Practise IB Business Management SL/HL 3.2.2 by applying external sources of finance concepts to exam-style questions.
Copper Health (CH)
Copper Health (CH) was the market leader in the production of anti-venom* vaccines to treat poisonous snake bites. CH's mission - influenced heavily by corporate social responsibility (CSR) - is to put customers first and profits second in the treatment of snake bites.
Despite 100000 deaths worldwide each year from snake bites and 400000 serious injuries, CH recently announced that it will no longer produce anti-venom vaccines. Several large Mexican, Brazilian and Indian pharmaceutical companies have entered the market selling anti-venom vaccines at a much lower price than C H.
A spokesperson for C H said: "We will remain a private limited company where corporate social responsibility (CSR) remains an important driving force for our mission. Our medical research is only financed from retained profit. When the lower-priced competition arrived, our sales and profits of anti-venom vaccines decreased significantly. Treating snakebites no longer makes financial sense. Instead, the technology used to produce anti-venom vaccines will be used to research and develop (R\&D) other life-saving vaccines".
A non-governmental organization (NGO) has demanded action. "CH is the largest manufacturer of anti-venom vaccines in the world. Although CH's competitors are increasing their production of anti-venom vaccines they will not be able to produce enough to satisfy demand for the next two years. There will be a major shortage. This will result in many life-threatening injuries and deaths."
The non-governmental organization (NGO) has urged CH to seek new sources of finance to continue the production of the anti-venom vaccine.
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* anti-venom: a medication made from antibodies that is used to treat venomous bites and stings
Explain two possible external sources of finance CH could use to continue production of anti-venom vaccines.
The question is sufficiently broad to allow candidates to explain a range of possible sources of finance, but any candidate who looks at internal organic sources, such as increasing sales/profits, must be not given credit.
Possible external sources include:
- As CH is a private limited company, the decision could be taken to raise funds through an initial public offering. CH could be "floated or listed" on the appropriate local share market to raise funds targeting ethical investors.
- Angel investors who have strong ethical/CSR intent could provide funds.
- The NGO has demanded action. Given the number of deaths and injuries from snakebites, the NGO could be approached to provide new finance or governments in those countries predominantly affected. There could be the possibility of a private public partnership.
- Bank loan. If candidates uses this source of finance, it is expected that the candidate either comments on the fact that is likely to come from banks with ethical objectives or from banks which accept the risk associated with CH's mission statement or that the bank is likely to give a loan for a cause such as saving lives.
It is expected that the candidates incorporate the ethical investors/ ethical support issues given the current mission statement of 'people before profit 'as application.
Candidates do not have to use the exact words as above but to show understanding that whoever provides the finance should believe in/ support CH's mission/able to justify given the finance that might be risky due to CH's mission and the possible impact on the population.
Accept any other relevant possible source. (grant, subsidies)
Donation is not really an applicable source of finance for what has to be done. CH is not a charity
Mark as 2 + 2.
- For an identification or a description of one possible source of external finance with or without application [1].
- For explanation of one source with no application [1].
- For explanation of one source and application [2].
Application must refer to the possible sources of finance for production of anti
venom vaccines.