July 2015 Edition of BEACON, A Monthly Newsletter by SIMCON. Inside this issue: About Us Our Team INDUSTRY ANALYSIS : Insurance Industry COMPANY ANALYSIS : Reliance - General & Life Insurance BRAND ANALYSIS : Walt Disney Concept of the month: Rule of 3 and 4

1. VOLUME 03BEACON
JULY 2015 i ISSUE 07

2. VOLUME 03BEACON
ISSUE 07JULY 2015
Contents
ABOUT US
OUR TEAM
INDUSTRY ANALYSIS
COMPANY ANALYSIS
BRAND ANALYSIS
CONCEPT OF THE MONTH:
RULE OF THREE & FOUR

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JULY 2015 1 ISSUE 07
OUR PRESENCE
ABOUT US
VISION
The SIMCON - SIMSREE consulting club is an
initiative started in 2012 for those students in
pursuit of excellence in management consulting
and strategic management. Aimed at creating
awareness among the students about consultancy
as a discipline, the club strives to maintain strong
relations with top consultancy firms and provide
platform to craft highly skilled & competent
consultants from SIMSREE. The club is a resource
for information about consulting and a place for
students to obtain real-world consulting experience.
SIMCON provides an avenue of interaction among
faculty, students and alumni through competitions,
live projects, guest lectures, and conclaves. For
this purpose the club has also been publishing its
monthlynewsletter– BEACON (BE A CONSULTANT)
and maintains a FACEBOOK PAGE where latest
news and development in the consulting industry
are posted.
MISSION
To create awareness amongst the students
about consulting industry & its latest trends.
To maintain strong relations with top
consultancy firms.
To provide platform to craft highly skilled &
competent consultants from SIMSREE.
To provide exposure to students via
competitions, live projects, guest lectures &
conclaves.
Contributions invited:
To make this feature a successful effort, we seek continued involvement and contribution from our readers, that is YOU. We
invite articles, research papers, and trivia on themes related to consulting. Be it industry news, consulting trends, a joke, a
cartoon or feedback, we are eager to hear from you. So go ahead, do your research, pen down your thoughts and mail your
entries to simcon.simsree@gmail.com.
Best Regards,
SIMCON - SIMSREE CONSULTING CLUB

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OUR TEAM
SANANDANDESHPANDE
NIKHILRAO
AMEYAMAHABAL
CHITRAWANI
deepesh jethwani
krishna nain
prathamesh indani
Sushil Gurav

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INSURANCE INDUSTRY
INDUSTRY ANALYSIS

