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GROUP MEMBER:
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Issue
To drop 50
smallest global
base business
brands
To increase the
marketing resource put
behind the 50 smallest
global base business
brands to increase its
sales.
Why ??
If Novartis only drop a few
unprofitable product brans it
will create more idle capacity
and they are not able to
enjoy 50% save of their total
fixed cost.
Cant Satisfied
medical needs
For a certain
county
Effect on the
relationship
between HMO,
doctors and
patients in each
countries
Effect on the
countrys
performance
measures and
managers bonus
payments
Hence, Novartis
needs to find a
buyer for their
product brand with
a lower cost
structure than
Novartis
Why ??
To increase the sales for the
50 smallest global base
business as its sales
projected for the next ten
years show a negative figure
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PLEASE REFER
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IN E X H I B IT
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THESE P
PERTOFRAN
SALES REVENUE CHF 1.0 million
VARIABLE COST
CHF 5.9 million
CONTRIBUTION
(CHF 4.9 million)
MARGIN
FIXED COST
( CHF 0 million)
LOSS
(CHF 4.9 million)
VISERGIL
:
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BRANDS DE
LIFE-CYCLE OF A PRODUCT
RESOURCE
UTILIZATION
PROFIT
BRAND IMAGE
AND
COMPANYS
REPUTATION
STRATEGIC
FACTORS
EMPLOYEES
INCENTIVE
CUSTOMER
DEMAND
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RATE OF 12%. W
THIS RATE?
LOST NPV OF CHF1,654.6 MILLIONS IN 10 YEARS PROJECTION (FROM 1999 2009) FOR ALL THE 50 PRODUCTS
12% DISCOUNT RATE
DROP ALL THE
50% FIXED COST SAVING
50 PRODUCTS
ONE-TIME RESTRUCTURING CHARGE COST OF CHF 15 MILLION
REASONS TO DROP
TOO MANY OF PRODUCT LINES WHICH MAY IMPROVE PRODUCTIVITY IN SIMPLIFYING
MANUFACTURING OPERATIONS AND FOCUS THE ORGANIZATION AND SALES AND MARKETING ON OTHER
KEY PRODUCTS
DECLINING NPVS IT SHOWS THAT THE NPV FOR EVERY CONSECUTIVE YEARS ARE DECLINING WHICH
INDICATE THE NEGATIVE GROWTH PERCENTAGE OF ALL THE 50 PRODUCTS CASH FLOW
FACTORS THAT INVOLVE IN DETERMINING THE RATE (IN ASSUMPTION OF 12% DISCOUNT RATE)
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N
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QUES
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SUPPOSE NO
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1
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W
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THE 50 P
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S H O U L D N O V A R T IS
THINGS TO CONSIDER
NOVARTIS NEEDS TO TAKE INTO CONSIDERATION THE CONTRIBUTION LOSS
THAT THEY WILL SUFFER IF THEY CHOOSE TO DROP THE 50 PRODUCTS.
(CHF 1654.6 MILLION)
PRICING SUGGESTION
NOVARTIS SHOULD TRY TO NEGOTIATE A PRICE WITH THE BUYER THAT WILL COVER THE CONTRIBUTION
LOSS AND THE RIGHTS TO THE PRODUCTS.
THE PRICE SHOULD ALSO BE IN RANGE OF MARKETABLE PRICE SINCE POTENTIAL BUYER IS FROM
SMALLER COMPANIES.
THE PRICE SHOULD AT LEAST COVER THE COST OF THE PRODUCTS IF NOVARTIS AND THE BUYER AGREED
ON A PRICE THAT IS LOWER THAN THE CONTRIBUTION LOSS.
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COMMENT ON
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L A S T PAR A
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WOULD YOU DO TO AD
Give extra
incentive pay to
employees
Handle their
personal
problems
sympathetically
Find the
attractive
company
locations
Incentives
Management
people involved
in planning
process
Give full
appreciation for
work done
RECOMMEND
We would recommend for Norvatis to apply those
incentive. It is better than dropping
all the 50 products and get harm in term of need
to bare a long term bad reputation in
all the countries as their evaluation of financial
statement is on sales base.
:
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N
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QUES
AS EBELING
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D E S C R IB E D I N P AR A G