International Strategic Management - “biopure” Case Study

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Part Two

Question 3A: What are the possible reference prices [what consumers may anticipate paying or consider reasonable to pay] for Hemopure?

- The coefficient between products will affect the price

When comes to the early 1998, the Hemopure was in the third phase in Europe. In anticipation of this allowance, Biopure had prepared to proceed immediately upon approval. And Biopure planned to sell this product at a high price like $600 to $800 per unit. However, the market department advised that they should bound to the statement of company in the market. The proportional relationship will appear in same type of products. Even, one is for animal, the other is for people. They are both blood products.” The coefficient is generally between 0.3 to 3 times. “

As the theory, if the Oxyglobin selling at $100, then Hemopure may be set from $30 to $300. But we must realize this is just a theory. Some internal reasons will also change the strategy of pricing. Such as the standard of human blood substitute must be higher than the veterinary blood substitute. The difficulties of production will increase the cost. As a result, the price of unit will rise. These links exist in this case.

- The competitors will also effect the strategy of setting a price.

As the case mentioned that the Baxter international and Northfield Laboratories were the most powerful competitors for Biopure Corporation. The price of their unit must be a reference. From the statistic，Baxter had make a contract with the Red Cross institute at a cost of $8 for each unit. The Northfield do the same contract with the government.

But the price has raise per year. In addition, these products from two companies should be kept in the frozen temperature. The advantage of Biopure’s products is easy to store. After comparing of the difference and advantages, there are the selling prices for Baxter and Northfield. They would price Between $600 and $800 for their products.

And Biopure also have the animal blood products which probably prices between 100-150. The price is not so high. According to the coefficient of two products the price of Hemopure should not over $450. But, in fact, Biopure wanted to set a higher price more than $450. Let’s imagine, if the quantity of using reflect the feeling of the consumer what will happen. When the hospital, patient and the insurance company feel the price is too high, the acceptance will have a direct impact. Although the Biopure will lose the profits could gain, the market possession will increase in a short term. As the sensitivity of medical consumed has not be tested in this market, the price battle will not happen in recent time. The price maybe a advantage for Biopure.

Part Three

Question 4A: What are the reasons for and against launching immediately Oxyglobin?

3.1 Reasons for launching the product

There is an opportunity to be the leader of the veterinary market. In this field, Oxyglobin was the first one who succeed to produce the “blood substitutes. Which means in this market there are no competitors in recent time. The confidence of the consumer and the public praise will easy to build if the product has a good quality. By contrast, another company should take two to five years to inventor the new animal blood substitute to the market. In that time, the Oxyglobin has already widely used in the veterinary practice. The popularity in the market has opened for Biopure.

The invention of these two products has cost lots of money of Biopure. The construction of a manufacturing factory continuously need money. The company peremptorily need capital and gain the first revenues in order to launch Hemopure.

As there is a scarcity of animal blood, Oxyglobin will capture the market in that period. With the proven success, the investors might have a greater impact on Hemopure.

Launching of Oxyglobin will help the market to known this company and gain the attraction from the investors. The activity will help Biopure to collect the feedback of the market which may help them to successfully launch the Hemopure.

3.2 Reasons against launching the product

As mention before the price of Oxyglobin will be $100. Since it’s just for the animals, the standard is not as high as the human blood. For example, the small clusters will cause minor gastrointestinal problems and discoloration of urine. In the animal market, it’s acceptable, but these effects will not be acceptable in the human market. There is a possibility, if the patient appears the same situation they will suspect they get a product for animal. This may cause the serious problem. It also rises the standard of Hemopure if the Oxyglobin released first. In the other side the consumer also make a link between the Oxyglobin and Hemopure. They will think the basic element is the same the price should not have a huge gap. The market may have an unrealistic price expectation of Hemopure.Which will decrease the profit and force the company to lower down the Hemopure which sounds so negative.

As I learned in the investor relation, the investor always be sensitive to launching a new product. The investor will call back their investment if they think the product doesn’t have a perfect market prospect. Which means their wealth will be put into a very dangerous plan.

Furthermore, when Biopure is in IPO progress, the estimation of risk will be much higher than it should be.

It’s obviously, if the intern rate of return can’t match the need of investor they will lose the confidence of Biopure in short period. Once the crisis of company’s confidence happens, it’s very hard to stop the repeal of investment. The cash flow of Biopure may broke. Even the worst situation doesn’t appear, the process of IPO will full of netural.