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Introduction - Insurance Industry
As of 2015, the macroeconomic factors (like GDP),
across many parts of the world, have shown significant
improvement. The number of people belonging to the
middle class and the HNIs has been increasing and also
their financial resources are on the rise. These factors
significantly help international property-casualty and
life-annuity insurance companies.
The key challenges in 2015 include-
• Rising competition
• Generally soft pricing conditions
• Tight profit margins
According to IMF, the Asia Pacific Region is forecasted
to have a GDP of 5.5% in year 2015. But the economic
growth is likely to be diminishing thereby affecting
the demand for life and non-life insurance products.
However, the growth is still higher than that in the
US and EU. The region will continue to attract foreign
insurers.
The life insurance and annuities in the US have their
prospects generally upbeat in 2015. The net premiums
in the US life insurance segment totalled $629 bn.
The U.S. insurance industry’s net premiums written
totaled $1 trillion in 2013, with premiums recorded
by life/health (L/H) insurers accounting for 54 %
and premiums by property/casualty (P/C) insurers
accounting for 46 %, according to SNL Financial. In
2013, Emerging Asia was the main contributor to
insurance growth, accounting for 29% of all global
growth.
Insurance Industry in India
India was ranked 10th among 147 countries in the life
insurance business, with a share of 2.03 %, in FY13.
Segments
The insurance sector can be divided into 3 segments
namely:
INSURANCEINDUSTRY
LIFEINSURANCE NON-LIFEINSURANCE RE-INSURANCE
The life insurance premium market in India grew at a
CAGR of 16.5 %, from US$ 11.5 billion in FY03 to US$
52.9 billion in FY13, whereas the non-life insurance
premium market rose at a CAGR of 14.9 %, from US$
2.9 billion in FY03 to US$ 11.6 billion in FY13.The
share of the private sector in life insurance market has
been growing over the years, from around 2% in FY03
to 27 % in FY13.
According to IBEF, the total market size of the
insurance sector in India is projected to touch US$
350-400 billion by 2020. India accounts for about
2% of the world’s life insurance premiums despite
being the second most populous nation. In India, Life
insurance penetration is just 3.1% of GDP, which has
almost doubled since 2000. While the Indian non-life
insurance segment has evolved significantly over the
past decade, the insurance density and penetration
levels are significantly lower as compared to the
developed and some of the developing countries.
As of February 2015, the insurance sector of India
consists of 52 insurance companies of which 28 are
in non-life insurers and 24 are life insurers. LIC (Life
Insurance Corporation of India) is the sole public
sector company among the life insurers. There are 6
public sector insurers among the non-life insurers.
GIC (General Insurance Corporation of India) is the
sole national re-insurer. The Insurance companies in
India have entered into JVs with foreign companies.
The JV between Bharti Enterprises and AXA group is
an example. Bharti AXA Life is a life insurance player
whichwasstartedintheyear2006.Ithasstrongfinancial
expertise of AXA Group- Paris-headquartered and
Bharti Enterprises - one of the India’s leading business
groups. The joint venture (JV) has a 74 % stake from
Bharti and 26 % stake from AXA.
Demographic Performance of Industry
In US, the % population in the age group of 25-40 is
set to decrease. Around 12% of men and 12% women
were in the age group of 25-40 in 1950 but it dropped
to 10.2% and 9.9% in 2010 and it is further expected to
drop to 9.6% and 9.1% respectively by 2050.
Source: CIA World Factbook, August 2014

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Porter’s Five Forces
Threat of New Entrants - High
The threat for new entrants lies within the industry
itself. They are running the threat of being squeezed
out by big players. Another threat is other financial
services companies entering the market.
Bargaining Power of Suppliers - Medium
For the insurance industry, the source of funds is the
premium paid by its customers, hence intertwining
the customer & suppliers here. The suppliers of funds
here, hence have the option of choosing from various
insurance agencies. However, the insurance agencies
cannot reduce the premiums below a minimum
support level. Thereby, the bargaining power of
suppliers is medium.
Bargaining Power of Buyers - Moderate to High
There are 2 types of buyers/consumers- individual and
corporate. Large corporate clients who pay millions of
dollars in premium have a lot more bargaining power
than individual clients. As a whole, the buyers have
moderate to high bargaining power.
Threat of Substitutes - Low
There is no real threat of substitutes for the insurance
industry. However, PPF and PF can act as low level
substitutes.
Intensity of Rivalry - High
The Insurance companies with low cost structure,
better customer service and greater efficiency will be
able to beat out its competitors. Considering that more
than 50 companies exist in this sector, the intensity of
competition would definitely be high.

