M A M Abdullah ……………………………..

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ACKNOWLEDGEMENT

We wish to express our sincere appreciation to the employees of AVIVA NDB

Insurance PLC for their great contribution in assisting and guiding us to collect data

for this assignment.

Our special thanks are extended to our course Director/ Lecturer Mr. Kolitha

Ranawaka who has always given support, direction and advices to prepare this

assignment.

Also, finally much credit should go to our group members who contributed with their

individual efforts for the success of this assignment.

We indebt to all of you for their enthusiasm and reference input to the assignment.

Without them, this assignment would not have been possible.

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EXECUTIVE SUMMARY

Eagle Insurance now known as AVIVA NDB Insurance PLC took wing as a leading

player within Sri Lanka's insurance landscape in the late 1980s. Over the years, the

Company's good governance practices, ethics and innovation have helped it to soar to

new heights.

This assignment was mainly focused on analyzing the re-orientation change in the

recent past at AVIVA NDB Insurance PLC, Sri Lanka who is selling Life and

General Insurance policies.

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TABLE OF CONTENT

Executive Summary

Table of Contents

Introduction

1. INTRODUCTION

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Re Orientation involve the combination of separate units such as mergers and

acquitions.

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1.2. INTRODUCTION TO THE ORGANIZATION:

AVIVA NDB INSURANCE PLC

1.2.1. Origin

In 1988, Eagle Insurance Company Limited took wing as the fledging CTC Eagle

Insurance Company, with Ceylon Tobacco Company (a member of BAT industries,

UK) as the company's main shareholder.

BAT Industries divested its financial services business to the Zurich Financial

Services Group based in Switzerland, as part of a global strategy in 1999. Thus, the

company became part of an international conglomerate with the National

Development Bank (NDB), Sri Lanka's development banking giant being the major

local shareholder.

As the major shareholder with a 75.6% holding in its subsidiary, Capital

Development and Investment Company Limited (CDIC), NDB acquired 100% of

NDB Finance Lanka Limited, the holding company (87.27%) of Eagle Insurance in

2003. The Bank of Ceylon was also a key shareholder of Eagle Insurance with its

23.92% stake in CDIC.

In February 2006, once again Eagle became a member of a multinational group of

Aviva International Holdings Limited Kingdom. Aviva is World’s oldest insurance

company and number one in the UK and 6th largest in the world, became the ultimate

holding company of Eagle with an indirect shareholding of 51%. The NDB holds

36.1% of shares indirectly and 5% directly in Eagle Insurance.

In February 2010, Eagle Insurance transformed in to AVIVA NDB Insurance creating

a historical landmark in the insurance industry. This transformation combined the

strengths of Eagle’s major shareholders, globle giant Aviva and NDB group, one of

the largest financial conglomerates in Sri Lanka with 51% and 41.15% holding

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respectively. Aviva became the major shareholder of Eagle in 2006. NDB has been a

key shareholder of Eagle since 1997.

1.2.2. Purpose

Prosperity & peace of mind

1.2.3. Vision

“ONE AVIVA, TWICE THE VALUE”

1.2.4. Core Values Progressiveness

Performance

Integrity

Teamwork

1.2.5. Corporate Information

Name of the Company:-

Aviva NDB Insurance PLC

Company Registration No- PQ 18

Legal Form

Public Company with limited liability

Incorporated in Sri Lanka on 12th December 1986 under the Companies Act

No.17 of 1982

Re-registered under the Companies Act No. 7 of 2007

A composite Insurance Company licensed by the Insurance Board of Sri

Lanka

The shares of the company are listed on the Colombo Stock Exchange

Tax Payer Identification Number (TIN)

134001356

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Vat Registration Number

1340013467000

Directors

Bill Lisle- Chairman Shah Rouf- Managing Director

Deepal Sooriyaarachchi Harvey Chamberlain

David Hope Eran Wickramaratne

Sarath Wickramanayake Lal de Mel

Indrajit Wickramasinghe Nihal Welikala

Accounting year

31 December

Registered Office/ Head Office

No. 75, Kumaran Ratnam Road, Colombo 02

Company Secretary

Ms Chathuri Munaweera – LLB, Attorney-at-Law

Company Registrars

SSP Corporate Services (Private) Limited

No.101, Inner Flower Road, Colombo 03

Lawyers

Julius & Creasy

Attorneys-at-Law & Solicitors

No.41, Janadhipathi Mawatha, Colombo 01

Auditors:- Ernest & Young

Chartered Accountants

No. 201, De Saram Place, Colombo 10

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2.0. Theoretical Background

Organizational diagnosis is concerned with identifying what is that needs to be

changed.

