Week 3 Assignment: Management Dynamics

Assignment Cover Sheet

College of Business School of Management

Student name: Student number: Unit name and number: Tutorial group: Tutorial day and time: Lecturer/Tutor: Title of assignment: Length: Date due: Date submitted: Campus enrolment:
Rebecca Smith

16964730

200571
EB.1.44

Management Dynamics

Thursday, 4pm

Greg Walker

Management Assignment 1: week 3 assignment

800 words

7/4/2011

7/4/2011

Parramatta

Declaration: I hold a copy of this assignment if the original is lost or damaged. I hereby certify that no part of this assignment or product has been copied from any other students work or from any other source except where due acknowledgement is made in the assignment. No part of the assignment/product has been written/produced for me by any other person except where collaboration has been authorised by the subject lecturer/tutor concerned I am aware that this work may be reproduced and submitted to plagiarism detection software programs for the purpose of detecting possible plagiarism (which may retain a copy on its database for future plagiarism checking) Signature:______________________________________ Note: An examiner or lecturer/tutor has the right to not mark this assignment if the above declaration has not been signed.

Week 3 Assignment: Management Dynamics

Week 3

Name Student Number Tutors Name Tutorial Time

Environmental Analysis
After you have: Attended the Week 3 lecture and gone over your lecture notes; Re-read Topic 3 and the Preface in your text; and Taken part in the Week 3 tutorial discussion: Instructions: Reflect on your analysis in the Week 3 tutorial discussion: Read the case Australias CSL Ltd. a global quiet achiever by John Rice and Nigel Martin (Case for chapter 8, on vUWS and also available from My Management Lab).

Answer the following questions based on the case in approximately 650 words: 1. Describe the changes to, and the current state of, the bio-pharmacetical industry within Australia? 2. Other markets offer unique business opportunities for CL Ltd. suggest what these opportunities are? 3. (a) What are the environmental factors that the managers of CSL need to consider as part of their growth strategy? (b) How should managers respond to these environmental factors?

Tips: You must answer the set questions to receive a pass. Download the marking criteria from the vUWS site before you begin so that you are clear about what is expected to achieve certain grades. Begin this exercise by letting the marker know that you understand why managers need to be aware of external environmental forces, and what responses would be appropriate in the context of the case, and why. Reference this material. You will need to undertake some research on Japan and the Japanese market. Suggested information sources include: appropriate academic sources such as books, journals, government websites etc. (select sources where authorship is known).

Week 3 Assignment: Management Dynamics

1. The Australian bio-pharmaceutical industry is constantly evolving, influenced by; political changes, medical innovations and the increasing demand for pharmaceutical products to enhance life quality and expectancy. Since the 1940s there has been an overall increase in government scrutiny and control of pharmaceutical product safety. This ideal is highly evident in the enactment of the Therapeutic Goods Act 1989, which historically has been one of the greatest influences on the pharmaceutical industry, introducing the Therapeutic goods Administration to regulate safety and product quality of pharmaceutical goods (Productivity Commission 1996, p.43). Another change has been through the Pharmaceutical Benefits Scheme, introduced in 1950s to subsidize medicines for the Australian community (Productivity Commission 1996, p.68). Furthermore the Australian bio-pharmaceutical industry has become a largely competitive market, with innovations of worldwide recognition, such as the creation of Commonwealth Serum Laboratories (CSL) Gardasil Vaccine and Biota Holdings flu drug, Relanza (DIISR 2010). 2. There are numerous opportunities for CSL, in global markets. Firstly Australia is limited in its growth potential due to its geographical isolation from the rest of the world. Most potential population growth is occurring in developing countries. As Australia has become a saturated market for CSL, overseas markets provide higher levels of demand and greater profits for CSL. Secondly with increasing global demand for plasma derived products, and new innovative plasma therapies produced by CSL, specifically Hizentra and Privigen , global markets offer the opportunity for CSL to increase its overall sales and cut costs by achieving economies of scale (DIISR 2010). Through selling significant amounts of products to the global markets there would be enough demand to warrant a larger scale of production at cheaper costs. Finally, through expanding into international markets, CSL may have opportunities to gain access to natural resources that are unavailable or more expensive in Australia. Furthermore, by forming alliances or merging with foreign companies, CSL has the opportunity to gain access to high quality technology, specialized knowledge and expertise. Such is evidential in their alliance with Merck, which enabled them to use technologies provided by Merck to develop a vaccine for the Human Papilloma Virus, Gardasil, as well as gaining access to numerous networking opportunities and supply channels (Rice et al. 2010, p.47). 3. a) Political
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Week 3 Assignment: Management Dynamics

