Welcome to COMM1100

The Week 5 lecture on Stakeholders and Customer Relations

Decisions will be starting soon.
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 COMM1100 Business Decision Making

Stakeholders and Customer Relations

Lecturers:
Dr. Jimi Kim
Ms Aleksandra (Sasha) Balyanova

To create a positive online class experience

• Please switch your microphone off so we can ensure a quality class experience.
• Please ask questions! We will use Slido to answer your questions.
• The lecture will be recorded, and the recording will be available in Moodle for you to review.
 Assessment 3
•Due at 6.00pm (AEDT) Friday, 31 March​

• 20% Writing task (Week 7)​

•Based on a case study​

•1,200 words, excluding references

•Via Moodle course site, through Turnitin​

•You will apply the tools and concepts you have developed over the first half of the course to analyse a
business case.​

•Use Harvard Referencing to reference your sources​

What you have learned so far
• Last week in the core learning we looked at an
organisation’s impact on stakeholders.
• We then learned more about legal responsibilities
and considerations, discussed in the lecture using
employer mandates as a case
• In the individual core learning this week we learned
about price discrimination, consumer protection and
intellectual property law.
COMM1100 Business Decision Making
Foundations of Business Decisions Decision Making Processes
Decisions Related to Stakeholders

1 2 3 4 5 6 7 8 9 10 11

10 11
Intro to Surplus
Stakeholders Employee Stakeholder
Business Decision measures and Legal rights of Competitor
Decision and & Supplier Decisions
Making welfare stakeholders Relations The role of Regarding Manages
making, Supply Customer Flexibility Relations
Stakeholders and Demand Market power in decision Decisions government in
and and imperfect Relations Week Decisions Complexity in
making business
CR competition Decisions Business Decision
Making
ASSESSMENTS

Quiz 1: Case study Quiz 2: Final

10% analysis: 20% 10% exam
50%

Participation: Participation: Participation: Participation: Participation: Participation: Participation: Participation:

10% (in total) 10% (in total) 10% (in total) 10% (in total) 10% (in total) 10% (in total) 10% (in total) 10% (in total)
 In this lecture
Today we will analyse the Harvard business case: The
Pharmaceutical Industry Faces AIDs in Africa
• Analysing business cases is a core approach to learning in the
UNSW Business School.
• A Case Study is a document of a real-life business scenario or a
realistic imagined business scenario. The case study will present
to you a problem, issue, conflict, report or impending decision-
making that needs to be addressed, solved or analysed for a
business.
• Through this process we will continue to build your capability to
analyse, integrate and think critically.
• This is also valuable preparation for submission of your case
analysis (week 7), final exam and graduate recruitment
processes.
What is the case study about?
Life, Death and Property Rights: The Pharmaceutical
Industry Faces AIDS in Africa
Life, Death and Property
Rights: The Pharmaceutical
Industry Faces AIDS in Africa
Photograph: Krista Kennell/Krista Kennell/ZUMA
/Corbis

1. What is the key business decision that the pharmaceutical

companies are making in the case?
2. Who are the main stakeholders involved in the business decision?
3. What are the ethical considerations when making the decision?
4. What are the legal considerations when making the decision?
5. What are the economic considerations when making the decision?
6. What would you do if you were a senior manager in one of the
pharmaceutical companies?
Questions
Direct Slido link:
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Or go to https://www.sli.do and enter the code #COMM1100

Case Analysis
Question 1
What is the key business
decision that the
pharmaceutical companies are
making in the case?

Photograph: Gideon Mendel/Corbis

Case Analysis
Question 2

Who are the main

stakeholders involved in
the business decision?

Image: Shutterstock
 Rainbow Diagram
Pharmaceuticals case for Stakeholder
study Analysis
Stakeholder Analysis
Case Analysis
Question 2B

Rate how each

stakeholder influences
and is impacted by the
Africa HIV drug price
decision.

Image: Shutterstock
Rainbow Diagram for Stakeholder Analysis
Case Analysis
Question 3
What would you do if you
were a senior manager in
one of the pharmaceutical
companies?

