Virtual Business Design Assignment Example | Topics and Well Written Essays - 1500 words

Virtual Business Design - Assignment Example Problem Definition Since the Eurozone debt crisis that affected Portugal since 2010, the pharmaceutical industry in general and Olive Pharmaceuticals have been experiencing reduced profitability. As a result, it has become difficult to stay within the annual operating budgets. As part of the 2011 IMF bailout package, the Portuguese government has instituted heavy reductions in public expenditure which includes the public health care system. Olive Pharmaceuticals has been affected because of the growing public debt of hospitals and the cuts in pharmaceutical expenditure by the government. In 2012, public hospitals owed â‚ ¬1.5 billion to international pharmaceutical companies. In 2013, the public pharmaceutical expenditure was further reduced by â‚ ¬333 million, which makes pharmaceutical expenditure just 1 percent of GDP (Feria, 2012). As a result, sales to state hospital pharmacies have declined by 10% over the past two years (Feria, 2012). At the same time, operational costs have not reduced proportionally because of increase in energy costs and imported raw materials. The business mission of Olive Pharmaceuticals is to provide high quality oncology pharmaceutical products at affordable prices to consumers through efficient operations and continuous research. This is achieved through goals of keeping operating costs low and maintaining supply chain efficiency. The situation has implications for planning and organizing decisions for Olive Pharmaceuticals as it influences the decision about investing in research or selling generic products. Secondly, the supply chain may have to be reorganized for greater operational efficiency. Situation Analysis Impact of the Situation on Planning Planning is defined as the management function related to the determination of organizational goals and objectives and identifying tasks and resources to achieve those goals (Hill and McShane, 2006). The goal of Olive Pharmaceuticals is to grow its market share and profitabili ty by investing in research and efficient operations. Planning is conducted at different levels such as strategic planning, tactical planning and operational planning. The present situation has implications for planning at all levels. Strategic planning is concerned with decisions about which products to produce and which markets to serve (Carpenter, Bauer, & Erdogan, 2009). In the current situation, where the government is reducing expenditure on pharmaceutical products, the sales of oncology products will become expensive due to high costs. Rationing will further reduce profits while keeping costs the same. On the other hand, sales of generic drugs will increase due to lower prices to the consumer. The planning decisions to be made in this situation include the selection of whether to continue investment in researching new products or market generic drugs to reduce costs and increase sales. This would require careful analysis of the organizational mission and goals. Tactical plann ing is concerned with decisions made at the divisional level. These goals and plans are developed with a view to help the achievement of strategic level goals and plans (Daft, 2013). The challenge of reducing operational costs can be achieved through effective planning at the tactical level with the divisional managers assuming responsibility for staying within the operating budgets for their divisions. Finally, operational level planning is also relevant in the current situ