Treasure of Lemon Brown Paper Essay

Treasure of Lemon Brown Paper Essay.

Treasure of Lemon Brown Paper Essay

In Walter Dean Myer’s story The Treasure of Lemon Brown a teenager named Greg meets Lemon Brown and shows him a lesson about what is truly valuable in life. The theme of this story is “Everyman has a treasure” (Pg. 475). When Greg finds out about Lemon Brown’s treasure he automatically thinks of something value in money not something emotionally value. But Lemon Brown teaches him that everyone has some kind of treasure and that it doesn’t have to have money value.

The story begins with Greg leaving his house from having an argument with his father about how his grades aren’t great. Greg was running away from his problems. Greg walks around when it starts raining and goes into an old abandoned testament. Greg meets a homeless, retired old blues singer named Lemon Brown. Lemon Brown lived in the testament. Lemon brown heard Greg coming in and thinks Greg came to steal him treasure. Lemon Brown frightening Greg “Don’t try nothin’ cause I got a razor here sharp enough to cut a week into nine days!”(Pg. 477).

Lemon Brown is very protecting of a treasure that has no money value which he truly cares about.

Brown then learns Greg isn’t trying to steal nothing. (Pg.478) Lemon Brown asks, “You ain’t one of them bad boys looking for my treasure is you?” Greg replies, “I’m not looking for your treasure…if you even have one.” Greg answered sarcastically wondering if Brown even had a treasure worth more than where he lived. Lemon responds, “What do you mean if I have one?” Greg says you have gold coins? Automatically thinks of a money value treasure. Lemon Brown teaches him, “Everyman has a treasure”.

Moments later there was a noise downstairs. Outside the window were people coming looking for Lemon Brown’s treasure. The bad people thought Brown’s treasure had lots of money value. (Pg.480) “You got any money,” bad people asked Brown. Automatically thinking of money and not sentimental value. Lemon Brown solved the problem by falling down the stairs on top of the burglars and saved Greg and his valuable treasure

Lemon Brown then got up and had only minor injuries. Greg asked again if he actually had a treasure. He still didn’t believe Lemon Brown. Lemon Brown then asked Greg if he wanted to see his treasure. Lemon Brown then reveled his rags which were old newspaper clippings and harmonica. Lemon Brown would be busy singing the blues and came home one day to find out that his son was killed in war. Then they sent what he kept with him over there. He kept my harmonica and newspaper clippings. “Him carrying it around with like that told me it meant something to him, “told Lemon Brown. That’s my treasure.

Lemon Brown taught Greg a valuable lesson and went home to talk to his dad. Greg learns from Lemon Brown what a true treasure is. A true treasure doesn’t need a money value. Greg learned he was his dad’s treasure and that’s why his dad was so concerned of him. Greg finally understood Lemon Brown and his dad.

Treasure of Lemon Brown Paper Essay

Value Chain at Louis Vuitton Essay

Value Chain at Louis Vuitton Essay.

(2) This case explores the competitive advantage in the world of high fashion luxury goods. Does the advantage come only from the brand name or there are other advantages? Louis Vuitton and Gucci are brand names which are always associated with high fashion and are among the most successful international fashion houses.

(3) THE FIRST PART OF THE PRESENTATION examines the value chain and the value system of the famous French fashion house LV. This will help to identify those parts of the business that are particularly profitable and therefore likely to be linked with potential advantage.

THE SECOND PART OF THE PRESENTATION then uses the value chain to identify those resources that are exceptional and have sustainable competitive advantage.

(4) THE WORLD OF LUXURY

Luxury products have more than necessary and ordinary characteristics compared to other products of their category, which include their relatively high level of price, quality, aesthetics, rarity, extraordinariness, and symbolic meaning.

With annual sales of over US$165 billion and gross profit margins of over 50 percent the major luxury goods companies rely on famous brands like Louis Vuitton and Gucci to deliver a competitive advantage.

Does the advantage come only from the brand name or there are other advantages?

(5) Louis Vuitton

(6) Gucci

(7) The VALUE CHAIN AND THE VALUE SYSTEM were developed by Professor Michael Porter. The concept of value added can be used to develop company’s sustainable competitive advantage. Like most of the organizations LV consists of activities that link together to develop the value of the business. The VALUE CHAIN is used for developing competitive advantage due to fact that they are unique to an organization.

In addition, the fashion house is part of a wider group of value generation – THE VALUE SYSTEM- which includes suppliers, distributers, buyers and competitors.

The VALUE CHAIN ANALYSIS emphasises on the linkage between two areas:

First, the value chain links the value of the organisation’s activities with its main functional parts. Then the analysis examines how each part might be considered to contribute towards the generation of value in the company and how this differs from the competitors. (Lynch, 2009)

(8) The value chain framework is a handy tool for analysing the activities in which the firm can pursue its distinctive core competencies, in the form of a low cost strategy or a differentiation strategy. In addition, Porter splits the company into two main parts:

PRIMARY ACTIVITIES OR THE PRODUCTION PROCESS ITSELF which includes: inbound logistics, operations, outbound logistics, marketing and sales and services.

SUPPORT ACTIVITIES such as the human resources management and the firm’s infrastructure.

The word ‘margin’ in the diagram is used by Porter to indicate what is defined as added value. The margin is the difference between the total value and the collective cost of performing the value activities. (Lynch, 2009)

(9)!! LET LOOK AT LV’S VALUE CHAIN!!

As part of designer’s next women’s spring collection, the creation of fashion haute couture silk dress will generate profits through the value chain of business activities. Usually the value chain in the luxury goods sector is complex with many parts where value is added. We have started with the management of the supply chain in order to see how the production lines are working within the factories of Louis Vuitton starting from the SUPPLIERS.

