Class 30 - Class 30: External Environments and...

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Unformatted text preview: Class 30: External Environments and Organizational Strategy Please sit with the same group you did last time MGTS 3401 Cummings Profit maximization Shareholder value ► Dr. Bill Campbell is in your office, and is asking you for a budget of $25­50 million, over 7 – 8 years I think I can, from a veterinary compound, develop a human drug to relieve itching and maybe even cure “river blindness.” 600,000 people are already blind from the parasite, and another 80 million threatened, in rural Latin America and Africa If successful, more funds would be required in about 8 years, to test the drug, and move it through the regulatory process No applicability outside poor, rural Latin America and Africa; no prospects for recovering costs, let alone any profit This request is about 4% of your R&D budget You are Roy Vagelos; Director of Research. What will you say to your research scientist (Dr. Campbell)? ► MGTS 3401 Cummings For Today For Today ► Think about where we left Roy Vagelos (at Merck) at the end of Wednesday’s class. Why would he tell Dr. Campbell “yes” to an 8 year financial commitment to develop a drug that only “might” work, and then add “but you can’t tell anyone”? MGTS 3401 Cummings For Today ► What are the three basic kinds of Strategy? How do they differ? ► Which organizational strategy is most consistent with Vagelos’ decision? Three Basic Types of Strategy ……an intro to MGTS 4481….. Innovation Strategy A strategy that emphasizes the introduction of major new products and services. Cost-minimization Strategy A strategy that emphasizes tight cost controls, avoidance of unnecessary innovation or marketing expenses, and price cutting. Imitation Strategy A strategy that seeks to move into new products or new markets only after their viability has already been proven. MGTS 3401 Cummings 9 years later… CEO Press Conference tomorrow about “new drug” launch, Mectizan; Expect word on pricing, etc. a) How will you price this drug? What will you say, exactly, about pricing? b) Will you call your Board of Directors tonight at home? If so, what, exactly, will you say? Peter Lynch, a major corporate investor, respects you, so has called this afternoon and given you a “heads up:” he will be at the Press Conference tomorrow, and will pose the question: “why did Merck develop a drug that has little or no prospect of financial return?” c) What, exactly, will you say publicly tomorrow in response to his question? MGTS 3401 Cummings Merck’s Mission Statement Merck & Co., Inc. is a global research­driven pharmaceutical company dedicated to putting patients first. Established in 1891, Merck discovers, develops, manufactures and markets vaccines and medicines to address unmet medical needs. The company also devotes extensive efforts to increase access to medicines through far­reaching programs that not only donate Merck medicines but help deliver them to the people who need them. Merck also publishes unbiased health information as a not­for­profit service. MGTS 3401 Cummings For Today ► What are the “institutions or forces” outside the organization (i.e., in the organization’s external environment), that can potentially affect an organization’s performance? Economy Allies Suppliers Legal/ Political Systems Regulatory Groups Customers organization Competitors Culture and Norms MGTS 3401 Cummings Technology The General Environment Sociocultural domain Economic domain Technological domain Legal/political Legal/political domain domain The values, customs, mores, and demographic characteristics of the people within a society. The rules and economic institutions that regulate business activity and govern the transfers of land, labor, capital, goods and services that an organization needs to fulfill its goals. The knowledge processes, means, systems, hardware, and software available to an organization to convert its inputs into outputs. Those systems that allocate power among various groups in society and settle disputes as they arise, and that develop, administer, and enforce the law. MGTS 3401 Cummings The Task Environment Suppliers All organizations have their suppliers, the providers of materials, labor, capital, equipment, and work space. Customers/ markets Regulatory and Regulatory influence groups influence Customers and/or markets, those who are the distributors and users of the organization’s goods and services. Regulatory agencies and influence groups that organizations have to respond to, such as government agencies, unions, and professional associations. All those organizations that the organization competes with for both markets and resources. Competitors Allies Those firms with which an organization might form a a partnership for a joint venture. MGTS 3401 Cummings Economy Allies Suppliers Merck Legal/ Political Systems Regulatory Groups Customers Competitors Culture and Norms MGTS 3401 Cummings Technology For Today What are the dimensions of “environmental uncertainty?” What, then, makes environmental uncertainty very high? Moderately high? Low? The Three Dimensional Model of the Environment Volatility Capacity Complexity E X H I B I T 16–10 MGTS 3401 Cummings For Today For Today ► How is Merck’s external Environment different today than it was when Dr. Vagelos made that decision? Be sure you use all of the “institutions or forces” and all three “dimensions of environmental uncertainty,” to justify your answer. MGTS 3401 Cummings Economy Allies Allies Suppliers Competitors Culture and Norms MGTS 3401 Cummings Legal/ Political Systems Regulatory Groups Organization Customers Technology For Today For Today Given the external environment uncertainty that Merck faces today, would you make the same “Yes” or “No” decision if Dr. Campbell was in your office today? Why or why not? MGTS 3401 Cummings For Monday Please: Read the rest of Chapter 16 Prepare Important FNT questions (for our discussion in class, and for Short Exam 3) Complete Survey before Class Begins ►check your email for a message from me with a direct link to the survey in Qualtrics ►Hard copy in FNT folder, if you prefer to do it that way ...
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This note was uploaded on 03/11/2010 for the course MGTS 3401 taught by Professor Pierce during the Spring '08 term at University of Minnesota Duluth.

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