Answered: Required: (a) Evaluate the performance…

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

See similar textbooks

Related questions

Question

Pharmaceutical Technologies Co (PT) is a developer and manufacturer of medical drugs in Beeland. It

is one of the 100 largest listed companies on the national stock exchange. The company focuses on buying

prospective drugs that have shown initial promise in testing from small bio-engineering companies. PT then

leads these through three regulatory stages to launch in the general medical market. The three stages are:

1. to confirm the safety of the drug (does it harm humans?), in small scale trials;

2. to test the efficacy of the product (does it help cure?), again in small scale trials; and

3. finally, large scale trials to definitively decide on the safety and efficacy of the product.

The drugs are then marketed through the company's large sales force to health care providers and end users

(patients). The health care providers are paid by either health insurance companies or the national

government dependent on the financial status of the patient.

The Beeland Drug Regulator (BDR) oversees this testing process and makes the final judgement about

whether a product can be sold in the country.

Its objectives are to protect, promote and improve public health by ensuring that:

- medicines have an acceptable balance of benefit and risk;

- the users of these medicines understand this risk-benefit profile; and

- new beneficial product development is encouraged.

The regulator is governed by a board of trustees appointed by the government. It is funded directly by the

government and also through fees charged to drug companies when granting licences to sell their products

in Beeland.

PT has used share price and earnings per share as its principal measures of performance to date. However,

the share price has underperformed the market and the health sector in the last two years. The chief

executive officer (CEO) has identified that these measures are too narrow and is considering implementing

a balanced scorecard approach to address this problem.

A working group has drawn up a suggested balanced scorecard. It began by identifying the objectives from

the board's medium term strategy:

- Create shareholder value by bringing commercially viable drugs to market

- Improve the efficiency of drug development

- Increase shareholder value by innovation in the drug approval process

The working group then considered the stakeholder perspectives:

- Shareholders want a competitive return on their investment

- Purchasers (governments, insurers and patients) want to pay a reasonable price for the drugs

- Regulators want an efficient process for the validation of drugs

- Doctors want safe and effective drug products

- Patients want to be cured

Finally, this leads to the proposed scorecard of performance measures:

- Financial - share price and earnings per share

- Customer - number of patients using PT products

- Internal business process - exceed industry-standard on design and testing; time to regulatory

approval of a product

- Learning and growth - training days undertaken by staff; time to market of new product; percentage of

drugs bought by PT that gain final approval.

The balanced scorecard now needs to be reviewed to ensure that it will address the company's objectives

and the issues that it faces in its business environment.

Required:

(a) Evaluate the performance measures proposed for PT's balanced scorecard.

b) Briefly decsribe a method of analysing stakeholder influence and analyses the influence of four different external stakeholders on the regulator (BDR).

(c) Using your answer from part b, describe how the application of the balanced scorecard approach at BDR would differ from the approach within PT.

Expert Solution

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, management and related others by exploring similar questions and additional content below.

Similar questions