A political force that CSL must be aware of as part of their growth strategy is Trade Agreements. Recently the World trade Organization has promoted competition in the pharmaceutical markets, with trade organization such as NAFTA and ASEAN agreeing to reduce barriers such as tariffs and also minimizing the process of drug assessment that is needed to enter markets (Productivity Commission 1996, p.142). Other forces that CSL must recognize are political stability and the laws and regulations of the foreign country they wish to gain access to. CSL must also make sure their products are intellectually protected through patents, to prevent production of generic brands reducing their profits (DIISR 2010). Economic Economic forces that will specifically influence CSLs global growth strategy are exchange rates, share market fluctuations and changes in disposable income. Pharmaceutical products are highly priced inelastic, meaning disposable income and inflation levels, would not affect CSL profit margins. Such is evidenced during the Global Financial Crisis of 2007 where CSL was able to maintain high profit margins as the demand for their products remained constant (Greenblat 2010). Furthermore, regarding exchange rates, over 75% of CSLs sales occur offshore, they benefit from the weaker Australian dollar, as overseas customers have greater purchasing power (Rice et al. 2010, p.47). Social With an ageing population and greater education about health risks, the demand for pharmaceutical sales is increasing, thus producing more demand for CSL goods globally. Another social impact on CSL is the increasing demand for pharmaceutical goods during the outbreak of new diseases and pandemics, evident in CSLs manufacturing of swine flu vaccine, during the 2009 outbreak (DIISR 2010). Furthermore, CSL should also consider the changing attitudes in Asia towards western versus traditional medicine (Productivity Commission 1996, p. 136). Technological CSL managers must consider the technological impact of computers and the internet which have allowed constant access to information, improved the ability to conduct research, allowed development of sophisticated products, and increased quality and safety in the formulation process of pharmaceuticals. Further technological forces CSL should recognize are improvements in the processing of information from clinical trials as new technological devices can now record patient reactions when they occur (DIISR 2010).

Week 3 Assignment: Management Dynamics

3. b) In such a dynamic and changing global environment, all managers are faced with the ideal of environmental uncertainty. Thus the CSL managers in their growth strategy should undertake the notion of strategic thinking, by being flexible and adaptable in their planning and organization, and continuously scanning the environment to take advantage of opportunities available (Balnave, Deo & Rosier 2010, p.106). To overcome cultural and social factors, CSL managers should acquire a geocentric outlook. Through balancing both local and global objectives, mangers are forced to understand and respond to global issues and market surroundings. To enforce this geocentric idealism and perception within the CSL Company, the CEO Doctor Brian McNamee, moved to the USA for two years (Greenblat 2010). This has allowed CSL to gain a better understanding of the local market forces and foreign customs. Another management strategy is financial risk spreading. By diversifying income sources, CSL will be less vulnerable to changes in the demand of one market because of differences in timing of the economic cycles between different countries, therefore allowing more stable periods of profit and growth (Balnave, Deo & Rosier 2010, p.101). As aforementioned foreign direct investment allows managers to have access to specialized technology and resources. This can be a powerful tool, to overcome international regulations such as patents on technology. As such, Managers of CSL should consider using this growth strategy when expanding overseas to remain competitive and gain greater control over their external technological environment.

Week 3 Assignment: Management Dynamics

Reference List Balnave, N, Deo, A & Rosier, G 2010, Management Dynamic, 3rd Edn, Pearson Education Australia, Frenchs Forrest, pp.96-117. Department of Innovation, Industry Science and Research (DIISR) 2010, Pharmaceutical Industry Profile, viewed 4 May 2011, <http://www.innovation.gov.au/INDUSTRY/PHARMACEUTICALSANDHEALTHTECHNO LOGIES/PHARMACEUTICALS/Pages/PharmaceuticalsIndustryProfile.aspx> Greenblat, E 2010, CSL injects expansion plans into its strategy, The Age, viewed 4 May 2011, < http://www.theage.com.au/business/csl-injects-expansion-plans-into-its-strategy-20100217oe1t.html> Productivity Commission 1996, The Pharmaceutical Industry, Industry Commission Inquiry Report, vol. 1, no.51, pp. 43-155. Rice, J, Martin, N, Carpenter M & Sanders W 2010, Strategic management: A dynamic perspective, Pearson Education Australia, Frenchs Forrest, pp. 446-447.