The international business strategy and financial management of Novartis Pharmaceuticals UK Limited
The company being chosen:
Subsidiary: NOVARTIS PHARMACEUTICALS UK LIMITED - registered number (company number) 00119006
(only this company, NOT the entire group)
(The word limit includes the introduction, the main body, conclusion, tables and figures, citation, appendices, notes and end notes in the text, but excludes the front cover sheet, and references. Your materials in the appendices will be counted towards the word limit. So, please do not exceed the maximum word limit.)
Date: 6th May night
Lecture notes (Will send you in next email)
1. Make plausible arguments whether your subsidiary builds its strategy based upon Porter’s single diamond (Porter, 1990), or whether it uses Rugman & D’Cruz’s/ Rugman & Verbeke’s double diamond (Rugman & D’Cruz, 1993; Rugman & Verbeke, 1993)/ generalized double diamond approach (Moon, Rugman & Verbeke, 1998). Critically analyze all attributes of the location advantages of the host country (also known as host country-specific advantages - host CSAs) which your subsidiary has accessed and exploited. Discuss various dimensions of distance (Ghemawat, 2001) between the home country and the host country, and analyze whether or not distance is really a challenge? How has your subsidiary overcome the distance (if any)?
· Make plausible arguments whether your subsidiary builds its strategy based upon Porter’s single diamond (Porter, 1990), or whether it uses Rugman & D’Cruz’s/ Rugman & Verbeke’s double diamond (Rugman & D’Cruz, 1993; Rugman & Verbeke, 1993)/ generalized double diamond approach (Moon, Rugman & Verbeke, 1998).
· Use the theoretical framework which you have just identified in bullet point 1 to critically analyze the location advantages of the host country which your subsidiary has accessed and exploited. Provide evidence, e.g. examples, facts, data, etc. to support your answer.
· Use Ghemawat’s CAGE framework to discuss the various dimensions of distance between the home country and the host country. Analyze whether or not distance really matters.
· Discuss how the subsidiary has overcome the distance (if any). Provide evidence, e.g. examples, facts, data to support your answer.
2. Use the framework of 10 patterns of FSAs development/ resource recombination to discuss clearly to what extent your subsidiary has firm-specific advantages (FSAs) developed by itself, or those FSAs developed by the parent firm? Does your subsidiary develop any new FSAs? If yes, describe your new FSAs and support your answer with two examples. If no, explain why it is sufficient for your subsidiary to use only the FSAs transferred from your parent firm and provide two examples.
· Use the 10 patterns of FSAs development/ resource recombination to discuss the extent to which the subsidiary has firm-specific advantages (FSAs) developed by the subsidiary, or those FSAs developed by the parent firm.
· Does the subsidiary develop any new FSAs?
· If yes, describe the new FSAs and support your answer with two examples of FSAs developed by the subsidiary.
· If no, explain why it is sufficient for the subsidiary to use only the FSAs transferred from the parent firm and provide two examples of FSAs developed by the parent firm and transferred to the subsidiary.
3. Use Rugman, Verbeke and Yuan (2011) diagram of re-conceptualization of national subsidiary roles along the value chains to discuss clearly what role(s) your subsidiary has? Explain and illustrate your answer with a diagram.
· Use Rugman, Verbeke and Yuan (2011) diagram of re-conceptualization of national subsidiary roles along the value chains, not Bartlett and Ghoshal (1998) model to discuss the role(s) of the subsidiary that you think they have.
· Explain why the subsidiary role(s) are placed in particular cell(s)
· Illustrate your answer with an appropriate diagram.
4. Show detailed calculations, analyze, compare and comment the financial performance trend of your subsidiary for each year of the three-year period of 2014-2016 (sales and profit growth/ decline; profitability ratios of gross margin ratio, EBIT ratio, net profit ratio, ROA; gearing ratios of debt-to-total assets, debt-to-equity, times interest earned; liquidity ratios of current ratio, quick ratio, working capital; operating efficiency ratios of inventory turnover in days, account receivable turnover in days). In case your subsidiary exports, analyze their sales in domestic market and international markets. You should present the financial statements of your subsidiary in the appendix.
· Refer to the accounting coach website www.accountingcoach.com for reference and for help if necessary.
· Show detailed calculations (i.e. formulas, figures in the numerators and denominators, NOT just the final results) of the full set of financial ratios of the firm for the three-year period 2014-2016. This part must be presented in the text of the body, NOT in the appendix.
· Analyze, compare and comment financial ratios: the analysis should be concise, clear, straight-to-the point, insightful, and useful in terms of causal relationship of strategy and performance. It is NOT sufficient to describe the data changes (e.g. increase/ decrease over time) or provide general comments of the meaning of the ratios.
· In case your subsidiary exports, analyze their sales in domestic market and international markets.
· Present a full set of financial statements of the firm (income statements and balance sheets), not just the extraction, in the appendix in the form of image.
· The financial statements must come from the subsidiary’s full accounts filed with the UK Companies House, NOT from any database. Any paper which is not in compliance with this particular instruction will be penalized and marked down.
· Only the materials on the calculation of financial ratios and the financial statements can be presented in the form of image, so that they will not be counted towards the word limit.
· The analysis of financial ratios must be presented in word.
5. What are the major financing sources of your subsidiary? Discuss whether or not your subsidiary has any role in foreign exchange risk management. How are foreign exchange risks managed in your subsidiary? Critically analyze whether or not your parent firm has used various mechanisms to manipulate profits in your subsidiary. Support your answer with specific well-explained data, facts, and examples.
· Read the UK subsidiary’s balance sheets/ the statements of financial position and disclosure notes of the full accounts/ annual reports (2014-2016).
· Use data as reported by the subsidiary.
· Critically analyze and explain clearly the major financing sources of your subsidiary in absolute value and ratios (each type of financing sources over total assets in percentage, and the absolute value of each type of financing sources).
· Discuss whether or not your subsidiary has a role in foreign exchange risk (FX) management or whether FX is centrally managed by the parent firm’s specialized shared services, e.g. central treasury/ finance company.
· Examine whether the subsidiary/the group has taken any hedging techniques/ measures for foreign exchange risk management (if any) and describe them (if applicable). Support your answer with data (2014-2016), facts and/or examples.
· Read the subsidiary’s annual reports, especially disclosure notes.
You should use headings and sub-headings. Notes or Endnotes should be used only if absolutely necessary and must be identified in the text by consecutive numbers, enclosed in square brackets and listed at the end of the essay.
Front page: essay title (including the subsidiary name), your group, your team number, your name, your student ID number, and total word count (word count excludes the front page, and references).
Introduction: briefly introduce the company background information. You may explain the main objective of this essay, the main arguments/findings, and the limitations of this study, etc.
Main body: you need to cover all the issues in the format of answers-to-questions. There is no need to rewrite the questions in your submitted work. This will give you more space to present your answers. You need to state explicitly the concepts and theoretical framework that you use to answer the questions. You are expected to demonstrate that you are capable of applying these concepts and frameworks to critically analyze the subsidiary you are studying. A good piece for this module should focus on a persuasive analysis and argument, based on the data, facts and examples you find. In addition, you are expected to present consistent and interactive arguments of the issues, e.g. hard data and thorough explanation could support your analysis on the strategy and performance (see detailed guidance in Appendix 1).