Antiretroviral drugs that have been combined to make

Triomune, a drug which is cheap easy to take. Photograph:
Gideon Mendel/Corbis
 Two ethical approaches to decisions

Utilitarian Deontological

• Calculate net benefit and • Apply a principle of

net cost for each what is right vs. wrong
stakeholder
• Determine ethical answer • If it is right, you do.
based on aggregate • If it is wrong, you don’t.
benefit vs. cost
Utilitarian: Consequentialist analysis

Stakeholders Option A Option A – Option B– Option B –

(Sample) – Costs Benefits Costs Benefits

#1
#2
#3
#4

Best decision = action that produces the greatest good for the
greatest number of people, for society overall.
 Deontology : Focus on principles/values

Deontology (duties and obligations to uphold ethical principals,

rules, and values):

Decisions based upon duty to uphold universal principles and

values (e.g., honesty, promise-keeping, fairness, rights, justice,
respect, compassion, etc.) or to act based on moral rules
(Golden Rule, Kant, Rawls).

Focus on doing what’s “right” according to these principles,

values, rules (rather than doing what will necessarily maximize
societal benefit).
Case Analysis
Question 3

What are the ethical

considerations when
making the decision?
(Deontological and
Utilitarian Approach)

Image: Africa Renewal, 10/2007

Answering Question 3: Utilitarian Approach

Page 14 of case
Case Analysis
Question 4
Which legal issues
impact the Africa
drug pricing
decision?

Image at https://www.istockphoto.com/photo/legal-law-concept-statue-of-lady-justice-with-scales-
of-justice-sky-background-gm1207748593-348831218
Case Analysis
Question 4B
Impact of intellectual
property rights on
decision….

Image at https://www.istockphoto.com/photo/legal-law-concept-statue-of-lady-justice-with-scales-
of-justice-sky-background-gm1207748593-348831218
Profitability vs. Legality vs. Responsibility

Conflict No Conflict Conflict

Between Between Between
Considerations Considerations Considerations

Profitability Unprofitable Unprofitable

Profitable
(Illegal/Enforced)

Legality Legal Illegal

Responsibility Harmful to Beneficial to Harmful to

Stakeholders Stakeholders Stakeholders
Case Analysis
Question 5
What are the
economic
considerations
surrounding the
Africa drug pricing
decision?

Image: https://leverageedu.com/blog/scope-of-business-economics/
Answering Question 5

• Pharmaceutical companies
have consistently higher profits
than other large corporations

• Pharmaceutical companies
have market power

• Industry with high fixed costs

and low marginal costs

• To be profitable, would need

to charge a sufficient
markup over marginal cost
 Answering Question 5

• If the firm cannot price

“Rich” market “Poor” market discriminate, what’s
the profit maximising
price to charge?
(10 people) (10 people) (10 people)

$10k $4k $500

Marginal cost = $50

 Answering Question 5

• If you charge $10k:

10000*10-50*10 = $99,500
“Rich” market “Poor” market
• If you charge $4k:
4000*20-50*20 = $79,000
(10 people) (10 people) (10 people)

• If you charge $500:

500*30-50*30 = $13,500

Profit maximising to charge

$10k $4k $500 $10k

This means poor in rich

market and everyone in the
poor market does not get
medicine.
Marginal cost = $50
 Answering Question 5

• What if the firm can

“Rich” market “Poor” market price discriminate?

(10 people) (10 people) (10 people)

$10k $4k $500

Marginal cost = $50

 Answering Question 5

• In the rich market, it is

“Rich” market “Poor” market still profit maximising
to charge $10k
($99,500>$79,000)
(10 people) (10 people) (10 people)

• In the poor market, the

firm can charge $500
and get an extra
$10k $4k $500 500*10-50*10 = $4500
in profit

• Total firm profits are

higher, and the poor
Marginal cost = $50 market is served
 Answering Question 5

• Price discrimination
“Rich” market “Poor” market can potentially provide
improvements in
access, BUT:
• Need guarantee of
(10 people) (10 people) (10 people)

no cross-market
sales
• Unlikely to result in
$10k $4k $500 access for the most
in-need

Marginal cost = $50

Re-cap and tutorial
• Today we have analysed the case: Life, Death and
Property Rights: The Pharmaceutical Industry Faces
AIDS in Africa.

• In the tutorial you will continue to discuss the issues

raised in this case study and consider them in light of
recent events, with some more in-depth exploration of
Price Discrimination.
Next week
• In Week 7 lecture, we will cover competitor relations
decisions (and introduce game theory)
Thank you!

If you have any questions about

this lecture, please post it on
Moodle.

The lecture recording will be made

available in Moodle.

Moodle course site:

https://moodle.telt.unsw.edu.au/course/view.php?id=60102

Course email:
COMM1100@unsw.edu.au
References
Spar, D., & Bartlett, N. (2005). Life, death and property rights: The pharmaceutical industry faces
AIDS in Africa. HBS No: 9-702-049. Boston, MA: Harvard Business School Publishing.