(10) In order to make the dress, silk is supplied as thread mainly from China to a co-ordinate company which uses its network of associated companies to die, spin and weave the silk. Essential part of the process is that the co-ordinating company will work very closely with the lead designer on colours, patterns and textures relevant to the appropriate design collection. In this case THE REAL DRIVING FORCE in terms of design, price and sales for both Chinese and Italian companies is the fashion house. This is the reason why THE MAIN VALUE IS GENERATED AT THE FASHION HOUSE, not at the earlier parts of the value chain.

(11)The second part is the INBOUND LOGISTICS and at that stage the amount of value added is LOW because of the variety of importers and methods which are not exclusive for the company.

(12) A crucial element in the process of developing the new silk dress is the designer. The designer is involved in the OPERATIONAL PART of the process where a SIGNIFICANT VALUE is added due to famous designers such as John Galliano and Stella McCartney.

The final stages involve invisible stitching using HIGHLY SKILLED SEAMSTRESSES who are an extremely important part of the top fashion house AND ADD ESSENTIAL VALUE to the final product.

(13) In order to create the illusion of exclusivity, LV’s DISTRIBUTION STRATEGY is focused only on specially selected locations which are limited. The shops are located on high streets and luxury shopping malls with other designer brands. These exclusive channels of distribution ensure greater control and flexibility on their product ranges. As a result, OUTBOUND LOGISTICS have also a high contribution to the value of the product and the competitive advantage of the brand.

(14) The MARKETING AND SALES DEPARTMENT also has a great impact on the value added to the final product due to the fashion shows and in the world’s fashion capitals New York, Milan and Paris. The media coverage of the show is extremely valuable and results in millions of dollars. The pre-collection briefings are useful for brand promotion, but the real value added at the fashion house comes at the ready-to-wear products and accessories such as shoes and bags as well as other related licensed items such as perfumes.

(15) THE SERVICE DEPARTMENT ADDS A SIGNIFICANT VALUE TO THE BRAND ALTHOUGH THE NUMBER OF HAUTE COUTURE CUSTOMERS IS LOW. THE FASHION HOUSE PROVIDES EXCLUSIVE AND DISCREET LEVELS OF SERVICE TO THEIR WEALTHY CLIENTS WHICH ADD VALUE TO THEIR PRODUCTS. LV ALSO OFFERS ADDITIONAL SERVICE TO THE GREAT NUMBER OF CLIENT FOR PRÊT-À-PORTER.

Apart from the design and manufacture of a single silk dress, value generation is captured in two additional aspects:

The market leader in luxury goods LVMH has developed its own 1,600 retail outlets around which derive around 80% of company’s sales.

LVMH also operates a range of at least 50 brands not only in fashion clothing. The purpose of this strategy is to spread risk and generate profits even if one brand suffers a temporary downturn.

REFERENCES

Shin’ya Nagasawa. (2008). Marketing Principles of Louis Vuitton. _The strongest Brand Strategy_. 44 (5), 44-45

Richard Lynch (2009). _Strategic Management_. 5th ed. England: Prentice Hall. 122-140.

Porter, M. E. (1990), The competitive advantage of nations, New York: Free Press

Macmillan, H. & Tampoe, M. (2000), Strategic Management, Oxford University Press.

Value Chain at Louis Vuitton Essay

The Stimulus-Value-Role Theory Essay

The Stimulus-Value-Role Theory Essay.

The Stimulus-Value-Role Theory has three stages of development. Stimulus, the first stage, is the evaluation of the physical attractiveness of prospective partners. The first impression towards a person is determined by the physical features, such as appearance and social qualities. If both individuals are pleased with each other’s unspiritual characteristics, they might enter into the next stage.

What is significant in the second stage, Value, is the mutual understanding between two persons. In a developing relationship, it is of certain importance for partners to share their fundamental values and thoughts ranging from national issues to household affairs.

This could give a general picture of one’s life to the mate. The more identical their attitudes are, the stronger their attraction becomes. When both members are compatible with each other’s beliefs in different fields, they could make the relationship to the third stage.

The noticeable trait of the final stage, Role, is the observation made by both individuals to see whether the partner’s values are verbalized in daily behaviour and real life situations.

If both members of a couple walk the talk, they might recognize each other as mate. The couple might enter into marriage when they navigate the three stages successfully.

The SVR Model could be applied to a love story of mine. Back in the time when I was still in my secondary education, I was attracted by one of my schoolmates. He was a brilliant student and athlete in my school with his good-looking face, well-trained body, stylish outfit and cheerful personality. Before knowing him completely and thoroughly, I was attracted and impressed by his outstanding physical attributes. Owing to his friendliness and my talkativeness, we have become friends. Thereby, this fulfilled the first stage, Stimulus, of the SVR Theory that the first impression and attraction of a potential partner is primarily determined by physical characteristics.

When I was no longer an acquaintance to him, we talked to each other a lot and shared our values and thoughts ranging from studying methods to future prospect. Both of us believed that studying hard and actively at that moment was the only duty we should perform, in order to strive for a seat in university for a bright and fruitful future. The more we shared, the more similar our values were, and the more intense our attraction become. Hence, this applied to the second stage, Value, of the SVR Model that the more matching two persons’ values are, the stronger their fascination becomes.

After knowing his attitude towards future, I started to observe if the values were expressed in his behaviour. Unfortunately, his academic result was degrading gradually due to the distraction from a number of sport competitions. As he did not walk his talk, our relationship could not be further developed. My experience did not end aligning with the theory into marriage; however, it still showed that some roles can be perceived if the final stage is successfully navigated by a couple.