2.1. PEST analysis

PEST analysis can be used to examine the organization’s environment and search for

evidence of change that might signal a problem or opportunity. Pest refers to political,

economic, socio-cultural and technical factors.

Political Factors:-

Include new legislation in area such as environment management, consumer

protection and employment; regulation of markets in area such as telecommunications

and broadcasting, fiscal policies and so on.

Economics Factors:-

Economics Factors include issues such as exchange rates, cost of borrowings, change

in levels of disposable income, cost of raw materials, security of suppliers, new

competitors and the trade cycle.

Socio-cultural Factors:-

Socio-cultural Factors include demographic trends such as a fall in the birth rate or an

ageing population. They also include shifting attitudes towards education, training,

work and leisure, which can have knock- on effects on the availability of trained

labour, consumption patterns and so on. Cultural factors can also affect business

ethics and the way business is done in different parts of the world.

Technical Factors:-

Technical Factors include issues such as the levels of investment that competitors are

making in research and development and the outcome of this investment; the

availability of new materials, products, production processes, means of distribution

and so on; the rate of obsolescence and the need to reinvest in plant and people.

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2.2. SWOT analysis

SWOT analysis offers a more comprehensive approach to diagnosing organization-

environment fit. In addition to assessing the opportunities and treats that a PEST

analysis might reveal, it also includes an assessment of the organization’s strengths

and weaknesses and its capability of responding to the threats and opportunities that

confront it.

Strengths Weaknesses

Opportunities Threats

This remarkable piece of history as to the origins of SWOT analysis was provided by

Albert S Humphrey, one of the founding fathers of what we know today as SWOT

analysis

SWOT analysis came from the research conducted at Stanford Research Institute

from 1960-1970. The background to SWOT stemmed from the need to find out why

corporate planning failed. The research was funded by the fortune 500 companies to

find out what could be done about this failure. The Research Team were Marion

Dosher, Dr Otis Benepe, Albert Humphrey, Robert Stewart, Birger Lie.

A scan of the internal and external environment is an important par of the strategic

planning process. Environmental factors internal to the firm usually can be classified

as Strength (S), or Weakness (W) and those external to the firm can be classified as

Opportunities (O) or Threats (T). Such an analysis of the strategic environment is

referred to as a SWOT analysis

The SWOT analysis provides information that is helpful in matching the firm’s

resources and capabilities to the competitive environment in which it operates. As

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such, it is instrumental in strategy formulation and selection. The following diagram

shows how a SWOT analysis fits in to an environmental scan.

SWOT Analysis Framework

Strengths

Firm’s strengths are its resources and capabilities that can be used as a basis for

developing a competitive advantage.

Weaknesses

The absence of certain strengths may be viewed as a weakness. In some cases a

weakness may be the flip side of strength.

Opportunities

The external environment analysis may reveal certain new opportunities for profit

and growth.

Threats

Changes in the external environment also may present threats to the firm.

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Environmental Scan

Internal Analysis External Analysis

Strengths Weaknesses Opportunities Threats

SWOT Matrix

SWOT Analysis

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Strengths

Patents

Technological Skills

Leading brand

Good reputation among customers

Production Quality

Exclusive access to high grade resources.

Distribution networks.

Management

Weaknesses

Lack of patent Protection

Absence of important Skills

Weak brand

Poor reputation among customers

Unreliable Product

Lack of access to the best resources.

Lack of access to key distribution networks.

