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                           2010
CASE
STUDY

                                   N‐PHARMA

LEENA
PALEKAR,
Queensland
Academy
for
Creative
Industries,
AUSTRALIA.





ABSTRACT

In
this
document,
you
will
find
SWOT
analysis,
PESTLE
analysis,
RATIO
analysis
and

several
questions
under
each
of
the
6
topics
for
N‐Pharma.

                                        



                                        

                     SWOT
ANALYSIS
FOR
N­PHARMA


                                        


           STRENGTHS
                                     WEAKNESSES

•   global

presence
                  






*



N‐Pharma’s
drugs
are
expensive


•   well‐established
brand
name
              • Inelastic
demand
for
some
N‐
•   N‐Pharma
‘label’
recognised
for
               Pharma
products


    quality
and
safety
across
East
           • Uniform
organization
structures

    Asia
                                          in
its
subsidiaries,
thus
ignoring

•   a
wide
portfolio
of
drugs
                     cultural
differences
between

•   Pharmax
and
Pharmaflo,
two
of
                 some
countries

    N‐Pharma’s
flagship
products

            • Canadian
subsidiary’s

    are
N‐Pharma’s
Star
and
                       productivity
levels
are
low

    Cashcow
                                  • A
drastic
fall
of
25%
in
N‐
•   Pharma,
a
well
established
                    Pharma’s
share
value


    product
since
1977
                       • Pharmaslim,
a
new
anti‐aging

•   close
relationship
maintained
                 drug
losing
its
market
share
vis‐
    with
suppliers,
thus
achieving
                à‐vis
competitors

    purchasing
economies
of
scale
            • Liquidity
position
has
fallen

•   B2B
operations
with
private
                   drastically
in
2009

    clinics
in
China
                         • Recent
controversy
reported
by

•   Above‐the‐line
promotion
                      the
media

    methods
being
used
to
market
             • Vulnerability
to
takeovers

    their
drugs
                              • Employees
in
the
Canadian

•   Family
branding
has
attracted
                 subsidiary
threatening
strike

    brand
loyalty

                                action,
low
employee
morale

•   Safe
haven
for
investors,
as
N‐
    Pharma
shares
are
regarded
as

    risk‐free

        OPPROTUNITIES
                                      THREATS

•   New
product
development
                  • gaining
approval
from

    resulting
in
competitive
                      regulatory
bodies,
European

    advantages
                                    Commission,
strict
legislations

•   Strong
demand
from
an
                    • competition
from
generic
drugs

    increasing
population
forecast
                and
cheaper
substitutes

    in
Japan,
China
and
the
Euro
             • concerns
in
setting
up
major

    area
                                          centre
in
Beijing
due
to
lax

•   Possibility
of
entering
the
                   patent
enforcements,
loose

    European
market
                               quality
control
procedures
in

•   Increasing
life
expectancy
and
                China
and
historic

    rapid
economic
development
in
                 disagreements
between
China

    China,
thus
gaining
access
to
the
             and
Japan

    largest
market
in
the
world
              • volatile
financial
markets,

•   Booming
veterinary
market
                     economic
recession

•   Rapidly
growing
market
for
               • interest
rates
forecast
to
rise
in

    anti‐obesity
drugs
                            2010
and
2011

•   The
writing
of
a
“Charter
of

        Ethics”


    •   Kaizen
approach


    •   Extensive
use
of
ICT
for

        communication
purposes

    •   Social
and
environmental
audits




                        PESTLE
ANALYSIS
FOR
N­PHARMA

                                              