Murstein, B. I. (1987). A clarification and extension of the SVR theory of dyadic pairing. _Journal of Marriage and Family_, _49_(4), 929-933.

The Stimulus-Value-Role Theory Essay

The Narrow Road to the Deep North Essay

The Narrow Road to the Deep North Essay.

“The Narrow Road to the Deep North” is one of the most magnificent works in classical Japanese literature. Basho was on the road for over a hundred and fifty days, almost entirely on foot. Even today Basho is revered in Japan for having the courage to abandon the material comforts of the temporal life in favor of the spiritual rewards of a life unfettered by possessions.

I respect people like Basho who was full of common sense. He has a character that was pure and penetrated by splendid emptiness.

He also seems to have somewhat of a mid life crisis. In his work “the narrow road to the deep north.” The characteristic of individualism has played a strong role in the live of Basho. Basho displays similar acts of individualism in his story as he departs not only from his home but also from the traditions that have helped shape his life for many years. Basho’s character leaves behind the familial and societal values that were vastly presented in Japanese tradition.

With Basho’s decision to be individuals, he obtains new attitudes and standards that relate to money, education and security. His individualism reveals in his long trip when he acted as there is nobody around except him and the quite nature. “The narrow road to the deep north” was written based on nature and unappreciated creatures, like the flea and the frog. He appreciates nature so much that he writes what he sees and notices in everyday life.

Basho’s description of nature also reflects emptiness and loneliness in his inner spirit. He starts to question the purpose of his existence when he sets off on his trip to the north. Somehow he was waiting for enlightment. He wrote: “I myself fell prey to wanderlust some years ago, desiring nothing better than to be a vagrant cloud scudding before the wind… But the year ended before I knew it… Bewitched by the god of restlessness, I lost my peace of mind; summoned by the spirits of the road, I felt unable to settle down to anything.” The new values and attitudes that people like Basho delivered are what brought Japan into a modern way of thinking and left the oldness.

“The narrow road to the deep north” is rich in sensitivity, quality and variety. Japanese literature in general ranks as one of the great literatures of the world. Their writing of Basho is artfully worded and structured, and it has always been characterized by its lyrical beauty. The beautiful nature of Japanese literature that is revealed in the story has stayed as one of the primary forms of Japanese art since the beginning of Japanese civilization to today. These factors combined with an ability to reach a person on an emotional and spiritual level, have and will continue to make Japan worthy of being one of the world’s great literatures.

bibliographies:

http://wikitravel.org/en/Narrow_Road_to_the_Deep_North

The Narrow Road to the Deep North Essay

The internal rate of return (IRR) and the net present value (NPV) Essay

The internal rate of return (IRR) and the net present value (NPV) Essay.

The internal rate of return (IRR) and the net present value (NPV) techniques are 2 investment decision tools that satisfy the 2 major criteria for the correct evaluation of capital projects. This criterion is that the techniques should incorporate the use of cash flows and the use of the time value of money. This makes them viable techniques for evaluating investment proposals.

The Net Present Value is one of the techniques that are used by firms when evaluating which investment proposals to take on board and which ones to reject.

The net present value is calculated by discounting all flows to the present and subtracting the present value of all inflows.

As cited by Petrochilos G 2004, the Net Present Value principle advises us to invest in the project as long as its Net Present Value is positive, and reject the investment suggestion if its Net Present Value is negative.

The reason given by Petrochilos G, 2004, is that when the flow of future returns is discounted at the cost of capital, and gives a positive NPV, the project can cover both interest and depreciation charges, and thus, the positive NPV represents a clear profit, which increases the wealth of the firm.

In the case of a negative NPV, the condition as referred to by Petrochilos, tells us that we shall lay yourself open to a loss in our internal venture opportunity, thus, should not invest, but consider, instead, using the outer opportunities by lending any money in the capital market.

Formula:Wheret – The time of the cash flowN – The total time of the projectr – The discount rate (the rate of return that could be earned on an investment in the financial markets with similar risk.)Ct – the net cash flow (the amount of cash) at time t (for educational purposes, C0 is commonly placed to the left of the sum to emphasize its role as the initial investment.).

The net present value of an investment tells you how this investment compares either with your alternative investment or with borrowing, whichever alternative you prefer.

The NPV uses the discount rate which is the interest rate used to evaluate the project. This discount rate represents the cost of the funds used also known as the opportunity cost of the capital.

After calculating the NPV if the value is positive that means that the project is financially feasible because after the cash inflows are added and discounted at the cost of capital and the cash outflow is deducted, there will still be something leftover. This would make any such proposal a good investment opportunity.

If after the calculations the net present value is negative, this means that the project is not a very good investment opportunity while if the NPV is 0, the project could be considered as it is on the border line of being viable. This is because it is just earning back the cost of the capital that would be invested in it.

For example if a company wanted to introduce a new product line, the new product will have startup costs, operational costs, and incoming cash flows over a certain period of time. This project will have an immediate (t=0) cash outflow of 0.000, which might include among others machinery, and employee training costs. Other cash outflows for years are expected to be 000 per year. Cash inflows are expected to be ,000 per year for the period estimated. The required rate of return is 10%.

The sum of all these present values is the net present value, which equals $8,881. Since the NPV is greater than zero, the corporation should invest in the project.

The Internal Rate of Return is another technique that is used when evaluating investment proposals. But just like the NPV it satisfies the criteria required for the correct evaluation o0f capital projects by using cash flows as well as the time value of money.