Management

Opportunities

Changing customer taste

Technological advances

Changes in government polices

Lower Personnel taxes.

Change in population age

New distribution channels

Threats

Changing Customer base

Closing of Geographic markets

Technological advances

Tax increase

Change in population age

New distribution channels

S

W

O

T

Internal factors

External factors

Positive

Negative

The SWOT Matrix

A firm should not necessarily pursue the more lucrative opportunities. Rather it may

have a better chance at developing a competitive advantage by identifying a fit

between the firm’s strengths and upcoming opportunities. in some cases the firm can

overcome a weakness in order to prepare itself to pursue a compelling opportunity.

To develop strategic that take in to account the SWOT profile, a matrix of these

factors can be constructed. The SWOT matrix (TOWS matrix) is shown below

SWOT /TOWS MatrixStrengths Weaknesses

Opportunities S-O strategies W-O Strategies Threats S-T Strategies W-T strategies

S-O strategies pursue opportunities that are a good fit to the company’s

strengths.

W-O Strategies overcome weakness to pursue opportunities.

S-T Strategies identify ways that the firm can use its strengths to reduce its

vulnerability to external threats.

W-T strategies establish a defensive plan to prevent the firm’s weaknesses

from making it highly susceptible to external threats.

2.3. The McKinsey 7S Model

The McKinsey 7S model highlights seven interrelated elements of organizations,

which, when aligned, make an important contribution to organizational effectiveness.

It can be used to identify relationships that are misaligned and point to elements of

the organization that need to be changed. While it considers strategy, the model does

not make explicit reference to outcomes or the external environment.

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The seven elements are:

Strategy:- Purpose of the business and the way the organization seeks to

enhance its competitive advantage.

Structure:- Division of activities; integration and coordination mechanisms;

nature of informal organization.

Systems:- Formal procedures for measurement, reward and resource

allocation; informal routines for communicating, resolving conflicts and so

on.

Staff:- The organization’s human resources, its demographics, educational and

attitudinal characteristics.

Style:- Typical behavior patterns of key groups, such as managers and other

professionals, and the organization as a whole.

Shared values:- Core beliefs and values and how these influence the

organization’s orientation to customers, employees, shareholders and society

at large

Skills:- The organization’s core competencies and distinctive capabilities.

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3.0. PRESENTATION OF INFORMATION

(LKR Mn) 2009 2008 2007 2006 2005

Total revenue 9655 7265 5875 4813 4277

Total Revenue

0

2000

4000

6000

8000

10000

12000

12345

Year

Val

ue

LK

R M

n

Total revenue

(LKR Mn) 2009 2008 2007 2006 2005

Profit before taxation 958 605 546 539 528

Profit before taxation

0

200

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1000

1200

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Va

lue

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Profit before taxation

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(LKR Mn) 2009 2008 2007 2006 2005

Gross written premium GI 2504 2045 1867 1468 1211

(LKR Mn) 2009 2008 2007 2006 2005Gross written premium - Life 4632 4342 3788 3150 2832

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Gross Written Premium GI

0

500

1000

1500

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year

Val

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R M

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Gross written premium

Gross Written Premium - Life

0

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3000

1 2 3 4 5

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Val

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LK

R M

n

Gross written premium

(LKR Mn) 2009 2008 2007 2006 2005Net assets 2579 2224 2025 1743 1467

(LKR Mn) 2009 2008 2007 2006 2005Life Fund 18048 14484 12306 10508 9238

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Gross Written Premium GI

0

500

1000

1500

2000

2500

3000

1 2 3 4 5

year

Val

ue

LK

R M

n

Gross written premium

Life Fund

02000400060008000

100001200014000160001800020000

1 2 3 4 5

Year

LK

R M

n

Life Fund

(LKR Mn) 2009 2008 2007 2006 2005Return on net assets (%) 37.12 27.2 26.97 30.92 35.98

(LKR Mn) 2009 2008 2007 2006 2005Basic earnings per share 24.35 15.46 17.57 17.45 17.18

