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SECTION C

5. Using quantitative and qualitative data from the case study and the additional
stimulus above, recommend which option 1 or 3 is best for achieving B-Pharma’s
objective of growth.

You will find it useful to calculate the predicted outcome for Option 3 in the above
decision tree. [20 marks]

Option 1:
overall cost less than option 3
lower predicted outcome than option 3 ($101 million rather than $148 million)
lower risk of failure than other option
so purely on decision tree, not the best, unless risk is the major factor
would hostile takeover work?
businesses could be bought cheaply, may give long term benefit
businesses would have local market knowledge
risk spread among several firms
also markets more similar to their traditional markets.
However:
costs of modernizing
workforce issues.

Option 3:
by far the highest predicted outcome, but risks very high and highest cost
may help to appear more ethical
huge and growing market worldwide.
However:
cost of failure is the highest
would joint venture work?
new to this market.

Decision largely depends on B-Pharma’s attitude to risk. There is no market research

on which to base the decision.

Accept any other relevant substantiation.

Marks should be allocated according to the assessment criteria on pages 4–5.

The text below gives additional guidance for when applying the assessment criteria.

Criterion A: Knowledge areas could include: risk, decision trees and predicted
outcomes, Ansoff matrix, diversification, market development, takeovers, joint
ventures, strategic decision making. No understanding of decision trees / predicted
outcomes, award a maximum of [3 marks].

Criterion B: Application will be judged by the use of the stimulus material in particular
the extra material. If only one option considered, award a maximum of [2 marks].

Criterion C: For full marks, there needs to be a balanced comparison between the two
options. If no comparison but analysis of one option, award a maximum of [2 marks].
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Criterion D: see criterion.

Criterion E: Likely issues include: impact on workers, views of the shareholders /

management, other stakeholders.

Note – a recommendation that a decision cannot be made due to lack of information

(eg market research) can be regarded as a decision provided the arguments are
supported.