Glaxo Italia Case Essay

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Glaxo Italia S.p.A. is introducing the new drug, Zinnat, into the market. Glaxo has the option to directly sell or co-market the pharmaceutical. If the company were to sell the product directly, Glaxo’s sales force would be the sole distributors of the drug. Using co-marketing, Glaxo would allow another company to sell the same product under a different brand name for a fee. We have compared the two options to determine which marketing strategy would be in the best interest of Glaxo Italia in terms of net present value, rather than the IRR or payback period used previously. We have decided that co-marketing with another company would be the best option for Glaxo Italia as it has the higher net present value.

Forecasting and Analysis
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Using this method, the project with largest IRR would be accepted. The problem with this method is that it assumes the cash flows from the project will be reinvested at the IRR. In this case, the IRRs that we are looking at are 546% and 2125%, so expecting to consistently reinvest at this rate is unrealistic.

A more accurate measure for considering whether or not to accept a project is its net present value. It is not without flaw, as any deviation from forecasted amounts will alter the NPV. NPV assumes that cash flows generated from the project are reinvested at the company's required rate of return, rather than the IRR. This provides a more realistic measure of how a project will affect the firm while providing a dollar amount, rather than an unreliable percentage. In comparing the evaluation methods, we feel NPV is the most appropriate for this case.

Marketing Strategies

Glaxo’s marketing strategy situation presents several qualitative tradeoffs regarding the antibiotic’s overall success. The difference in performances between the marketing strategies is expected to be present in varying degrees throughout the entire useful life of the drug. However, the emphasis of Glaxo’s decision will focus heavily upon initial market penetration, since their primary goal is to immediately begin capturing an increasingly large market share for Zinnat.

Under direct selling, the expected product launch
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