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Impact Analysis
• Increase in FDI cap from 26% to 49%
For growth purposes, it is very much essential that a
lot of capital is made available. A bulk of this could
come through the FDI.
• Foreign Re-insurers
Foreign re-insurers possessing a minimum net-owned
fund of Rs 5000 Cr must now register with IRDA if
they intend to open branches in India.
• Re-Insurance defined
The term “re-insurance” has been defined in the Bill
for the first time and refers to insurance taken by an
insurer from a re-insurer, only for a part of the risk in
the insurer’s insurance policy. The re-insurer will be
paid a “mutually acceptable premium” for its services
by the insurer. The effect would be that the insurer
cannot insure 100% of its risk through a re-insurer.
• Raising Capital
The GIC and other public sector general insurance
companies have been permitted to raise capital for
increasing their business in social and rural sectors.
The only condition is central government should
maintain minimum 51% shareholding.
• Fewer Compliances
The 2015 amendment to insurance bill has done away
with the following requirement-
Indian promoters must bring down their stake in
insurance company to 26% after a 10 year period,
from day the insurance company started its business.
The Indian promoters had previously raised concerns
over being the minority shareholder while foreign
investors gain the majority stake.
Latest Trends
These are the 4 technologies which the companies in
this sector should integrate in 2015-
• Big Data Analysis
This would most probably help in improving the
efficiency in various ways such as catching fraudulent
claims or improving the swiftness of adapting to the
changing client needs and expectations.
• Mobile
Most of the major insurance companies already offer
access to quotes, claims support or roadside assistance
via mobile apps.
• Re-Engineering Underwriting
Insurers would assess risks and liabilities in much
more sophisticated ways by using spatial data, such
as google maps, public statistics on crime, income,
education and health care.
• Cloud/Client Computing
Many of the insurance carriers are using cloud
computing and more would join in the coming years
so this trend is expected to continue.
References
PWC , IBEF , Policy Holder , EY

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RELIANCE-GENERAL&LIFEINSURANCE
COMPANY ANALYSIS

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JULY 2015 8 ISSUE 07
History of Insurance in India
Life Insurance came to India from England in 1818.
Oriental Life Insurance was the first company set up
in Calcutta which insured only the Europeans. Later,
after a lot of efforts of some leaders like Babu Muttylal
Seal, foreign companies started insuring Indians albeit
with higher premiums. Indian insurance companies
started with very patriotic and nationalist motives of
social service through insurance. Bharat Insurance
Company (1896) started like this. In the year 1912,
Life Insurance Companies Act came into existence
and it brought in the standard of setting the premium
tables by actuaries.
Reliance Capital
Reliance Insurance business is a part of Reliance
Capital owned by Mr Anil Ambani. The Reliance
Capital structure is shown as below:
RelianceCapital
Asset
management
Insurance Commercial
Finance
Broking&
Distribution
Other
GeneralInsurance
LifeInsurance
A) GENERAL INSURANCE
Reliance was one of the first companies to apply
for insurance licenses after the liberalization of the
insurance business in 2000. It ventured into General
Insurance and soon became one of the top private
players in the business. It soon grew in size and
business and today it provides nearly 94 customized
insurance products to cater to various segments like
Motor, Health, Travel, Home, Corporate and SME
insurance. Reliance has over 200 offices inthe country
spread across 173 cities and 22 states.
Product Basket
1) Health Insurance: RelianceHealthWise Policy -
Standard, Silver and Gold Plan, Critical Illness Policy,
Individual Mediclaim Insurance Policy
2) Motor Insurance: It helps to meet the expenses of
repair and damage in case of any accidents. One of the
products of motor insurance is ‘Reliance Two wheeler
Insurance Policy’
3) Travel Insurance: Reliance travel care insurance
policy for individuals and family, Schengen, Asia and
Reliance Pravasi Bharatiya Bima Yojana
4) Student Travel Insurance: For students planning
to travel abroad to pursue international education
reliance offers ‘Reliance Travel Care Insurance for
Students’
5) Accident Cover: Reliance Individual Personal
Accident Policies
6)Home Plans: Plans to safeguard your homes against
burglary with plans like Household Packages
7) For Corporates:
a) Fire Insurance
b) Engineering insurance
c) Marine Insurance
d) Liability Insurance
e) SME Plans
Key Executives
Name Designation
Mr. Rakesh Jain CEO and Executive Director
Mr. H. Ansari Independent Director
Mr. S. P. Talwar Independent Director
Mr. Soumen Ghosh Non-Executive Director
Ms. Kirti Kothari Actuary Department
Financial Overview
The company recorded an underwritten Gross direct
premium of 2,388.83 crore in 2013-14 recording an
increase of 19% over last year. According to industry
reports from IRDA, the gross direct premium recorded
by the industry was 77,538.25 crore in 2013-14 with
an increase of 12.23% over the last year. This goes
to show that Reliance General Insurance performed
better than the industry.
Following is the graph which shows a gross direct
premium for last 4 years and loss due to insurance
throughout. A trend that can be seen is that
throughout these years the loss has been reducing
drastically. Losses due to insurance happen as a result
of third party car insurance. IRDA has increased the