Basic earnings per share

0

5

10

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25

30

1 2 3 4 5

Year

LK

R M

n

Basic earnings per share

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Return on net assets

0

5

10

15

20

25

30

35

40

1 2 3 4 5

Year

LK

R M

n

Return on net assets (%)

(LKR Mn) 2009 2008 2007 2006 2005Market capitalisation 5340 3450 4523 4065 2550

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Market Capitalization

0

1000

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6000

1 2 3 4 5

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LK

R M

n

Market capitalisation

4.0. ANALYSIS AND DISCUSSION

PEST analysis

Political Factors:-

In choosing assets for investment, AVIVA NDB has ensured that the determinations

issued by the regulator relating to the admissibility of assets and the Solvency Margin

Rules are complied with in full. As AVIVA NDB has invested a high proportion of its

assets in government securities and other admissible assets, the Company was able to

maintain solvency levels which are much higher than the minimum levels required by

the regulator. The Company’s statements of solvency are certified annually by the

Company’s appointed Actuary and independent external auditors.

Economics Factors:-

During the year, the Company recorded a growth of 11.7 % for GWP with the

General insurance and Life insurance segments reporting a growth of 22.4 % and 6.7

% respectively.

In June 2009, the Company divested its asset management subsidiary Eagle NDB

Fund Management Company Limited (now known as NDB AVIVA Wealth

Management). NDB AVIVA Wealth Management is owned by NDB bank (51%

effective control) and Aviva (49% effective control) who are the parent companies of

AVIVA NDB and therefore still remains within the Group. NDB AVIVA Wealth

Management is the outsourced service provider of investment management services

to the Company. The outsourced investment management operation is governed and

overseen by the Investment Committee of the Board through an investment mandate

drawn up based on the risk appetite of the Company, in order to mitigate likely risks

and ensure regulatory compliance.

In line with the objectives of creating new market space, the Company, expanded its

reach to the North and East during 2009, opening branches in Jaffna, Batticaloa and

Vavuniya and increasing its footprint to 54 distribution points operating through 35

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locations. 2,945 member strong direct sales force contributed towards selling our

policies in addition to the bancassurance distribution channel. Bancassurance

relationships were strengthened in 2009 with an operating presence of 129 locations.

In a unique Private Public Partnership, AVIVA NDB entered into an MOU during the

year with Wayamba University to provide a certificate level qualification in Personal

Financial Management exclusively to the Insurance Advisors of AVIVA NDB to

enhance their financial knowledge. The sales force will storm the market in 2010 as

WealthPlanners providing financial solutions not limited to insurance alone. Through

this technical skill enhancement, the policyholders of AVIVA NDB will receive

superior financial advice, which is one of the Company’s key corporate

responsibilities. This is another first in the industry pioneered by the Company.

Socio-cultural Factors:-

The Company focused on voluntarism throughout 2009 where employees were given

paid leave to engage in Company approved corporate social responsibility activities.

AVIVA NDB continued to conduct a mass media campaign reminding the public to

light crackers with care and contributed significantly to a reduction of accidents

during Avurudu festivities. The Company’s consistent aim is to educate and create

awareness on the dangers of firecrackerswhen used carelessly and conducts extensive

multimedia and below-the-line communication campaigns during festive seasons.

AVIVA NDB Samana, focusing on the disabled community under the theme of

“Creating an equally-abled society”, was extended with the involvement of AVIVA

NDB volunteers. To strengthen this initiative volunteer staff underwent a one-day

intensive training programme at the Kotte, Sevana School for children with special

needs and the School for the Deaf and Blind, Ratmalana. These volunteers were

allocated to Special Schools on Staff Volunteer Hours on a continuous basis. This

was to ensure mutual benefit to the children with special needs, as well as the

volunteers themselves.

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AVIVA NDB launched the Employee Volunteer Leave programme – “Eagle Lend a

Hand” in which employees were granted paid leave to engage in volunteer social

work. This was an initiative to empower and encourage employees to give back to the

community and engage in activities identified from the company ‘charities list’. This

was an extension of the Company’s consistent focus on corporate responsibility.

