Sunday, August 24, 2014

The Terry Fox Run at IIT Madras, Chennai

Charity Begins at Home: thus goes the first lesson in Moral Science.

At a time when everyone seems to be joining the bandwagon of the Ice Bucket Challenge, IIT Madras takes the road less taken.  While most challenge each other over dumping buckets of the liquid, better known as ‘Life’, to promote awareness about Amyotrophic Lateral Sclerosis (ALS), otherwise less known in the Indian subcontinent, IIT Madras has a more meek and underhyped method of doing its bit. When seven lakh Indians die of Cancer every year, while over 10 lakh are newly diagnosed with some form of the disease, we have a better reason to be worried about. Hence we ‘supported’ the ‘TERRY FOX RUN’, organized by the Rotary Club of Madras East and played the role of a proud host to the same.

With one leg having been amputated, Terrance Stanley Fox (July 28, 1958 – June 28, 1981), a Canadian athlete, humanitarian, and Cancer research activist, embarked on a cross-Canada run to raise money and awareness about cancer research in 1980. Albeit the spread of his Cancer eventually compelled him to end his pursuit merely after 143 days, covering 5,373 kilometres, and ultimately cost him his life, his endeavour resulted in a lingering, worldwide legacy. The annual Terry Fox Run, first held in 1981, has grown to involve millions of participants spanning over 60 countries and is now the world's largest one-day fundraiser for cancer research.

Came Sunday, August 24, 2014, and we all ran the errand to deliver our motto and message:
Working together to outrun cancer! Run, walk cycle or skate & DONATE to create a cancer free tomorrow.

In a country where Cancer is one of the leading causes of deaths, where nearly three million patients are suffering from the deadly disease, and where experts say the incidence of the disease is expected to rise five-fold by 2025, it’s time we woke up and ran for the noble cause. 

Eight O’ clock, Sunday morning: not too early either, was it? ;)

PS: Watch the Terry Fox Story at:


The DoMS Interface Team.

Friday, May 2, 2014

Evolution of Indian Insurance Industry

While historians sell what happened yesterday, Insurance companies sell what might happen tomorrow. Some of them even go to an extent to say that insurance companies sell fear! Intrigued by this we decided to get some more in-depth insights on the Insurance industry and decide for ourselves what it is all about. Hence we invited Mr Mohan Babu  , Associate Vice President and Global Head of Insurance Practice  Infosys Technologies ltd .He was very excited to grace this occasion and started the session  by discussing about the evolution of Indian Insurance Industry wherein he said the first law to regulate the life Insurance business was enacted in 1912 which continued for a while, these were small Insurance companies and they were not able to maintain solvency, which resulted in a curtailed settlement of claims, hence only around 50% of the claims were getting settled. Therefore around 245 Indian and foreign insurers and provident societies were taken over by the Central Government and were nationalized to form the Life Insurance Corporation. From 1972-1998 the government expected to increase the penetration and density of the insurance industry, but the insurance companies were not able to cover it effectively & efficiently and a slackness creeped in over a period of time. To break this, the Insurance Industry was opened up with limited liberalization of upto 26% FII. There was a lack of regulatory activism or supervision till 2000, when the IRDA bill was passed in this year to regulate better.
He then discussed the key regulations and the impact that was seen over a period of 14 years right from 1999 and 2013.Mr Babu believed, this was a Golden period for the Indian Insurance Industry where it started moving in the direction of maturity. Right from the clearance of the IRDA bill which initiated the liberalization of the sector to the increase in FDI in Insurance industry to 49%, which led to greater under-writing capability in the Insurance markets , each of these regulations have helped the industry in one way or the other.
We were then introduced to the different sub-segments under the broader business segments of Life insurance and General Insurance was then discussed. Mr Mohan Babu took the pains to explain in detail the Life-Insurance Industry Market sizes in terms of the density and penetration, comparing the figures for the emerging markets and the advanced markets covering many countries. India with an Insurance density of 59 USD and penetration of 4.10% stood 15th in the world in the year 2001. The total life insurance premium stands at $53.6 billion in 2011-2012, registering a negative growth of 1.57% from the previous financial years with a total of 24 Life Insurance Companies as of September 2012, with LIC being the sole public sector representative among the lot. Whereas in terms of Non-Life Insurance companies ,  there are 27 of them as of September 2012, including 4 standalone health insurance companies with the Gross Direct Premium stood at $9.79 billion in 2011-2012, registering a growth of 24.19%, as compared to a global premium growth of 1.9% in 2011.
We then tried to brainstorm on the differences in the approach between the emerging markets and the advanced markets in the Non life Insurance industry, with many students pitching their own points on how developed nations like the United States use the pay per use method to calculate the premium which is enabled because of the technology and product innovations , effective distribution channels ,better regulations and minimized frauds.With loads of data , be it the official figures which he discussed in detail or the immense experience that he has by working in this sector for so long, Mr Mohan Babu then began discussing the SWOT analysis of the Indian Insurance market, which gave a clear understanding on where the Industry stands today and what needs to be done in the future to have a sustained growth. One more interesting point that he made was the key trends that were seen in the Indian Insurance Industry such as the Emergence of New Distribution channels, Launch of Innovative products and mounting focus on embedded value over profitability.
On the whole Mr Mohan Babu believes that this industry is still untapped and there are a lot of opportunities. Rapid development in Tier II and Tier III cities and growth in new bankable households have led to the emergence of a large insurable class with an appetite for sophisticated life insurance products. Increasing life expectancy, favorable savings, and greater employment in the private sector and the opening of the pension market with the passing of the PFRDA Bill 2011 has enabled opportunities in the Low-income Urban class including the Pension and Annuity Markets. He also gave us some idea on the future areas of investment such as Mobile Solutions, especially for claims management, multichannel integration capabilities alternative delivery models, including business process outsourcing (BPO) ,business process utility(BPU) and software as a service(SaaS)
Then the floor was open to questions where the students did try to question Mr Babu on the various happenings and the topics discussed by him. In the process of answering all these questions Mr Babu elucidated on the various roles available in the industry for budding managers, the Techniques, skills, and abilities required to excel in this chosen area of profession. We hope to make use of this session as well to the maximum extent by equipping ourselves with these necessary skills over a period of time.