The Internal Rate of Return is the discount rate where the Net Present Value is zero. Internal rate of return (IRR) is a rate of return on an investment. The IRR of an investment is the interest rate that will give it a net present value of zero.

The IRR is calculated by a trial and error processStarting with a guess at the IRR, r, the process is as follows:The NPV is calculated using r.

To find the internal rate of return, one needs to find the values of r that satisfies the following equation:YearCash Flow0-1001+302+353+404+45Internal Rate of Return (IRR)IRR = r,IRR = 17.09%Net Present Value (NPV)Thus using r = IRR = 17.09%,If the NPV is close to zero then r is the IRR.

If the NPV is positive r is increased.

If the NPV is negative r is decreased.

This technique looks for the interest rate that equals the present value of inflows and outflows.

The IRR technique use the accept/reject criteria of comparing the IRR with the cost of capital which is based on comparing the internal rate of return to the cost of the capital of the project.

If the IRR is less than the capital then that project should be rejected because it is not very feasible. If the Internal Rate of Return is larger than the capital required for the project, it should be accepted while if the IRR is just equal to the capital then the project could be considered because it is at the very least earning its cost of capital and should therefore be accepted at the margin.

When evaluating any investment proposals, the NPV technique and the IRR technique usually provide results that are in sync with each other in regards to any single proposal. This means that in many cases it is clear after calculating both the NPV and IRR of any project whether it should be accepted for investment or rejected.

This is because for most projects if the NPV is greater than 0, the IRR is usually greater than the cost of capital making it a viable project. Also where the NPV is equal to zero, the IRR equals the capital putting the project on the margin as it is just able to cover the cost of its capital. In instances where the NPV is less than 0, the IRR is less than the capital so such a venture is not very financially viable and as such should be rejected.

This sync between the results from the NPV and IRR techniques is especially true in cases where the proposals being analysed are independent of each other. In such cases, both the NPV and IRR will give consistent results. This means that a company can invest in 2 projects and run them at the same time just as long as they are do not require the same resources, pass both the NPV and IRR tests and the company has enough funds to invest in both projects at the same time.

Sometimes the results from the NPV and the IRR may contradict each other. This usually happens in cases where a firm is analysing proposals for projects that are mutually exclusive to each other. In such circumstances, the results from the NPV and the IRR may be conflicting which gives rise to a question on which proposal should be accepted and which should be rejected.

These differences in results from the NPV and IRR method can be brought about as a result of a number of circumstances.

The first one of the reasons for such results can be that there is a difference in the initial costs required to set up the different projects that are being analysed. This means that since the initial capital required to set up each project is different from the other, the NPV and IRR values when calculated will tend to conflict and not give conclusive results on which projects should be accepted or which should be rejected.

Another circumstance that can lead to conflicting NPV and IRR values is that the different projects may have different shapes of their subsequent cash inflow streams. For example for one project it could have big cash inflows in its early stages while another project could have small cash inflows in its early stages which then go on increasing overtime. This difference in the shape of their cash flows will lead to the conflict in the NPV and IRR test results for such projects.

These conflicting results of the IRR and the NPV tests occur as a result of implicit reinvestment assumption. The formula for calculating the NPV assumes that cash inflows are automatically reinvested at the cost of capital while the IRR assumes that cash inflow is reinvested at the Internal Rate of Return. This will then result in 2 different set of results for the NPV and IRR tests.

Another scenario where the IRR and NPV may give conflicting results is where the 2 projects being analysed have significantly contradictory cash inflow shapes. Although the initial outlays for 2 mutually exclusively project maybe the same, the shape they take after that may be different. For example for one project, the cash inflow may start out slowly and then gradually build itself up while for the second project it may have a big cash inflow initially that will then decline overtime. In such a circumstance the NPV and IRR tests will give you conflicting results on which of the 2 projects you should accept and which one you should reject.

Furthermore, you may have a problem using the NPV and IRR techniques if the projects you are analysing have unconventional cash flows. Under normal circumstances a project would have a conventional cash flow where cash out flows are followed by a number of cash inflows for the remaining time period of the project. In this case, the only change that occurs is from negative flows (outflow) to the positive flows (inflows. In projects where this does not happen and instead the project started with positive flows (cash inflows) that are then transcending into negative flows (.outflows). In this situation, if the IRR technique is used 2 analyse such projects, it will give 2 different IRR results which can be confusing but if you use the NPV method to analyse the same project, you get one single answer.

The IRR technique should not be used to analyse proposals for projects that have different durability. This is because it does not make assumptions that positive cash flows are reinvested into any project and as such if you use it to analyse 2 different projects with 2 different durations, you will end up with 2 IRR values which make it difficult to decide which of them to reject or which one you should invest in. Many analysts will then use the Modified Internal Rate of Return as it gives them a better understanding of how efficient any project will be in contributing to its discounted cash flows.

Furthermore, the IRR technique is not very effective in circumstances where there are many sign changes before the cash flows for example where a positive cash flow is followed by a negative cash flow then a positive then a negative and so on. In situations like this, there will be many IRR values for a single project which will lead to confusion on the true value of investing in such a project. Examples of such projects are strip mines and nuclear power plants because they have large cash outflows at the end of the project.

Another weakness of the IRR technique is that it does not show the actual annual profitability of a project. This is because although the IRR technique assumes that cash inflows are reinvested into the project at the rate of return, the intermediate cash flows are almost never reinvested and as such the actual IRR will always be lower. The intermediate cash flows include things such as the value of return on stocks and bank deposits. This weakness can be rectified by using the modified internal rate of return which has an assumed reinvestment rate usually at the cost of the capital. As such if you use only the IRR to determine how profitable your investment will be, you may not get an accurate value.

