Capital Budgeting

Use the Shapiro Library database to locate a company (excluding Caterpillar, Inc.) that is currently (within the last three years) dealing with business/investment risk. For a recent example, consider how Apple has expanded its iPhone production to Bangalore, India. What were the risks? 

Pull yearly financial statements (10-Ks) for the company that you are interested in, and analyze items 1A (Risk Factors) and 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations). In your initial post, address the following:

Identify the company and summarize the risk situation for your classmates.

Explain any political or country risk involved.

How well did the company handle the risk situation? What did they do well? What could they have done better?

In your responses to your peers, compare and contrast how different companies have dealt with business risk. What parallels can be drawn? What factors influence the effectiveness of risk mitigation strategies in making capital budgeting decisions?

The company I am interested in is Shire Pharmaceuticals. There are a series of risks that have to be considered. First the Company’s products may not be a commercial success since the commercial success of the Company’s marketed products and other new products that the Company may launch in the future, will depend on their approval and acceptance by physicians, patients and other key decision-makers, as well as the receipt of marketing approvals in different countries. Second the increased pricing pressures and limits on patient access as a result of governmental regulations and market developments may affect the company’s future revenues, financial condition and results of operations. Third, the Company depends on third parties to supply certain inputs and services critical to its operations including certain inputs, services and ingredients critical to its manufacturing processes The Company relies on third-party suppliers, vendors and out.

Shire has handled the risk very well . They have grown both organically and through acquisition, completing a series of major transactions that have brought therapeutic, geographic and pipeline growth and diversification. The Company continues to conduct its own research and development, focused on rare diseases, as well as evaluate companies, products and pipeline opportunities that offer a strategic fit and have the potential to deliver value to all of the Company’s stakeholders: patients, physicians, policy makers, payers, partners, investors and employees.

Reference:

Shire PLC. (n.d.). Form 10-K. retrieved from http://investors.shire.com/~/media/Files/S/Shire-IR/documents/form-10k-annual-report-22-02-17.pdf

Hi Glenda,

I like your company’s selection. The company has some key risks for consideration. I have selected some key ones to share. First Adverse conditions in the U.S. and international economies could impact the results of operations. Second, there are competition that may reduce the overall profits. Third, if Verizon is not able to adapt to changes and disruptions in technology and address changing consumer demand on a timely basis, they may experience a decline in the demand for their services, be unable to implement their business strategy and experience reduced profits. Forth, they depend on key suppliers and vendors to provide equipment that they need to operate the business.

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