11. VOLUME 03BEACON
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premiums for third party car insurance as it became
very tough for companies to bear losses.
One of the important incomes for the insurance
companies is the income from investments. Reliance
earned 426.16 crores from investments in the year
2013-14.
0
500
1000
1500
2000
2500
0
50
100
150
200
250
300
350
400
Gross Direct Premium (Rs Cr) Loss from Insurance (Rs Cr)
2013-20142012-20132011-20122010-2011
Investments
The investments were placed in different asset classes.
The debt part of it comprised 98.38% while the equity
part 1.62%. The debt part comprised of the following
as shown in the graph:
Money market and Fixed Income
AA/AA-/A+
AA+
AAA
Sovereign Bonds
Portfolio (in %)
36.38%
32.78%
12.54%
7.16%
11.13%
Business Segments
Revenuesforthegeneralinsurancebusinessaredivided
amongst fire, marine, miscellaneous insurances. The
largest premium is recovered from fire insurance,
which is also the only profit making segment. The
premiums earned and the profitability of the business
segments can be shown as below:
Miscellaneous
Marine
Fire
Premium Earned (in Rs '000)
97%
2%1%
Insurance Profit/Loss( Rs’000)
Fire 2,28,879
Marine -5,958
Miscellaneous -4,56,605
Key Ratios
Ratio Head
Mar
‘13
Mar
‘14
Implications
Gross Direct
Premium to
Net Worth
ratio
2.58 2.82 This shows the
increase in the
business. The
d e n o m i n a t o r
includes profits
of the business
also. So if the ratio
has increased it
also implies that
volumes in the
business have also
increased.
Net Earnings
ratio
-6% 3% With the increase
in profits i.e. change
from losses to
profits, net earnings
to ratio has been
positive and it is
expected to grow
further
O p e r a t i n g
Profit ratio
-10% 0% As the underwritten
profits increase this
ratio increases
Competitor Analysis
Private companies have a 43% market share of General
Insurance in India, while the majority 57% is still with
the public sector companies. Let us have a look at the
distribution in private sector.
Public Sector Companies
Others
ICICI Lombard
Bajaj Allianz
Royal Sundaram
Sriram General
Tata AIG
Reliance General
HDFC ERGO General
IFFCO Tokio
Market Share in General Insurance
57%
4%
4%

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JULY 2015 10 ISSUE 07
SWOT Analysis
• Growing revenues &
profitability
• Good distribution net-
work
• Strong capital base
• Low investments in R&D
• Small business units
• Increasing income levels of
consumers
• Growing demand owing to
newer risks in businesses
• Increasing interest rates
• Increasing competition due
to increasing FDI for insur-
ance industry to 49%
Strengths Weaknesses
Opportunities Threats
A) LIFE INSURANCE
Reliance Life Insurance is one of the top 5 private
sector companies in terms of individual weighted
received premium and new business. It is the largest
corporation in insurance business which is not
supported by a bank. It has a network of over 900
branches.
Shareholding
Nippon Life Insurance Company
Owner
Shareholding (%)
74%
26%
Key Executives
DesignationName
CEO and Executive DirectorAnup Rau
Chief Operating OfficerSrinivasan Iyengar
Chief Human Resources
Officer
Andleeb Rabbi
Chief Risk OfficerS.V.Sunder Krishnan
Chief Financial officerSunil Agrawal
Head MarketingAlok Kalra
Chief Investment OfficerViral Berawala
Appointed ActuaryPrithesh Chaubey
Company Financials
Miscellaneous
Marine
Fire
Premium Earned (in Rs '000)
97%
2%1%
The revenues from the premium have consistently
declined, thus hampering the profitability of the
company.
Comparative Analysis
Net Profits (in Rs Crores)
Growth
(%)
2014-152013-14
Company
Name
4.41634.391,565.59
ICICI
Prudential
-14.58761025
Bajaj
Allianz
10.8820.04740.13SBI Life
8.3785.51725.28HDFC Life
-5414.24435.91Max Life
-36.2263.62412.95Tata AIA
-23285.4370.75
Birla
Sunlife
-62.3135.18358.83
Reliance
Life
-4.3228.89239.13Kotak Life
92.9154.5680.11
IDBI
Federal
-65,597.835,953.68TOTAL
The above table shows the drop in growth of most of
the top private players in life insurance business. The
over life insurance business has been a drop in growth
by nearly 6%.
The profitability of life insurance companies has
also seen a drop of 2.9% during 2014-15 owing to
the low surrender charges of Unit Linked Insurance
Plans (ULIP). This happened as a lot number of ULIP
investors surrendered their policies after a three year
lock-in period.
Reliance saw the largest drop in growth of nearly 63%

