Jordana Gracenin - PowerPoint PPT Presentation

Title: Jordana Gracenin


1

• Jordana Gracenin
• Alex Leckie
• Amanda Stanonik

2

• We dedicate ourselves to humanitys quest for
  longer, healthier, happier lives through
  innovation in pharmaceutical, consumer and animal
  health products.

3
Table of Contents

• Jordana Gracenin
• History
• Factors of Production
• Resource Allocation
• Ceteris paribus factors of supply and demand

• Alex Leckie
• Elasticity
• Income and Substitution Effects
• Corporation, Diversification and Sunk Cost

• Amanda Stanonik
• Profit Maximization
• Perfect Competition
• Monopoly
• Oligopoly

4
History The Enterprise Begins!

• 1849 Charles Pfizer opens as a fine-chemicals
  business in Brooklyn, New York.
• 1862 The first domestic production of
  
• tartaric acid and cream of tartar
• 1880 Begins managing citric acid
• 1899 Leader in the chemical business

5
History Processes and Products

• 1906 Charles Pfizer dies
• 1910 Company sales total 3 million
• 1919 mass production of citric acid by mold
  fermentation of sugar
• 1928 Penicillin mold discovered
• 1939 Leader in fermentation technology
• 1944 Worlds largest producer of the miracle
  drug

6
History Age of Research and Rebirth

• 1961 Establishes a World Headquarters
• 1971 Central Research Division
• 1972 One billion-dollars Reached!
• 1980-1992 Feldene, Zoloft, Norvasc, Zithromax
• 1995 World leader in the development and
  production of pharmaceuticals for livestock and
  companion animals
• 1998 launch of Viagra

7
History The Future of Pfizer

• 2000-2004
• Geodon schizophrenia
• Bextra Rheumatoid Arthritis
• Vfend serious fungal infections
• Relpax migraines
• Caduet high blood pressure and cholesterol

8
Factors of Production

• Land
• Labor
• Capital
• Entrepreneurship

9
Factors of Production

• Land
• Preexisting gifts of nature
• Physical space on which production takes place
  and the useful materials found under it or on it.
• Pfizers Land
• Corporate Headquarters NY, NY
• Research Development Connecticut,
• England, Japan, France, California,
• Massachusetts, Michigan
• Health Care NJ

10
Factors of Production

• Labor
• The time human beings spend producing goods and
  services
• Pfizers Labor
• Job Opportunities
• Global Research and Development, Manufacturing,
  Pharmaceuticals and Pharmaceutical Sales
• Corporate and Divisional Functions, Consumer
  Healthcare, Animal Care

11
Factors of Production

• Pfizers Capital
• Fermentation tanks
• Robotic high-throughput screening
• Sophisticated genomic studies

• Capital
• Something produced that is long-lasting and used
  to produce other goods
• Physical capital physical goods, (machinery,
  equipment and factories)
• Human Capital skills and training

12
Factors of Production

• Entrepreneurship
• The ability and willingness to combine the other
  resources into a production enterprise

• Pfizers Entrepreneurship
• 2004 Total Revenues 52.5 Billion
• 2004 Actual Research and Development Spending
  7.7 Billion

13
Resource Allocation

• Which?
• How?
• Who?

14
The 3 Methods of Resource Allocation

• Traditional Economy
• Long lived practices of the past
• Command (Central Planned) economy
• Explicit instructions from a central authority
• Market Economy
• Individual decision making

15
is

• A MARKET ECONOMY
• Freedom of Choice
• Those who control more resources will have more
  choices available to them then those who control
  fewer resources

16
Ceteris Paribus Factors of Demand

• Income
• Number of Consumers
• Expectations of Consumers
• Price
• Taste

A change in ANY of these factors will cause the
demand curve to shift either to the left or right
17

• High demand for drugs because of a sudden
  outbreak
• Rightward shift
• Merck company decreases their prices for a
  particular drug
• Leftward shift

18
Ceteris Paribus Factors of Supply

• Input prices
• Number of Suppliers
• Expectations of Sellers
• Price of Alternate Goods
• Technology

A change in ANY of these factors will cause the
supply curve to shift either to the left or right
19

• More efficient use of materials
• Shift rightward
• Cost of Penicillin Mold increases
• Shift leftward

