Page 8 - CIMA SCS Workbook November 2018 - Day 1 Suggested Solutions

CIMA NOVEMBER 2018 – STRATEGIC CASE STUDY

 Policy of making drugs available at affordable prices in developing nations will reduce
criticisms of high profit margins/exploiting powerful position in the market

 Products are tested to a standard that exceeds regulatory requirements, thereby reducing
risk of product failure and litigation

 Some experience in new technological advances in drug testing e.g. computer simulation
(AI?) and DNA sequencing that could result in less testing on live subjects (including
animals?)

 Responsible employment practices such as paying living wage and operating a bursary
scheme in several countries will help to attract new staff

 Approximately C$7.5 billion in cash means healthy liquidity position

Weaknesses

 No experience of producing generic drugs may mean loss of competitive advantage to
those companies that do

 Two of the company’s most successful drugs went off-patent in 2016, meaning competitors
can now copy and launch their own version

 Recent disappointments in the testing of new potential drugs could lead to falling
revenues/lack of cash in the future

 Company has 108,000 employees globally but there is no HR Director

 Lack of balance at Board level – 6 EDs v 4 NEDs (including Chair)

 Falling revenues and profits in 2017 compared to 2016

 High dividend pay-out ratio means little profit retained to fund future R&D

 Share price has fallen by around ⅓ over the last 5 years, suggesting shareholders potentially
unhappy, particularly as this seems poor when compared to the sector as a whole

Opportunities

 Diversify into other areas of healthcare e.g. biotech, equipment manufacturing etc.

 Grow by acquiring newly developed companies with promising research projects

 Use of Big Data and AI in advancing medical research e.g. by earlier diagnosis and making
cure more prescriptive to each patient

 Manufacture generic drugs i.e. drugs already on the market from competitors which go off-
patent

 Growing sales opportunities in developing economies; as the economy becomes wealthier,
so the government can spend more on healthcare. Such economies should be targeted

48 KAPLAN PUBLISHING