13. VOLUME 03BEACON
JULY 2015 11 ISSUE 07
which goes on to show that they have high dependence
on ULIPs. Other companies like SBI Life and HDFC
Life handled the transition phase quite nicely and also
reported the profits. While a lot of big private players
saw a deceleration in growth, a lot of small companies
did a fairly good job.
Net Profits (in Rs Crores)
Growth
(%)
2014-152013-14
Company
Name
2365.353.08Exide Life
7.252.4248.9
PNB
MetLife
4333.339.90.9
DHFL
Pramerica
-6.89-25.47IndiaFirst
-0.99-38.68
Future
Generali
Life
-12.87-46.5
Star Union
Dai-Ichi
-178.37-7.77TOTAL
SWOT Analysis
• Robust and diverse port-
folio
• Network of 1252 offices
and 165000 agents
• Strong capital base
• Controversies related to
Reliance Capital may lead to
negative publicity
• Low advertising as com-
pared to competitors
• New urban and rural terri-
tories for new markets
• Earning urban youth look-
ing for investment
• Economic crisis & global
financial problems
• Entry of neew NBFC’s in
sector
Strengths Weaknesses
Opportunities Threats
Recent News
• CBI had initiated a preliminary inquiry against
Reliance General Insurance and the former chairman
of IRDA for violating IRDA guidelines continuously.
The Chairman has been accused of favouring the
company and reducing the charges against Reliance
General Insurance from 17,500 crores to 20 lakhs.
• Reliance Life insurance business has seen a 12% rise
intheirbusinesswiththelaunchof‘RelianceEducation
Plan’. Agents being the main strength of this business,
Reliance have decided that it would increase its agent
base by 20%.
• Increase in use of technology has improved the
operations in Reliance General Insurance division.
The number of complaints has been reduced by 30%
with the direct benefits to customers. Reliance General
registered a total of 1,354 complaints as against 1,467
by HDFC Ergo, 1,799 by IFFCO Tokio, 3086 by TATA
AIG.
Recent Developments
• Reliance has been adding new plans in its portfolio.
Some of the plans added in 2015 are health insurance
policy, health total plan with renewal till 99 years,
child education plan- Umar Ujala.
• With the new regulations of cap on the bank selling
insurance products exclusively, the move has affected
a lot of banks who had tie ups with the insurance
companies. Reliance Life had never been in a tie-up
with banks (bancassurance) to sell their products and
hence the move is not going to affect Reliance.
• Reliance life in its CSR activity, started to reach out
to children. It has started to build 1000 libraries in
Hyderabad where children can come and read for free.
References
Reliance Life - Media Centre , Economic Times , Money
Control , Reliance Life , Life INS Council , DSPACE
NITRKL