Many people consider, the NPV as a better technique in comparison to the IRR because projects with the highest NPV will give the highest present value for the business and since the ultimate financial goal of any firm is to maximise its stockholder抯 wealth, this makes it quite effective as an investment decision tool. This is because it helps you choose the projects that will ultimately give you the most return if you decide to invest in them.

Furthermore, the fact that NPV assumes reinvestment of the cash inflows at the cost of capital while IRR assumes reinvestment of cash inflows at the rate of return. This makes NPV a more realistic technique on which an investment decision should be made .This is because intermediate cash inflows are almost never reinvested at the rate of return and as such this misconception that all cash inflows are reinvested at the rate of return will give an unrealistic view of the actual annual profitability of a project.

In some situations where the after calculating the NPV and IRR of 2 projects, one has the higher NPV while the other has the higher IRR, a crossover method is sometimes used to determine which is the most viable option of the 2. If the Cross Over Point is greater than the IRR then you choose the project with higher NPV and if the Cross Over Point is less than the IRR value then you opt for the project with higher IRR value.

Because of the many weaknesses of the IRR technique, many analysts consider NPV to be the more accurate of the 2 methods. This does not necessarily make NPV the more popular of the 2 as despite its weaknesses many investment analysts still opt to use the IRR technique. This is because they prefer to compare investment proposals by percentages given by IRR than actual cash amounts got by using the NPV. IRR is usually more effective in determining whether a single project is worth investing in rather than comparing 2 mutually exclusive projects to determine which is better for investment.

In conclusion, both the NPV and IRR techniques are important tools in the decision making process in determining which projects a firm should invest in and which ones they should reject. They give the analyst an idea of the future earning potential of projects and as such make investment decisions easier. Whether the techniques are used together or separately will depend on the nature of the projects being analysed. This will go a long way in easing the investment decision making process.

Bibliography

Chris Mulhearn, Howard. R. Vane, James Eden, (2001), 慐conomics for business, Palgrave Foundations, London: pages 127-131.

Joseph.G.Nellis and David Parker, (1992), 慐ssence of business economics, prentice hall, London: page 150-151.

Evan, Dorla A and Shawn. Forbes, 1993, 揇ecision making and Display Methods. The case of prescription and practice in capital budgeting, the engineering Economist, page 87-92.

Petrochilos. A. George, (2004), 慚anagerial Economics A European Text, Palgrave Macmillan, pg 315McGuigan et al. 2002, Managerial Economics: Applications, Strategy and TacticsSalvator, e D. 2003, Managerial Economics in a Global Economyhttp://en.wikipedia.org/wiki/Net_present_valuehttp://www.investopedia.com/terms/n/npv.asp

The internal rate of return (IRR) and the net present value (NPV) Essay

Genzyme/Geltex Pharmaceuticals Joint Venture Essay

Genzyme/Geltex Pharmaceuticals Joint Venture Essay.

Early in 1997, Genzyme Corporation began negotiations with Geltex Pharmaceuticals in an attempt to launch a joint venture to market Geltex’s first product, RenaGel. Geltex was a young biotech research company with only two products in its pipeline, and they didn’t have the resources necessary to launch RenaGel on their own. Genzyme, on the other hand, was a quickly growing company that experienced revenues of $518 million in 1996. They were attracted to the joint venture with Geltex because of the likelihood of increased earnings, as well as the joint venture being an excellent fit for Genzyme’s specialty therapeutics.

Genzyme/Geltex Pharmaceuticals Joint Venture Essay.

Genzyme also felt that the joint venture would lead to a similar deal in launching Geltex’s second product, CholestaGel. Before cementing a deal with Geltex, Genzyme managers had to ask themselves three questions:

What is the likely enterprise value of the joint venture?

How much of the venture should Genzyme acquire?

How much should Genzyme pay for its interest?

We will attempt to answer these questions by first giving a brief overview of the two companies involved, and then by calculating the Net Present Value of the joint venture based on expected cash flows.

Because we were given no operating history of the two companies, this is the only method we will use to determine what interest Genzyme should take in the joint venture. We will provide answers in three different scenarios: Genzyme’s estimates, conservative, and worst-case.

Launched in 1981 by Henry Blair, Genzyme Corporation is the fourth-largest biotech company in America. What differentiates Genzyme from its competition is that it uses living organisms or their products to generate drugs, rather than chemicals. Genzyme made its name in the industry with Ceradase, a treatment for Gaucher’s disease. This drug was approved for sale in March of 1991 and had a market of 3000 people. Two years later a recombinant form of Ceradase was released and the company began to enter new markets through alliances, joint ventures, and acquisitions. Genzyme quickly became a leader in its industry.

The broad array of products and services Genzyme provided gave the company an ample platform to work with in achieving medical breakthroughs. However, the company decided to outsource innovations through partnerships rather than focusing on developing the next miracle drug. They felt this strategy would lead to higher quality products in late-stage development, which increased the likelihood of the product being approved by the FDA.

Geltex is a company founded in 1992 by George Whitesides, Dr. James Tananbaum, Bob Carpenter, and Henry Blair. The company was started to develop Whitesides’s ideas involving using polymers as drugs. Eight initial investors generated $875,000 to fund the startup, which lasted a year. One year later, $6.8 million was raised from venture capitalists, and the company moved into a new facility in Lexington. In 1994, $10 million more was raised in another round of financing.

Geltex went public in November of 1995 by selling 2,875,000 shares of common stock for $26.2 million. Geltex kept costs down by employing a handful of experts to oversee development and then by outsourcing the actual work. The possible joint venture deal with Genzyme would affect only the American and European markets. The joint venture planned on rolling out the drug in 1999 in the U.S. and a year later in Europe. Genzyme was expecting to take a large interest in the joint venture, so in our analysis we will assume they want anywhere from 30-50%.