20
Elasticity

• Definition Elasticity A unit-free measure of
  responsiveness.
• How responsive a dependent variable is to changes
  in the independent variable.
• Examples
• Price elasticity of demand
• Price elasticity of supply
• Income elasticity of demand

21
Elasticity (cont.)

• Determinants of own price elasticity of demand
• The fraction of the budget
• The time period
• The number and closeness of substitutes

22
Elasticity (cont.)

• When it comes to the number and closeness of
  substitutes, remember
• The more substitutes, the more elastic
• The fewer substitutes, the more inelastic

23
Rx Substitutes
24
OTC Substitutes
25
Income Substitution Effects
26
Income Substitution Effects

• A closer look at Viagra
• What substitute products directly compete with
  Pfizers Viagra?
• Does Get back in the game ring a bell?

27
Income Substitution Effects
28
Corporation

• Acts through managers
• Owned by investors, i.e. stockholders
• Separate legal entity
• Limited liability
• Double taxation

29
Corporation (cont.)
FINANCIAL HIGHLIGHTS THREE-YEAR SUMMARY

AS OF AND FOR THE YEAR
ENDED DECEMBER 31


Change
(MILLIONS OF DOLLARS)
2004 2003
2002 04/03 03/02 Revenues

52,516 44,736 32,294
17 39 Research and development
expenses 7,684 7,487
5,208 3
44 Merger-related costs
1,193 1,058
630 13 68 Income
from continuing operations before provision
for taxes on income, minority interests and
cumulative effect of change in accounting
principles
14,007 3,246 11,766
332 (72) Net income
11,361
3,910 9,126 191
(57) Diluted earnings per common share
1.49 .54
1.46 176
(63) Weighted-average shares diluted
7,614 7,286 6,241
5 17 Number of common
shares outstanding 7,474
7,630 6,162 (2)
24
30
Corporation (cont.)

• Last Stock Quote
  Change
• 27.03
  -0.19
• Stock Symbol PFE
  Change -0.7
• Stock Exchange NYSE Day
  High 27.20
• 
  Day Low 26.89
• Stock Quote at
  Open 27.10
• 400PM EDT, April 25, 2005 Previous
  Close 27.22
• 
  Volume (000s) 24154900
• 
  52 Week High 37.77
• 
  52 Week Low 21.99
• 
  Market Cap 201.61

31
Diversification

• In order to diversify, the firm must be large.
• Diversification among firms
• Ex Own other firms
• Diversification within firm
• Ex Different product lines

32
Diversification Within
33
Diversification Within (cont.)
34
Sunk Cost

• Definition Sunk Cost A cost that has been paid
  or must be paid, regardless of any future action
  being considered.
• Sunk costs should not be considered when making
  decisions.

35
Profit Maximization

• MRMC

36

• So what type of market structure is
  Pfizer Pharmaceuticals?

Perfect Competitive? Monopoly?
Oligopoly?
37
Pfizer viewed as a spectrum, not a strict
category!

• Different tastes
• Different opinions of substitutes
• shares characteristics of all three market
  structures

38
Characteristics of Perfect Competition

• Large number of buyers and sellers
• Price Takers
• Sellers offer a homogenous product
• Easy entry or exit from the market

39
Perfectly Competitive
Yes

• Large Number of Buyers

No

• Small number of sellers
• Heterogeneous Products

40

• Buyers do notice significant differences in the
  outputs of different sellers

41
Characteristics of a Monopoly

• Single seller of a good with no close substitutes
• Price Searcher
• MR is positive
• Barrier of entry of exit

42
YES Monopoly
NO Monopoly

• Not the only seller many close substitutes
• Viagra
• Caverta, Silagra, Kamagra, Edegra, Meltabs
• Benadryl
• Banophen

• Price Searcher
• Barrier of Entry or Exit
• Reputation

43
Characteristics of an Oligopoly

• Small number of firms that are strategically
  interdependent
• Dependence is recognized
• Heterogeneous Products

44
Pfizer is an Oligopoly !!!

• Heterogeneous Product
• Strategically interdependent

45
What did we learn today ?

• History, Factors of Production Resource
  Allocation, Ceteris paribus factors of supply and
  demand

• Elasticity, Income and Substitution Effects
  Corporation, Diversification and Sunk Cost

• Profit Maximization, Perfect Competition,
  Monopoly, Oligopoly