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Compact case
Case
-
Reference no. 302-149-1
Authors: Robert Luke (Bucharest School of Management)
Published in: 2002

Abstract

This is the second of a three-case series (302-148-1, 302-149-1 and 302-150-1). Farmaco has been a company, which, for over 25 years, has been run under a communist regime, in a market where for many products, it has held a monopoly position. Because of an urgent need for capital to undertake a vital capital expenditure programme, it has been forced to bring in outside investors who changed top management with their own people. Some basic changes were undertaken, though no real attempt was made to change the culture of the company. At the end of case (A), the general manager is faced with a series of critical decisions forced on him by exogenous circumstances. He finally becomes so frustrated at lack of movement on regulatory approval of requested (and necessary) price increases, he decides to confront the Ministry of Health, rather than work with it. This has a disastrous outcome in terms of company image in the market, and with the Ministry. As a result in this case (B), the general manager is fired, along with the president, and the venture capital (VC) representative moves in as the new president and institutes a series of changes to improve the situation. Unfortunately, a government body has instituted an investigation as to the possible abuse of a dominant market position and this, at the end of case (C), leads Mr David, the VC representative, to consider closing down the production facility and moving production offshore. This would significantly affect a whole series of stakeholders.
Industry:
Size:
2,000 employees, USD40 million sales
Other setting(s):
2001-2002

About

Abstract

This is the second of a three-case series (302-148-1, 302-149-1 and 302-150-1). Farmaco has been a company, which, for over 25 years, has been run under a communist regime, in a market where for many products, it has held a monopoly position. Because of an urgent need for capital to undertake a vital capital expenditure programme, it has been forced to bring in outside investors who changed top management with their own people. Some basic changes were undertaken, though no real attempt was made to change the culture of the company. At the end of case (A), the general manager is faced with a series of critical decisions forced on him by exogenous circumstances. He finally becomes so frustrated at lack of movement on regulatory approval of requested (and necessary) price increases, he decides to confront the Ministry of Health, rather than work with it. This has a disastrous outcome in terms of company image in the market, and with the Ministry. As a result in this case (B), the general manager is fired, along with the president, and the venture capital (VC) representative moves in as the new president and institutes a series of changes to improve the situation. Unfortunately, a government body has instituted an investigation as to the possible abuse of a dominant market position and this, at the end of case (C), leads Mr David, the VC representative, to consider closing down the production facility and moving production offshore. This would significantly affect a whole series of stakeholders.

Settings

Industry:
Size:
2,000 employees, USD40 million sales
Other setting(s):
2001-2002

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