act 460 db 8
For companies operating in the global market space, make or buy (outsourcing), special order, or equipment purchasing decisions can have qualitative considerations which may or may not outweigh a favorable calculated outcome. In this assignment, you will dialogue with your classmates and instructor on what some of those considerations could be and your thoughts on how the qualitative considerations should be weighed in a company’s decision making.
Here’s the scenario:
The pharmaceutical industry faced a challenging situation in September 2017 with the significant weather disruption incurred by their manufacturing plants when the island of Puerto Rico was hit by damaging Hurricane Maria. How big of a deal was it for the industry? For many years, favorable tax laws made it cost beneficial for pharmaceutical companies to locate manufacturing plants in Puerto Rico. In fact, almost 75% of Puerto Rico’s exports in 2016 were pharmaceutical products according to the Bureau of Labor Statistics. Shortly after Maria hit, the U.S. Food Drug Administration identified a list of more than 40 high-priority pharmaceutical drugs where short-term distribution disruption could be an issue! That’s a huge hit to the industry which it likely had not planned for and would have to incur significant additional costs to remedy. Bye-bye to some of those cost savings.
If the CEO of a newer pharmaceutical company was in the process of looking to outsource the manufacturing of a medication currently produced at a plant in the U.S. to Puerto Rico when Maria hit, should (s)he immediately stop his/her consideration of the plans because of the hurricane, even if it was financially favorable to outsource there?
Vetting each qualitative and quantitative matter takes time and resources, but it is necessary to make sure the company makes sound business decisions from both perspectives.
Your initial posting should be 250-500 words
Solution Preview
Pharmaceuticals in Puerto Rico
Business decisions often follow an evaluation by the management, determining the viability of a particular option. The American investments in the pharmaceutical industry in Puerto Rico are primarily based on the friendly tax options in the country. Consequently, most American firms consider the cost saving aspects of pharmaceutical manufacturing in the Latin American country, and importing the finished product in the United States (Gray, Roth, & Leiblein, 2011). However, just as would be the case in the American environment, those that choose to outsource production to Puerto Rico incur the primary investment costs on capital for the production process.
(387 words)