RenaGel, a drug for chronic kidney failure, is the focus of the joint venture. Healthy kidneys are maintained when there is a balance of phosphorus and calcium in the blood. In patients with chronic kidney failure, the kidneys were unable to maintain this healthy balance. Bone demineralization could result if untreated. RenaGel works by absorbing excess phosphorus and maintaining the healthy calcium and phosphorus balance.

There are many factors involved in this case that will affect the final numbers. Our analysis takes into effect the following variables: product launch delay (years), peak market penetration rate, price per patient, market compliance, gross profit, life of the drug, U.S. growth rate, European growth rate, and the discount rate.

Genzyme’s Analysis

In this section we show how Genzyme went about their analysis and what values they used for certain variables. These numbers were generally found by settling somewhere near the average of the range provided by market research.

One factor that must be considered is that the drug had not yet been approved by the FDA, but was in phase III trials. Historical data shows that 65% of drugs in this phase eventually get approved for sale to the market. It was felt that approval of the drug would occur late in 1998.

It was expected that 90% of the U.S. market would be eligible for the drug, while this number was lower for the European market, at 70%. The U.S. growth rate was based on the historical rate of 8%, while the European rate was found similarly at 6%.

Analysts’ reports provided a range of 20-59% for a peak penetration rate into the market. As with most new drugs, the penetration rate was expected to start low, grow to a peak, and then begin to slowly decline again. Analysts estimated a peak penetration rate of 43%

Not all patients would continue to regularly use the new drug, even if recommended to do so by their doctor. The compliancy range was felt to be 75-94%, with an average of 87% expected.

The annual price paid for the drug per patient depended on several factors, including how many pills the patient used as well as competitive pressures on how much could be charged for the pill. A range of $600 to $1300 per patient per year was possible, with $1000 as the average. Because the drug had yet to enter the market, variable costs were difficult to estimate. Genzyme decided to use the industry average of 70% of revenues to estimate gross profit to keep their analysis accurate.

One very important variable in this analysis is the life of the drug. There were currently no competitors to RenaGel on the market, but several were under development. It was estimated that the life cycle of the drug could last anywhere from 10-20 years, with a likely life span of 14 years. It was projected that RenaGel would reach its peak penetration within five years of entering the market.

The joint venture planned to market the drug to doctors with the largest patient populations instead of concentrating solely on patients with chronic renal failure. Using this approach, it was decided that a sales force of 45 people would be enough to distribute the drug. Each sales representative would cost $200,000, rising at 5% yearly. General and Administrative costs were assumed to be 40% of the cost of the sales force.

To forecast the cash flows, the joint venture would comprise a 45-day collecting period for receivables, a 90-day period for inventory, and a 45-day period for payables. Capital expenditures were expected to be $14 million, which were split over the first three years of the venture. Receivables were estimated to be 12.3% of revenues. It was estimated that payables would be equal to 30% of receivables, and that inventory would maintain a level at 60% of receivables. Depreciation was expected to be $400 thousand for the first two years of the venture and $950 thousand every year following that.

Based on these assumptions, we can answer the three questions proposed to us by forecasting the income statements and cash flows resulting from the joint venture. The joint venture does not become profitable until 2001. Following this, however, net income quickly rises and reaches more than $89 million in 2012, the final year in the life of the drug.

By projecting cash flows from our net income numbers, we are able to calculate the net present value of the joint venture at $89,792,891. Genzyme was highly interested in this joint venture and wanted a large stake in the business. A 50% interest would give their interest in the joint venture a value of nearly $45 million. We feel it is reasonable to expect to realize about 40% of this net present value when the initial investment is factored in, so an estimate of $27,500,000 was determined as how much Genzyme should pay for their 50%
interest in the joint venture. To summarize:

What is the likely enterprise value of the joint venture? $89,792,892

How much of the venture should Genzyme acquire? 50%

How much should Genzyme pay for its interest? $27,500,000

Calculations for these numbers can be found in Appendix A, Exhibits 1 & 2.

Conservative Scenario

To determine our answers in the conservative scenario, we used what we felt were the most likely numbers from the ranges provided by market research, and adjusted accordingly if we thought necessary.

The first change we made was to reduce the life span of the drug to 13 years. We felt that it would still peak within five years of reaching the market, but we gave it a peak penetration rate of 40% to be on the safe side. A compliance rate of 90% could be reasonably expected, as there are currently no competitors on the market. We also factored in a one-year launch delay in the U.S. and a two year delay in Europe, based on the idea that it was possible the FDA would not approve the drug before the end of 1998. The annual price per patient was left at $1000 as we felt this was an accurate estimate. The discount rate was left at 20%, as this number had been found using the industry historical average.

All other factors were left the as they were in the previous analysis. These factors are based mostly on historical data and are likely to be accurate, so we left them alone.

When using these numbers, we get a very different answer. First off, the joint venture would not become profitable until 2002. Its net income would peak in the final year of the joint venture at more than $85 million. The net present value of the joint venture is $64,156,817. Our analysis shows that a 50% interest in the joint venture is not very profitable for Genzyme unless their initial investment decreases. To maintain the approximate 40% realization of net present value after factoring in the initial investment, Genzyme could pay $19,000,000 for a 50% interest in the venture, $15,500,000 for a 40% interest in the venture, or $11,500,000 for a 30% interest. The net present values associated with these three situations are $13,078,409, $10,162,727, and $7,747,045, respectively. Thus, a 50% share is most beneficial for Genzyme. To summarize:

What is the likely enterprise value of the joint venture? $64,156,817

How much of the venture should Genzyme acquire? 50%

How much should Genzyme pay for its interest? $19,000,000

Calculations for these numbers can be found in Appendix B, Exhibits 1 & 2

Worst Case Scenario

For the worst case scenario, we adjusted the variables to the low end of the ranges provided by market research. This scenario was analyzed to see if it was possible to profit from the joint venture in the event that all market conditions made it unlikely.