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WALT DISNEY
BRAND ANALYSIS

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JULY 2015 13 ISSUE 07
Walter “Walt” Disney was arguably one of the most
famous animators and cartoonists of all time. Mickey
Mouse has made him one of the most famous
cartoonists amongst children and Disney the brand is
all due to the charisma of the man.
the Kansas City Art Institute. During his high school
freshman year, Disney took night classes at the
Chicago Academy of Fine Arts under the tutelage of
artist Louis Grell.
He became the cartoonist for the school newspaper,
drawing patriotic topics on World War I.
In 1920, Disney along with another cartoonist Ubbe
Iwerks, formed a short lived company called “Iwerks-
Disney Commercial Artists”. While working for the
collaboration, Disney decide to become an animator.
Disney started creating cartoons called Laugh-O-
Grams. Disney studied Aesop’s Fables, and the first
six of the new Laugh-O-Grams were modernized
fairy tales. His cartoons were very successful, and
Disney was able to acquire his own studio due to the
resounding success.
After losing the rights to Oswald the Lucky Rabbit
which he himself created, Disney realized he needed to
create another character to replace him. Thus, Mickey
Mouse was born, the most iconic of Walt Disney’s
creations.
Walter Disney
Origins
Disney was born on December 5, 1901, to parents of
Irish-German; and German English descent. At his
school he met Walter Pfeiffer, who introduced Disney
to the world of vaudeville, theatre and motion pictures.
Soon, Walter started attending Saturday courses at Mickey Mouse First Appearance in Steamboat Willie

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2) Parks and Resorts
In 1955, Walt Disney opened Disneyland in Anaheim,
California, an idea he had of a place where parents
and children could both have fun at the same time.
He conceptualized the idea after visiting amusement
parks with his daughters.
Soon, in 1965, Disney started seeking a second site,
to build another theme park. Disney World was
announced, with plans for theme parks, hotels, on
thousands of acres of land purchased outside Orlando,
Florida.
3) Walt Disney Studios
For over 90 years, The Walt Disney Studios has been
the foundation on which The Walt Disney Company
was built. Today, the Studio brings movies, music and
stage plays to consumers world over. Films are released
under the following banners: Disney, including Walt
Disney Animation Studios and Pixar Animation
Studios; Marvel Studios; Lucasfilm; and Touchstone
Pictures, the banner under which live-action films
from DreamWorks Studios are distributed.
4) Disney Consumer Products
Disney has one of the largest licensing deals, due to
the sheer number of film merchandise that it licenses
out to various toy makers. Disney is the world’s largest
licensor and is responsible for bringing merchandise,
toys, apparel and a host of other products to children
worldwide. Disney Consumer Products also includes
Disney Publishing Worldwide, which is the world’s
largest publisher of children’s books, magazines and
digital content.
5) Disney Interactive
Disney Interactive consists of interactive
entertainment, games as well as educational material.
Products are released to mobile and console games,
online digital content providers as well as the Disney
website.
Disney World, Florida
Mickey Mouse became hugely popular in the 1930s,
becoming the most famous cartoon character.
The Disney Brand
In November 1932, Disney received a special Academy
Award for the creation of Mickey Mouse. In 1934,
Disney began planning a full length feature film.
Disney intended to create a full length feature film on
Snow White, however most felt this was a mistake and
would destroy the Disney brand and his studio.
Snow White, the first animated feature in America
made in Technicolor, was released in February 1938.
The film became the most successful film that year.
Disney was able to build a new campus for the Walt
Disney studio following the success of Snow White.
Soon, Pinocchio, Bambi, Alice in Wonderland and
Peter Pan were in the pipeline.
The Disney brand had officially arrived.
Walt Disney in a Scene from the Original Snow White
Business Segments:
Percentage of RevenueSegment
46%Media Networks
29%Parks and Resorts
16%Walt Disney Studios
7%Disney Consumer
Products
2%Disney Interactive
The Walk Disney comprises of five business segments:
1) Media Networks
Disney’s Media Networks comprise of a wide range
of broadcast, cable, radio and digital businesses; that
are grouped into two divisions: the Disney/ABC
Television Group, and ESPN.

