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    Answer The Following Question.: Section C

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    Loraine
    Option 1 involves B-Pharma entering the European market through hostile takeovers of several European companies at a cost of $100 million. However, the European plants would need modernizing, workers may resist restructuring, and workers are concerned about B-Pharma's animal testing scandal. Option 3 involves diversifying into animal drugs through a $120 million joint venture with a Japanese company. This new market is very competitive and risky for B-Pharma as they have no experience in it. The decision tree shows Option 1 has a higher predicted revenue of $101 million compared to Option 3 whose predicted outcome is unknown.

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    Answer The Following Question.: Section C

    Uploaded by

    Loraine
    74 views2 pages
    Option 1 involves B-Pharma entering the European market through hostile takeovers of several European companies at a cost of $100 million. However, the European plants would need modernizing, workers may resist restructuring, and workers are concerned about B-Pharma's animal testing scandal. Option 3 involves diversifying into animal drugs through a $120 million joint venture with a Japanese company. This new market is very competitive and risky for B-Pharma as they have no experience in it. The decision tree shows Option 1 has a higher predicted revenue of $101 million compared to Option 3 whose predicted outcome is unknown.

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    decison tree

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    Decision_Tree_IB_question

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    Option 1 involves B-Pharma entering the European market through hostile takeovers of several European companies at a cost of $100 million. However, the European plants would need modernizing, workers may resist restructuring, and workers are concerned about B-Pharma's animal testing scandal. Option 3 involves diversifying into animal drugs through a $120 million joint venture with a Japanese company. This new market is very competitive and risky for B-Pharma as they have no experience in it. The decision tree shows Option 1 has a higher predicted revenue of $101 million compared to Option 3 whose predicted outcome is unknown.

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    74 views2 pages

    Answer The Following Question.: Section C

    Uploaded by

    Loraine
    Option 1 involves B-Pharma entering the European market through hostile takeovers of several European companies at a cost of $100 million. However, the European plants would need modernizing, workers may resist restructuring, and workers are concerned about B-Pharma's animal testing scandal. Option 3 involves diversifying into animal drugs through a $120 million joint venture with a Japanese company. This new market is very competitive and risky for B-Pharma as they have no experience in it. The decision tree shows Option 1 has a higher predicted revenue of $101 million compared to Option 3 whose predicted outcome is unknown.

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    of 2

    –6– SPEC/3/BUSMT/HP1/ENG/TZ0/XX

    SECTION C

    Answer the following question.

    5. The Board of Directors at B-Pharma are now exploring the other two strategic options:

    Option 1: Market development in Europe

    Likely overall cost: $100 million.

    To gain productive capacity and a network of distribution channels in Europe, B-Pharma could enter
    this market through hostile takeover of several European companies. The businesses could be bought
    cheaply.

    However, to achieve synergies, some obstacles must be overcome:


    • the plants available for acquisition need modernizing. As a result they could benefit from factories
    latest total quality management (TQM) methods
    • European workers expect empowerment and are likely to resist any attempts at restructuring
    • European workers are concerned about B-Pharma’s reputation after hearing about the animal
    testing scandal.

    Option 3: Diversification of the product portfolio

    Likely overall cost: $120 million.

    Some directors think that the company could be seen as more ethical if they made products to improve
    animal welfare. B-Pharma could produce a range of drugs for animals to be sold to vets. This huge
    and growing market around the world is very competitive and for B-Pharma has several risks. This
    market is completely new to B-Pharma so a joint venture with an experienced Japanese company has
    been suggested. B-Pharma is considering a new brand name.

    The two options are summarized on the decision tree below:

    Probability Forecast revenue

    Option 1 Successful 0.9 $220m


    $100m Not successful 0.1 $30m

    Predicted
    Option
    outcome
    Successful 0.3 $800m 1 $101m
    Option 3
    3 ??
    $120m Not successful 0.7 $40m

    (This question continues on the following page)


    –7– SPEC/3/BUSMT/HP1/ENG/TZ0/XX

    (Question 5 continued)

    Using quantitative and qualitative data from the case study and the additional stimulus
    above, recommend which option 1 or 3 is best for achieving B-Pharma’s objective of
    growth.

    You will find it useful to calculate the predicted outcome for Option 3 in the above
    decision tree. [20 marks]

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