Case Analysis: Bayer’s Major Changes in One Plant

Topics: Bayer, Aspirin, IG Farben Pages: 5 (1541 words) Published: January 5, 2011
Introduction
1 ) Given the respective scenarios and the projections described in the exhibits for each option , evaluate and choose the alternative that best optimizes Bayer 's prevention and children 's business . Explain . Upon reading the two options that have come up , the best alternative would be choosing the second option : Reintroduce Children 's ASPIRIN worldwide as a prevention product and rename it under the brand ASPIRIN 100 (R . Figure 2 (See below ) summarized that this option appears to have more benefits than the first option given .

Although venturing into this option would require repackaging , relabeling , and reindicating the brand and it might accelerate the cannibalization of Pharma 's sales , reintroducing the product could attract new users from competitive brands . As Joachim Zander analyzed the two scenarios under when they reintroduce their product : ``Under the first scenario , we essentially create attention for ourselves and the market reacts . As a result , Pharma 's high-end product , CardioASPIRIN (R , loses 10 of its sales due to our cheaper alternative . However , we also appropriate incremental sales of 10 from the competition . Beyond that , by keeping the product on the market , though in a new form , we are able to keep 20 of the children 's ASPIRIN customers .

Under the second scenario , I envision that the market does the opposite and reacts very little to our product change . Thus , Pharma doesn 't lose any volume , and Consumer Care is unable to gain any incremental volume from the competition . Either way , we still keep 20 of the children 's ASPIRIN customers '

Comparing Exhibit 6 with Exhibits 7A and 7B , the forecast losses in Option 1 will be substantially greater given the Middle and Worst Case Scenarios than what is featured in losses in Option 2 . Although in the Best Case Scenario in Option 1 could appear to be advantageous , assuming that scenario to happen would be faulty . Also , as emphasized in Exhibit 5 , although the sales of children 's aspirin is declining , its margin against the Prevention CardioASPIRIN (R ) is still significantly higher . Keeping their seasoned and most valued customers who give them more profits will be the optimal approach . Thus , the win-win solution would be Option 2 because either way 20 percent of the children 's aspirin customers will be maintained . This business decision will be less damaging to the company , either best or worse case happens . 2 ) Do you agree with quantitative assumptions used to develop the forecasts ? Why or Why not ?

Yes , I agree . In order to come up with the best decision , managers must make a number of educated assumptions about future trends and events and modify those assumptions once new information becomes available . Quantitative forecasts are typically based on historical data or tests and which involve complex statistical computations , which the Bayer Aspirin Case presented to represent the financial outcomes of the two options . Although quantitative forecasting is not foolproof , it is a valuable tool that enable managers to fill in the unknown variables that inevitably crop up in the planning process .

History
Bayer AG was founded in Barmen (today a part of Wuppertal), Germany in 1863 by Friedrich Bayer and his partner, Johann Friedrich Weskott. Bayer's first major product was acetylsalicylic acid (originally discovered by French chemist Charles Frederic Gerhardt in 1853), a modification of salicylic acid or salicin, a folk remedy found in the bark of the willow plant. By 1899, Bayer's trademark Aspirin was registered worldwide for Bayer's brand of acetylsalicylic acid, but because of the confiscation of Bayer's US assets and trademarks during World War I by the United States - and the subsequent widespread usage of the word to describe all brands of the compound, "Aspirin" lost its trademark status in the United States, France, and the United Kingdom....
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