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Major Milestones
MilestoneYear
Release of First Mickey Mouse cartoon
“Steamboat Willie”
1929
Release of Snow White and the Seven
Dwarves, the first full-length animation
feature
1937
There-recordingofFantasiabreaksground
as the first film done in digital sound
1982
Captain EO, one of the first “4-D” films (a
3-D movie incorporating special effects
such as smoke and lasers), opens at
Disneyland
1986
Pixar Animation Studios releases Toy
Story, the first full length computer-
animated film
1995
Disney makes full-length TV episodes
available on Apple’s iTunes Music Store
2005
Disney stores adopt Apple Pay2014
Disney Social Media
For a company like Disney, social media is one of the
most important areas of focus. Disney has a total of
300 million likes on Facebook across 267 pages. On
YouTube, Disney has generated more than 365 million
video views. Disney has its target demographic as 12
year olds to late teens, and to cater to this strategy, they
particularly emphasize their Facebook social media
pages. Another reason for this is the integration of
games on Facebook, which further augments their
desire to cater to the teen demographic.
Another tool that is used judiciously is sweepstakes.
Sweepstakes are often one of the popular ways to
engage with fans across social media. Fans also tend to
share more content when it is regarding sweepstakes,
since they hope to win merchandise or tickets.
Disney, contrary to popular belief isn’t focussed on
garnering the most likes or shares on social media.
Disney instead focusses on the emotional experience
of the audience, the majority of their demographic are
children, and hence appealing to them on an emotional
level rather than a superfluous attempt to garner the
maximum likes on social media is what works in
Disney’s favour. To achieve this, Disney would share
rare pictures of Walt Disney, or a picture of a child
enjoying at Disney world, this allows the audience to
connect on an emotional level.
Positioning
Disney has been very astute with its positioning.
Think of Disney, and magical worlds, fantasy tales
and family entertainment spring to mind. Disney has
built this image over the course of decades, with its
theme parks, movies, franchises. This has been a very
deliberate effort, in contrast with Universal Studios,
one of Disney’s major competitors. Universal Studios
has a target demographic of a slighter older audience,
and this has been due to some of the more mature
themes in some of Universal Studios franchises such
as Harry Potter amongst others.
Disney in India
WaltDisneyIndiawasformedinAugust1993asaJoint
Venture with Modi Enterprises & is headquartered in
Mumbai.
In 2001, Disney created a wholly owned subsidiary
company to launch the Disney Channel in India. Walt
Disney Television International (Asia Pacific) took
over distribution of content in September 2003 to
Star Movies, AXN, and HBO along with several other
children’s programs.
On December 17th 2004, Disney Channel was
launched along with Toon Disney channel in three
languages, English, Tamil and Telugu. The channels
were to be distributed by the Star Group. Talks began
regarding the launch of an amusement park, with the
outskirts of Delhi seemingly the best location. During
the same time, Disney partnered with Indiagames to
release Disney games, wallpapers and other digital
content, primarily in association with Airtel.
In August 2005 Funskool India and Disney partnered
for Funskool to sell Disney Princess products in India.
The next year, 2006, Disney obtained a controlling
share in Hungama TV from UTV Software
Communications, while also getting a 14.9% stake
in UTV. In 2008, the company seized an additional
17.5% share in UTV.
In May 2011, Disney and UTV agreed to co-produce
Disney family films with both entities handling
creative function and UTV producing, marketing
and distributing the films. In February 2012, Disney
announced the complete acquisition of UTV. UTV
Chief Executive Officer Ronnie Screwvala would
become Managing Director of The Walt Disney
Company India.
References
Fortune , Walt Disney Company , Disney Institute , Social
Media Today , Digiday , Richmond