Class of 2015

Thursday, February 20, 2014

Predatory Pricing and the German Cartel

In a time long long ago, the world supply of bromine was controlled by Bromkonvention, a German cartel backed by the German government composed of 30 separate entities. This powerful monopoly sold bromine at a fixed price of 49 cents per pound throughout the world.
In 1889 Dow received his first patent after inventing
a more cost-effective and streamlined process for bromine extraction. His associates were impressed with his work and in 1890 helped him to found the Midland Chemical Company in Midland, Michigan. Dow continued his work extracting bromine and by early 1891 he had invented the Dow process, a method of bromine extraction using electrolysis to oxidize bromide to bromine which was more efficient than the existing processes of the world. With his new company and new technology, Dow was able to produce bromine very cheaply, and began selling it in the United States for 36 cents per pound. The German cartel had made it clear that they would flood the American market with cheap bromine if Dow attempted to sell the element abroad. In 1904, Dow defied the cartel by beginning to export his bromine at its cheaper price to England. A few months later, an angry Bromkonvention representative visited Dow in his office and reminded him to cease exporting his bromine.

Predatory pricing-: 
In business and economics, predatory pricing is the practice of selling a product or service at a very low price, intending to drive competitors out of the market, or create barriers to entry for potential new competitors. If competitors or potential competitors cannot sustain equal or lower prices without losing money, they go out of business or choose not to enter the business. The predatory merchant then has
fewer competitors or is even a de facto monopoly.

Why is it relevant?
One of the most popular views is that the government needs to protect us from predatory price-cutting. Large corporations, according to this argument, have big advantages in the marketplace. They can cut prices, drive out their competitors, then raise prices later and gouge consumers. Antitrust laws are needed, so the argument continues, to protect small businesses and consumers from those corporations with large market shares in their industries.
The story of Herbert Dow, founder of Dow Chemical Company, is an excellent case study for those who think predatory price-cutting is a real threat to society. Dow, a small producer of bromine in the early 1900s, fought a price-cutting cartel from Germany. He not only lived to tell about it; he also prospered from it. Like David fighting Goliath, he actually believed he could throw stones at the large German chemical monopolies and topple them from world dominance.

The Battle
Dow started the battle in 1904, selling bromine in England and undercutting the cartel at the same price he was selling it in the US.
In early 1905, Bromkonvention followed through on its threat, cutting the price of potassium bromide in half in the US from 30 cents/lb, to 15 cents/lb, while holding the price at 40 cents/lb in Europe. Other bromide prices were also halved.
Another visit was paid by Jacobsohn (the representative of Bromkonvention), who threatened a price war to run Dow out of business if he did not desist. The cartel was backed by the German government and had ample financial resources to win, he argued. Herbert Dow would have none of it, and dismissed the astonished Jacobsohn, who said: "You don't know what you are doing."

The Master Plan
The imaginative Dow worked out a daring strategy. He had his agent in New York discreetly buy hundreds of thousands of pounds of German bromine at the cartel’s 15 cent price. Then Dow repackaged the German product and sold it in Europe—including Germany!—at 27 cents a pound, again, lower than the cartel's rates at Germany. "When this 15-cent price was made over here," Dow said, "instead of meeting it, we pulled out of the American market altogether and used all our production to supply the foreign demand. This, as we afterward learned, was not what they anticipated we would do."

The Aftermath
Antitrust laws are needed to protect small businesses and consumers from those corporations with large market shares in their industries.
Indeed, the Germans were befuddled. They expected to run Dow out of business; and this they thought they were doing. But the U. S. demand for bromine kept growing higher and higher! And where was this flow of cheap bromine into Europe coming from? Was one of the Bromkonvention members cheating and selling bromine in Europe below the fixed price? Powerful tensions surfaced from within the Bromkonvention. According to Dow, "The German producers got into trouble among themselves as to who was to supply the goods for the American market . . . ." The confused Germans kept cutting U. S. prices—first to 12 cents and then to 10.5 cents a pound. Dow meanwhile kept buying the stuff and reselling it in Europe for 27 cents. Even when the Bromkonvention finally
caught on to what Dow was doing, it wasn’t sure how to respond. As Dow said, We are absolute dictators of the situation." He also wrote, "One result of this fight has been to give us a standing all over the world . . . . We are in a much stronger position than we ever were . . . ."
The bromine war lasted four years (1904–08), when finally the Bromkonvention invited Dow to come to Germany and work out an agreement. Since they couldn’t crush Dow, they decided to at least work out some deal so they could make money again. The terms were as follows: the Germans agreed to quit selling bromine in the United States; Dow agreed to quit selling in Germany; and the rest of the world was open to free competition. The bromine war was over, but low-priced bromine was now a fact of life.

Arnab Saha
Class of 2015

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