AVIVA NDB Insurance presented Higher Education Scholarship benefit certificates

to 25 students from all districts in the country. These ‘Highfliers’ have proved their

academic excellence by topping the batch in each district at the Government Year 5

Scholarship Examination held in 2002. They entered Advanced Level class and were

entitled to receive the scholarship benefits.

Technical Factors:-

Unit-linked or investment-linked Life insurance products are in their nascent stage in

Sri Lanka. The buoyant equity market in 2009 stimulated a greater interest in unit

linked products due to potential equity returns associated with these products. There

is a customer need for similar investment based products as evidenced by the growth

in these products.

As consumer needs in first time, AVIVA NDB Insurance launched Unit-linked or

investment products for retirement and cater to education. As a result, the industry

will need to explore new markets and products in order to sustain continuous growth.

SWOT analysis

Strengths:-

The transformation will combine the strength that is NDB bank - a world class

Sri Lankan - with Aviva’s global experience, tried and tested processes and

practices to transform into an entity that is supported by a “family culture” and rich

heritage of the past, to deliver Prosperity and peace of mind to all its stakeholders

at this new dawn.

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Weaknesses:-

Opportunities:-

With the changes taking place in the industry the Company is pioneering once again

to leverage on the growth potential and the opportunities garnered from the resolution

of the 33 year old internal conflict. The transformation addresses a strategic shift in

2010 which focuses on gaining a sustainable competitive advantage by leveraging on

the new windows of opportunity, resources, skill and competency of its people to

deliver value to all stakeholders.

Threats:-

Competition with other insurance companies- The insurance sector in total consists of

17 insurance companies, of which 10 are composite insurers, with 5 offering only

General insurance and 2 offering only Life insurance products.

The McKinsey 7S Model

The seven elements are:

Strategy:-

Structure:-

Systems:-

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Staff:-

The full time employees of the Company increased to 786 during the year to

support the expansion and growth initiatives. A programme of “Talking Talent” was

unveiled in 2009 as part of Aviva’s brand promise to its employees. Talking talent

identifies and builds on the existing potential and strengths of the individual while

recognising employees for who they are.

At AVIVA NDB, talent is diverse and we value it in all its forms. Whilst certain

companies use the term “talent” to a selected, miniscule portion of the total employee

population, at AVIVA NDB all employees are considered as “talent”. During the

year, the Company commenced rolling out Aviva’s Talking Talent process to the

second level of leaders. These leaders were taken through the Talking Talent process

in detail, with the ultimate outcome of them having development paths tailored to

their particular needs. Talking Talent has a long term view in terms of where the

Company envisions being in the future and the type of talent we need in the

organisation. The process is to be rolled out to all employees of the Company in

future.

“Real Deal” is a tool that is used to identify what really and individually matters to

employees in their work and life. In identifying this, the Company is able to learn

what would cause an employee to make or break the psychological contract with the

Company as well. The ‘real deal’ for all employees is being identified and is in the

process of being centrally stored in the Human Resource Information System. This is

referred to in interactions with employees and in tailor-making employee solutions.

The Real Deal cards are also used as a recruitment and development tool.

Every individual is unique. Therefore, organization believes that the way recognise

employees should not be a ‘one size fits all’ model. In tailor-making recognitions,

AVIVA NDB launched a new recognition scheme during the year, branded ‘Rainbow

Cards’. Every departmental head is now equipped with a pack of cards, representing

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the colours of the rainbow, to recognise their employees on-the-spot. On the back of

each card a reward is indicated which best suits the individual.

Style:-

Shared values:-

Skills:-

AVIVA NDB is known for its abundant learning and development opportunities. The

launch of Aviva Academy, powered by the learning tools of the Aviva group, was a

significant event this year. The Accelerated Leadership Development Programme is a

3 module residential programme focusing on enhancing technical and general

management skills and personal development for 30 selected junior management

staff.

In addition, the Company launched the Aviva Academy Leadership Development

Programme for managers of Life distribution. 48 Regional Managers participated in

this inaugural programme. This is a continuation of the Leading People workshop

launched in 2008.

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