           POLITICAL
FCTORS
                          ECONOMIC
FACTORS

    •   disagreements
between
China
              • economic
boom
in
Japan
in

        and
Japan
                                  1980s

    •   strict
EU
laws
on
drug
                   • current
economic
recession


        approvals
                                • volatile
financial
markets

    •   patent
legislation
not
strictly
          • rapid
economic
development
in

        enforced
in
China
                          China

                                                  • veterinary
market
booming

            SOCIAL
FACTORS
                        TECHNOLOGICAL
FACTORS

    •   growing
consumer
trends
                  • R
&
D
in
the
pharmaceutical

        towards
anti‐obesity
and
anti‐              industry
is
a
long
and
expensive

        aging
drugs
                                process

    •   east
Asians
have
brand
loyalty
           • Cheaper
substitutes
are

        for
Japanese
pharmaceutical
                possible
to
produced

        labels
                                   • Generic
drugs


    •   income
elastic
nature
of
some
            • ICT
for
communication

        drugs

    •   cultural
differences
among

        employees
in
Canada
and

        Australia

    •   increasing
life
expectancy
in

        China

    •   social
audit

             LEGAL
FACTORS
                           ENVIRONMENTAL
FACTORS

    •   testing
is
a
pre‐requisite
to
gain
       •     experiments
on
animals


        approval
for
a
new
drug
                  •     environmental
audit

    •   quality
assurance
and
quality

        control
are
vital
for
ensuring

        safety
of
drugs

    •   threat
from
trade
union
of

        strike
action

    •   quality
control
procedures
not

        as
tight
in
China










                                          








                                 RATIO
ANALYSIS

                                          

    1. Net
working
capital

=
CA
–
CL


2008
                                         2009

CA
=
190
+
310
+
250
=
750
                   CA
=
60
+
350
+
356
=
766

CL
=
620
+
115
=
735
                         CL
=
630
+
230
=
860

NWC
=
750
–
735
=
US
$
15
m
                  NWC
=
766
–
860
=
US
$
(94m)

   

   2. Current
ratio
=
CA/CL

      

2008
                                         2009

750/735
=
1.02
                               766/860
=
0.89

      

   3. Acid­test
ratio
=
CA‐Stock/CL


2008
                                         2009

750‐250/735
=
0.68
                           766‐356/860
=
0.48

   



The
net
working
capital,
current
ratio
and
acid
test
ratio
have
all
fallen
in
2009
in

comparison
to
2008.

The
net
working
capital
has
turned
negative
in
2009
with

CL
exceeding
CA.

The
current
ratio
does
not
meet
the
ideal
ratio
of
2:1,
likewise,

the
acid
test
ratio
also
does
not
meet
the
1:1
rule
of
thumb.

N‐Pharma
is

experiencing
severe
liquidity
crisis
in
2009.
























TOPIC
1
–
BUSINESS
ORGANIZATION
&
ENVIRONMENT

QUESTIONS:


    1.  Define
‘patents’

    2.  Define
‘social
and
environmental
audit’

    3.  In
what
ways
can
a
private
limited
company
grow?

    4.  Identify
N‐Pharma’s
internal
and
external
stakeholders

    5.  Explain
the
‘decision‐making’
stages
involved
in
the
development
of
new

        drugs

    6. To
what
extent
are
‘ethical
objectives’
important
for
a
pharmaceutical

        company
like
N‐Pharma?

    7. Why
may
some
shareholders
object
to
N‐Pharma’s
ethical
objectives?

    8. Identify
the
commercial
advantages
that
N‐Pharma
may
gain
from
its

        socially
responsible
approach

    9. Use
PEST
analysis
as
a
framework
to
highlight
the
most
significant

        ‘external’
factors
affecting
N‐Pharma


    10. Make
a
comprehensible
analysis
of
the
external
environment
faced
by
N‐
        Pharma
at
the
present
time

    11. 
Discuss
how
Tadashi
Agi
can
implement
a
‘change’
in
the
corporate

        culture
prevailing
at
N‐Pharma


    12. Examine
the
potential
problems
that
Tadashi
Agi
could
experience
in

        changing
the
corporate
culture
at
N‐Pharma

    13. 
Prepare
a
SWOT
analysis
for
N‐Pharma.

Identify
N‐Pharma’s
distinctive

        competencies

    14. If
the
joint
venture
arrangement
is
completed
with
R‐Taylor,
analyse
the

        problems
that
may
occur
and
suggest
practical
approaches
to
reduce
the

        problems
identified

        

        




TOPIC
2
–
HUMAN
RESOURCES

QUESTIONS:

