Essay on "Financial and Strategic Tools"

Essay 5 pages (1779 words) Sources: 1+

[EXCERPT] . . . .

Financial / Strategic Analysis

How strategic assessment tools were or could have been used to aid development and use of meaningful information about the company to develop its path for moving forward; (strategic assessment tools includes: value chain analysis, porter five forces, SWOT analysis and GE/McKinsey Matrix)

In the case of Hybritech there were a number of different strategic assessment tools that were utilized the most notable include: Porter's Five Forces analysis. This is when you are analyzing the underlying strengths / weakness of a business; by examining five different factors that could have an impact upon the organization to include: supplier power, threats of substitutes, degrees of rivalry, buyer power and barriers to entry. Supplier power is when the company is vulnerable to changes from costs associated with producing the final product. Where, you are looking for possible changes that could occur in wholesale prices from suppliers. In the case of Hybritech they were facing increasing costs associated with research and development (over the short-term). However, the added investment would help the company to reap sizeable benefits down the road. As it is establishing, a long-term line of products that can be marketed to consumers. ("Porter's Five Forces Model") ("Hybritech Incorporated" 1 -- 29) This is important, because it shows how this kind of analysis was utilized during all planning, to help the company move forward.

The threat of substitutes is when alternative products could be developed that will take away from possible sales as well as patents. As far as Hybritech is concerned, the company was fearful that their rival Genentech and their alliance with Abbott Labs would create a host of alternative products. At the same time, they were worried about this partnership allowing competitors to make significant scientific breakthroughs. ("Hybritech Incorporated "1 -- 29) This is important, because it shows how these views would push Hybritech, to seek out partners who could help them address this challenge. ("Porter's Five Forces Model")

The degree of various rivalries is when you are examining the intensity of the competition inside the industry itself. In the biomedical research sector, the competition is fierce, as various patents that are expiring and the use of generic drugs could have an impact upon the overall bottom line. As result, Hybritech understands this situation and would seek out a larger company, who could be facing similar kinds of challenges. At which point, an alliance could help to address the intense competition that both organizations are dealing with. ("Porter's Five Forces Model") ("Hybritech Incorporated "1 -- 29)

Buyer power is the effect that consumers could have on the industry, as their demand for various goods / services could cause prices to rise or fall for a particular product. In the pharmaceutical sector, buyers are constantly seeking out generic drugs as way to reduce their overall costs. This would help Hybritech in finding a partner that was facing similar challenges as themselves. At which point, the alliance could help both companies, be able to prevent a decline in having their products lose patent protection. ("Porter's Five Forces Model") ("Hybritech Incorporated" 1 -- 29)

Barriers to entry are the overall challenges of new companies entering the industry. As the total amount of obstacles, would determine how quickly new rivals could emerge. In the case of Hybritech, the barriers to entry to the sector are challenging. As large amounts of capital and research / development, are necessary to conduct any kind of biomedical research. However, if these initial barriers can be met, then new companies can be able to become a competitor in the industry. ("Porter's Five Forces Model") ("Hybritech Incorporated "1 -- 29)

When you analyze the Porter Five Forces Model, it is clear that these elements would help Hybritech to address the underlying pressures that they facing from sector. As a result, one could argue that this analysis would push them, to seek out a partner that addresses their obvious shortfalls (leading to intense discussions with Eli Lilly)

As a result, it is clear that strategic assessment tools are helping Hybritech to be able to adapt to various situations. Where, they can be able to effectively evaluate their various strengths, weaknesses and needs. The roles that these elements play in the development of the company are: that they help to point how they can take advantage of their strengths. At the same time, they are allowing Hybritech to isolated their weaknesses and create a strategy to mitigate the effects. When you put these two elements together, they are highlighting the importance of strategic assessment tools in archiving the objectives of the company.

The role of metrics for advocating, shaping and analyzing past performance and the success of any plan for moving forward (Financial Metrics include: CFROI, EVA (EVA and CFROI weren't used in of the cases, but, you can tie their importance to the answer) and Regular Solvency ratios (used in Hybritech case)

During and before any kind of initial discussions that took place between the two companies, Hybritech would use financial metrics. In an effort, to determine the possible underlying benefits of various actions they could take. A few most notable include: CFROI and EVA. CFROI is when you are analyzing the cash flow return on investments. It is designed to help determine, how effectively an organization is utilizing the cash that investors have given them. In the case of Hyrbritech, they have been experiencing a negative CFROI for the last several years. EVA is economic value added measures, which are to designed to determine the underlying profits the company is seeing. As far as Hybritech is concerned, they have a positive EVA, as their net income would continue to show improvement between 1984 and 1985. ("Understanding the Metric Wars" 427 -- 465) When you compare these two elements with each other, they are showing how the negative CFROI would push the Hybritech. To find those organizations that can help address the challenges they were facing. At the same time, the positive EVA would allow them to highlight, how they have the ability to increase the bottom line results significantly in the future. ("Hybritech Incorporated "1 -- 29)

The solvency ratios for Hybritech was 2.0, indicating that the company had a low amount of debt in comparison with their total assets. However, from 1984 onward this ratio would begin to decline, with the business taking on added amounts debt (in an effort to keep up with rising research and development costs). This is important, because it is showing how Hybritech needs additional funding to help achieve their long-term goals. ("Hybritech Incorporated "1 -- 29)

When you step back and compare the financial metrics with solvency measures, it is obvious that they are highlighting how the company needs working capital. The reason why is because there are increased upfront expenses, that they will face when conducting their research and development. As a result, this is causing their underlying amounts of debt and CFROI to begin to show consistent declines. If these issues are not addressed, the company could face the possibility that they may lose their competitive advantage. This is forcing Hybritech to find out those organizations that can address, their immediate needs and help improve their overall financial competitive position in the market.

As a result, these different financial metrics help Hybritech to effectively determine what direction they need go. As both tools are addressing specific aspects of the business (finance and solvency).This is important, because these two factors are necessary for the survival of the company. Where, they have identified specific actions that the board and share holders must consider in the future. Once you take these different elements into account, they are providing a more detailed picture of the underlying strengths and weaknesses of an organization.

The relative roles of business analysis and planning v. financial analysis and planning in the development of enterprise solutions.

Business analysis and planning is when you are analyzing various factors that could have an impact upon the organization itself. This would include examining the effects of: competitors, changes in the economic cycle and the adverse impact from rising costs. These different elements are important, because they allow you to see the various external factors that could have an effect upon the organization. Where, they will play an interconnected role in determining the underlying amounts of possible supply and demand issues (based upon these elements). At which point, the business can be able to make an accurate assessment as to how these challenges could be affecting them in the future.

Financial analysis and planning, is when you are looking at the impact that these factors are having on the balance sheet of a company. This is accomplished by examining a number of different financial measurements. As they are used, to determine how they could affect the company's balance sheet to include: the total amount of debt, rising / falling earnings, cash flow and shareholder value. When you put these different elements together, they will tell you the underlying… READ MORE

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