Our first adjustment was to lower the life of the drug to 10 years. Its peak penetration rate was limited to 20%, but would still be reached within 5 years of the drug hitting the market. Compliance dropped to 75%. We factored in a 2 year launch delay in America, thus a 3 year delay in Europe as well. The annual price per patient was lowered to $600. Once again, any other factors not mentioned here were left as they were in the original analysis. The discount rate was left at 20% because Genzyme was confident this would be the rate based on historical data.

When looking at the results of this scenario, it is obvious that Genzyme would not want to go through with the joint venture with Geltex. The venture does not become profitable until 2003, and net income peaks in 2007 at almost $22 million. The present value of the future cash flows doesn’t look any better. The net present value of the joint venture is ($29,513,370). No matter what share of this Genzyme took, it would provide a negative net present value, and thus the project should not be undertaken. To summarize:

What is the likely enterprise value of the joint venture? ($29,513,370)

How much of the venture should Genzyme acquire? 0%

How much should Genzyme pay for its interest? $0

Calculations for these numbers can be found in Appendix C, Exhibits 1 & 2

Genzyme/Geltex Pharmaceuticals Joint Venture Essay

Personal and organizational values Essay

Personal and organizational values Essay.

What are personal and organizational values?

Values are one of the most special achievements as human beings. A person acts not just in service to personal needs, but also out of a broader sense of what is important, purposeful and meaningful (Cynthia D. Scott, 1993). Values are the building blocks of organizational culture. They represent an organization’s basic guidelines about what is significant; how business is conducted; how people relate to one another; its clients and customers relationships; and its decision making strategies.

Values affect every aspect of the organization, and take years, constant attention, and perseverance to change. Values serve to inspire and foster commitment, motivation, innovation and trust around principles of conduct that are held inviolate.

They reflect intentions and provide guidance for every action when there is a gap between intentions and reality. When actions do not comply with stated intentions, the gap becomes a source of cynicism and loss of confidence and momentum toward change and innovation.

Values are represented in decision making processes, interpersonal interactions, leadership actions, reward structures, supervisory styles, and information and control systems. Each plays a role in sustaining the structure of a value, and each serves as a lever of change. To stimulate an organization toward change, we must minimize or fill the gap between the stated values and value actions (Rodney Napier, 1997).

Conflict between personal and organizational values and goals

How do organizational and personal goals differ? Organizational goals are carefully and logically determined. Frequently, this must be discussed with other people in order to define them exactly. An organizational goal is one that we understand and commit to intellectuality. A personal goal, on the other hand, is a private and often purely emotional commitment (Merrill E. Douglass, 1993). Value conflicts arise when people are working in a situation where there is a conflict between personal and organizational values. Under these conditions, employee may have to struggle with the conflict between what they want to do and what they have to do (Diane F. Halpem, 2005).

This can be a distracting experience as you face changes, contrasts and a few surprises, and have to make some sense of all this (Henry Tosi, 2000). For example, people whose personal values dictate that it is wrong to lie may find themselves in a job where lying becomes necessary for success. Successful job performance may require a bold lie, or perhaps just a shading of the truth.

People who experience such a value conflict will give the following kinds of comments: “This job is eroding my soul,” or “I cannot look at myself in the mirror anymore knowing what I’m doing. I can’t live with myself. I don’t like this.” If workers are experiencing this kind of mismatch in values on a chronic basis, the burnout is likely to arise. However, a Machiavellian individual, who believes that the end justifies the means, will have a better fit with a job in which lying is essential to success and will probably not experience value conflict and many other situations (Diane F. Halpem, 2005).

Value-driven management

Value-driven philosophy is designed to develop effective and value-driven leadership at every level in the organization. The decision making and leadership styles of effective business leaders are value-driven men and women who create value for their organizations that goes far beyond mere stockholder value. This is not to suggest that they should disregard profitability as an important corporate goal, but it is instead to state that the financial bottom line—as a value—is integrated with other value drivers in their leadership behavior. Value Driven Management and value driven leadership are interactive and synergistic.

Value-driven organizations will tend to develop value-driven leaders, and value driven leaders will create value over time for their organization and their organizations are becoming more valuable and fulfilled, and continue to grow and thrive throughout their lifetimes. This view is especially significant in today’s growing force of high employment, knowledgeable workers, and the concept of measuring and managing organizational knowledge as intangible financial assets.

There are 8 value drivers that impact organizational and individual decision making. These value drivers are to some degree interrelated and overlapping, but in total, they encompass the universe of the organization, combining the internal and external variables it must confront throughout its existence:  external cultural values, organizational cultural values, individual employee values, customer values, supplier values, third-party values, owner values and competitor values. When these value drivers are used systematically and properly in the company’s decision processes, and when their individual and collective impact is weighed and balanced, in organizational decision making, the firm will create value for –itself over time—particularly in the long run (Randolph A. Pohlman, 2000).

