GlaxoSmithKline and Pfizer choose to collaborate on HIV drugs
Here is an excellent highly relevant article on cooperative behaviour between oligopolistic giants. Two of the world’s biggest drugs companies GlaxoSmithKline and Pfizer have announced a plan to merge their HIV treatments in a joint venture. ViiV Healthcare is an attempt for both companies to limit the risks of costly races to find new profitable treatments for HIV/aids and give them an opportunity to counter the loss of the revenues as these companies lose patent protection and are open to competition from generic drug makers. It is a strong reminder of the very high fixed costs of research into new drugs; the long lead times between new drug development, testing and finally getting it to the market. And also the impact of the entry of generic drugs into markets once patent protection runs out. The new company has a 19% share of the global drugs market, in comparison to the Californian company Gilead’s 31%.
Drug firms’ collaboration pools HIV treatments (Independent)
IPO of HIV business is ‘up to shareholders’ (Telegraph)
HMV diversifies into cinemas
Here is a great example of business diversification and growth through joint venture. HMV is entering into a joint venture with cinema chain Curzon Artificial Eye to open a cinema called hmvcurzon above its Wimbledon store.
read more...»Budgeting for expansion
Here is a really good example of two businesses looking to exploit opportunities from the economic downturn.
Travelodge - which is owned by Dubai International Capital - has announced an fresh expansion plan which fits into its long-term aim to grow to over 70,000 rooms in nearly 1000 hotels by 2020 and to be the biggest hotel operator in London by the time the Olympics arrives in 2012.
And as part of the organic growth strategy, Travelodge is teaming up with the discount food retailer Aldi to develop sites together into supermarkets and hotels. Notably two of the initial projects in this joint venture are in Middlesbrough (on Teesside) and in Newquay in Cornwall - both in regions where per capita incomes are substantially below the national average.
Both businesses are taking advantage of the collapse in demand for commercial and residential property - which is freeing up land for others to invest in.
Revision: Growth of Businesses
The growth of businesses is related to several other topics at A2 level – including:
Economies of scale and scope
Development of monopoly power in markets
Different objectives of businesses e.g. growth max rather than pure profit max
The role of profit in allocating scarce resources
Competition policy and economic welfare – market power issues
This 3 page revision note looks at why firms grow and how they grow with lots of recent examples to supplement your notes. There are no analysis diagrams in this revision note - but do think about which diagrams you might be able to use.
Revision note:
Business_Growth.pdf
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