18. VOLUME 03BEACON
JULY 2015 16 ISSUE 07
RULE OF 3 AND 4
CONCEPT OF THE MONTH

19. VOLUME 03BEACON
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Introduction
Bruce Henderson, the founder of BCG, in 1976, put
forth an interesting hypothesis about the evolution
of industry and leadership. He propounded that an
industry which is “stable and competitive” will never
have more than three significant competitors and that
the industry structure will find equilibrium when the
market shares of the three companies reach a ratio of
approximately 4:2:1
This rule is created because of the following conditions:
• A market share ratio of 2:1 between any two
competitors seems to be the equilibrium point at
which it is neither practical nor advantageous for
either competitor to increase or decrease its share.
This observation is pragmatic.
• Any competitor which has less than one quarter the
share of the largest competitor cannot be considered as
an effective competitor. Though this is also empirical,
it is quite predictable from the experience curve
relationships.
Source: Euromonitor International
Illustration of Rule of Three and Four
(Evolution of US Car Rental Industry)
An excellent example of the rule of three and four is
that of the US rental car industry:
• In 2006, in US four competitors namely- Avis,
Hertz, Enterprise Holdings and Vanguard Car Rental,
individually had total market share of more than 10
percent.
• In March 2007, Enterprise acquired Vanguard which
gave the latter nearly half of the market. Competitive
dynamics was set in motion because of this event
which inferred the rule of three and four.
• In 2011, the 3 market leaders- Enterprise Holdings,
Vanguard and Avis had shares of 48%, 22% and 14%
respectively. This ratio was close to the ratio 4:2:1
which was predicted by Henderson. The acquisition of
Dollar Thrifty by Hertz in 2012 aligned the numbers
even more closely.
If two competitors have market shares that are nearly
equal,theonewhichisabletoincreasesitsrelativeshare
(by means of acquisition in the above example) gains
both volume and cost differential and the potential
gain is high compared to the cost. If the market share
difference widens, the opportunity diminishes for
the leader. The potential gain is less because price
reduction costs more. This rule is confined to “stable
and competitive” industries which have low turbulence
and limited regulator intervention. The rule of three
and four is also applicable to other industries such
as household appliances (eg: GE, Whirlpool and
Electrolux) and machinery manufacturing (eg. John
Deere, Agco and CNH). It does not apply to the
dynamic, unstable industries such as IT software and
services, investment banking, consumer electronics
etc.
Strategic Implications
• In the absence of any external control on competition
(like government regulation) and large number of
competitors, a shakeout is almost predictable
• Those competitors who wish to survive will have to
grow faster than the market in order to maintain their
relative market shares
• The losers, if they try to grow at all, will have
increasingly large negative cash flows
• All competitors except the top two (who have the
largest market shares) will either be losers and will
eventually get eliminated or be marginal cash traps
that report profits periodically and reinvest forever
The experience curve is an excellent indicator to find
whether the shakeout has started. If the slope of the
curve is 90% or flatter then the leader is probably losing
its share and still holding the price. If the curve has a
sharp break from 90% or above to 80% or less then
the shakeout will continue until the Rule of Three and
Four is satisfied. For more details about ‘Experience
Curve’ refer the June edition of Beacon and the graph
in the following page.

20. VOLUME 03BEACON
JULY 2015 18 ISSUE 07
Implications For Decision Makers
For the corporate decision makers, this rule has many
significant implications. First, indepth understanding
of the industry environment is critical and then
the decision makers must determine whether their
company has a long term viable position in the
industry. Accordingly, the decision makers should
shape their strategies. For a company that operates in
an environment where the rule of three and four is not
applicable, it should employ adaptive strategies.
The Rule of Three and Four is not so easy to apply. It
depends on the exact definition of relevant market. It
requires many years to reach the equilibrium unless
the leader chooses to hold his share during the high
growth phase of product life. However, the rule
appears to be inescapable.
The rule of three and four is a great way to predict the
future of certain industries having characteristics such
as low innovation, stability and high barriers to entry,
etc. But the main limitation of this rule is that it lacks
predictive power explaining what sort of industries
will end up following the rule and which companies
within those industries will end up at the top.
References
Caseprep , BCG Perspective - Growth Business Unit
Strategy , BCG Perspective - Rule of Three & Four