Your pharmaceutical firm is seeking to open up new international markets by part
ID: 1216607 • Letter: Y
Question
Your pharmaceutical firm is seeking to open up new international markets by partnering with various local distributors. The different distributors within a country are stronger with different market segments (hospitals, retail pharmacies, etc.) but also have substantial overlap. a. In Egypt, you calculate that the annual value created by one distributor is $60 million per year, but would be $80 million if two distri- butors carried your product line. How much of the value can you expect to capture? b. Argentina also has two distributors with values similar to those in Egypt, but both are run by the government. How does this affect the amount you could capture? c. In Argentina, if you do not reach an agree- ment with the government distributors, you can set up a less efficient Internet-based distribution system that would generate $20 million in value to you. How does this affect the amount you could capture
Explanation / Answer
a.
Annual value of one distributor is $60 million. Appointing two distributors gives the highest annual value, $80 million, although the rate is decreasing, ($80 million / 2 =) $40 million per distributor. As long as the firm gets higher value it should opt for higher number of distributor. Two distributors should be captured here.
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