Collegial vs. meritocratic structure of value

Better fit between individuals’ and organizations’ values predicted higher levels of satisfaction and commitment and lower turnover. Leadership organizations have a tough, but not, harsh, view of change. They focus on accountability for actions and give some emphasis to the discussions of goals and means. Although these organizations are still basically compliance-oriented, their documents portray the change process less impersonally and more persuasively, seeking to encourage employees to comply with the requirements rather than simply expecting it. In the meritocratic value structure, this appears to be a much greater emphasis on motivating employees to play a constructive role in change.

This emphasis involves explaining both the goals of change and the means for bringing it about. Meritocratic structures can be characterized as trying to challenge or energize employees. Change, although difficult, is associated with achieving important goals, and the organization signals that people’s efforts and achievements are recognized and appreciated.

This is characterized by themes of striving, effort, goals, achievement, motivation and recognition. Only collegial organizations view change in a positive way and emphasize employee participation. Collegial ones do not challenge their employees to achieve organizational goals; instead, they emphasize the benefits change brings to internal and external stakeholders and depict an enthusiastic, responsive orientation to change (Boris Kabanoff, 1995).

Entrepreneurial vs. bureaucratic values (differences in social origins, including gender and cognitive ability)

Differences in social origins, such as gender and cognitive skills create different sets of belief concerning the qualities of a good job. According to Miller and Swanson theory (1958), the theory identifies two major value systems—the entrepreneurial and bureaucratic. These values are oftentimes merged, and thus form beliefs about the desirable attributes of jobs, by comparing expected returns against expected risks in the search of opportunities for future economic wellbeing.

Some people may embrace either of the entrepreneurial or bureaucratic orientation is determined mainly by entrepreneurial skills and attitudes towards risk, which in turn can be affected by family background, schooling, gender, and cognitive skills. The adult achievements are favored by early family and schooling forces, and the very same personal qualities that give in to advantages for achievement, also creates expressions of preference that favor entrepreneurial type over the bureaucratic job properties.

Cognitive ability and gender, being the most powerful sources of variation in job values, are followed by years of schooling. Parental education, occupational status, self-employment and income all geared towards entrepreneurial over bureaucratic job properties. Significant other’s influence, educational aspirations and years of schooling, aside from favoring entrepreneurial over bureaucratic values, create a very strong preference for esteem over all other job properties and is significantly related  in the value system geared towards  achievements (Halaby, 2003).

Cultural values on problem solving, teams, gender, stress and ethics

National culture plays an important role and leads to differences in how problems are solved and in the quality of the solutions. Chinese employees are more likely to delay informing a manager about a problem until the manager sees the problem on his or her own. The employees are also likely to minimize the seriousness of the problem. In western cultures, managers are more likely to appreciate and give credit to an employee who draws attention to a problem, and therefore, problems are more rapidly identified and brought to the attention of management.

  The result is that Western managers are more likely to speak directly about the problem. In collectivist cultures, decision making is more likely to rely on consensus while managers from individualist rely more on their own experience and training when making decisions. It is also  found that Australians prefer a decision making style based on having a selection choices that require careful individual thought, whereas the Japanese prefers styles that require more references to other people. In Japan, individuals are likely to measure their personal success by the success of their team and organization (Siverthome, 2005).

Impact of technology

While technology has increased the ability to communicate, one might question whether it has increased or diminished the capacity to connect with co-workers in the workplace. It is through feeling this connection that we derive our sense of teamwork, community, attachment, and belonging—all essential aspects of what humans needs to feel: valued, respected and acknowledged. It is these core social and emotional elements that lubricate human beings and keep them going in times of difficulty, be it a personal, professional, or even a national crisis (Lewis, 2006).

Dealing with value conflicts

What can be done to alleviate burnout? One approach is to focus on the individual who is experiencing stress and help him or her to either reduce it or cope with it. Another approach is to focus on the workplace, rather than just the worker, and change the conditions that are causing the stress. The challenge for organization is to identify interventions that target those particular areas (Diane F. Halpem, 2005). What implications these have for managers?  Value configurations may motivate and support the organization’s coherence, strength, and stability. They also offer managers a framework for conceptualizing the nature and purpose of organizational change. One possible explanation for the high failure rate of company mergers and acquisition is “culture incompatibility” and “culture collisions.” (Boris Kabanoff, 1995)

 

 

 

References:

BORIS KABANOFF, R. W., MARCUS COHEN (1995) Espoused Values and Organizational Changes Themes. Academy of Management Journal, 38, 1075-1104.

CYNTHIA D. SCOTT, D. T. J., GLENN R. TOBE (1993) Organizational Vision, Values and Mission, Thompson Crisp Learning.

DIANE F. HALPEM, S. E. M. (2005) From Work-family Balance To Work-family Interaction: Changing The Metaphor, Routledge.

HALABY, C. N. (2003) Where Job Values Come From: Family and Schooling Background, Cognitive Ability, and Gender. American Sociological Review, 68.

HENRY TOSI, N. P. M., JOHN R. RIZZO (2000) Managing Organizational Behavior, Blackwell Publishing.

LEWIS, G. W. (2006) Organizational Crisis Management: The Human Factor, New York, Auerbach Publications.

MERRILL E. DOUGLASS, D. N. D. (1993) Manage Your Time, Your Work, Yourself AMACOM American Mangement Association.

RANDOLPH A. POHLMAN, G. S. G. (2000) Value Driven Management: How to Create and Maximize Value Over Time for Organizational Success, AMACOM American Management Association.

RODNEY NAPIER, C. S., PATRICK SANAGHAN (1997) High Impact Tools and Activities for Strategic Planning: Creative Techniques for Facilitating Your Organization’s Planning Process, McGraw-Hill Professional.

SIVERTHOME, C. P. (2005) Organizational Psychology in Cross-cultural Perspective, NYU Press.

Personal and organizational values Essay