    1. Evaluate
the
use
of
financial
and
non‐financial
rewards
in
motivating

       employees

    2. Use
motivation
theory
to
explain
the
resentment
felt
by
the
employees
at

       N‐Pharma’s
Canadian
subsidiary

    3. Using
relevant
motivation
theory,
discuss
two
practical
measures
Susan

       James
could
implement
to
reduce
staff
dissatisfaction

    4. Analyse
the
leadership
and
management
style
of
Susan
Jones
and
the

       implications
of
this
style
for
N‐Pharma

    5. Explain
the
benefits
to
N‐Pharma’s
Australian
subsidiary
of
restructuring

       the
company
to
ensure
that
the
employees
work
from
home,
rather
than

       from
a
central
office

    6. Explain
two
advantages
and
two
disadvantages
of
a
flat
and
tall

       organization
structure

                                         



    7. Describe
the
communication
network
established
by
N‐Pharma
to
handle

        the
negative
publicity
in
2008
in
a
positive
manner

    8. Distinguish
the
leadership
styles
adopted
by
Susan
and
Laura

    9. Do
you
think
that
the
organization
structure
of
the
Canadian
subsidiary
is

        adequate
and
efficient?

Can
you
suggest
some
changes
that
would
result

        in
better
coordination
and
hence
improve
efficiency?

    10. Is
delegation
of
authority
desirable
for
a
global
pharmaceutical
company

        like
N‐Pharma?

What
advantages
accrue
from
delegation
of
authorit?

    11. Evaluate
three
ways
in
which
Susan
James
can
improve
the
effectiveness

        of
communication
in
the
Canadian
subsidiary
of
N‐Pharma

    12. Discuss
the
need
to
adapt
organization
structures
to
cultural
differences

        in
different
countries



TOPIC
3
–
ACCOUNTS
&
FINANCE


QUESTIONS:


    1. Explain
why
organizations
often
experience
cash
flow
problems,

       especially
in
the
first
year
of
business

    2. How
could
N‐Pharma
have
overcome
poor
cash
flow
problems
in
the

       early
years
of
its
operations?

    3. Comment
on
the
liquidity
position
of
N‐Pharma

    4. Identify
three
ways
in
which
N‐Pharma
could
improve
its
liquidity

       position

    5. Explain
why
organizations
such
as
N‐Pharma
need
working
capital




TOPIC
4
–
MARKETING

QUESTIONS:


    1. What
marketing
strategies
should
be
employed
by
N‐Pharma
in
the

       introduction
stage
of
its
new
drugs?

    2. On
a
BCG
matrix,
identify
N‐Pharma’s
product
portfolio

    3. In
what
stages
of
the
product
life
cycle
are
N‐Pharma’s
portfolio
of
drugs?

    4. What
are
the
benefits
of
using
‘family
branding’?

    5. What
type
of
market
research
methods
could
N‐Pharma
have
used
in
East

       Asia
to
assess
customers’
loyalty
to
its
products?

    6. How
could
N‐Pharma
use
‘Above‐the‐line’
and
‘Below‐the‐line’
promotion

       methods
to
boost
the
sales
of
Pharmatics?

    7. N‐Pharma
is
looking
at
merging
with
Anigam,
one
of
the
world
specialists

       in
animal
drugs.

Design
an
appropriate
marketing
mix
to
enter
the
Asian

       market

    8. Using
relevant
marketing
concepts
such
as
Ansoff
matrix,
design
a

       marketing
plan
aimed
at
penetrating
the
Asian
veterinary
market

    9. State
and
explain
two
ways
in
which
N‐Pharma’s
marketing
mix
might

       change
as
a
result
of
the
introduction
of
generic
drugs
and
cheaper

       substitutes
into
the
market

TOPIC
5
–
OPERATIONS
MANAGEMENT

QUESTIONS:


    1. Evaluate
the
use
of
‘cost‐based
pricing’
for
N‐Pharma’s
drugs

    2. Analyse
the
factors
affecting
successful
innovation
of
new
drugs
in
the

       pharmaceutical
industry

    3. Tadashi
Agi
intends
to
use
a
Kaizen
approach
to
change
the
corporate

       culture
in
all
of
N‐Pharma’s
departments.

Explain
the
role
of
Kaizen
in

       quality
improvement



TOPIC
6
–
BUSINESS
STRATEGY


QUESTIONS:

1.

Applying
suitable
tools
such
as
Ansoff’s
growth
matrix
and
Porter’s
generic

strategies,
evaluate
the
three
strategic
growth
options
for
N‐Pharma,
proposed

by
the
Board
of
Directors

    


    











				
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