Topics: Vice President of the United States, Investment, Estimation Pages: 1 (390 words) Published: September 25, 2014
GB519 | Case study 1
Information, decisions, frameworks and responsibilities
The case study below has been drawn from Chapter 1 of Jackson et al. (2008). Elaine Shumate has been working for GSM, a pharmaceutical research company, for more than seven years. It is her first job since finishing her graduate work in molecular biology and her performance evaluations have been exemplar y. She has received increasing responsibility as opportunities have become available at GSM. Unfortunately, her knowledge and experience have not prepared her for the situation she currently faces. GSM has invested heavily in a molecular identification process (MIP) that the company’s top management believes holds tremendous promise for the future. If all goes well, the company plans to patent the process and license the process to large pharmaceutical companies for their use in medication production. Elaine is the lead manager on MIP and she is worried that the latest research results do not look as promising as earlier results. The vice president of research, Blake Walton, has asked Elaine to meet with him to discuss the results. After a brief discussion in the hallway, Blake suggests that Elaine take another look at the latest results. He doesn’t believe that her interpretation of the data is correct. In preparing for their meeting, she looked over the company’s earlier cost estimates and operating income projections for the project. Records indicate that the estimated research and development costs were $140 million and annual operating income was expected to be approximately $25 million. Given the latest results, MIP may have fewer applications in the pharmaceutical industry than originally believed. Elaine spoke with Richard Lawrence, vice president of sales, to get an updated estimate of the potential market value for MIP. Richard suggested that MIP would likely generate operating income of just $17.5 million per year if the recent results hold up after further testing. Elaine...
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