Running head: 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 9-1 Final Submission: Business Implementation Plan Jason Brady Southern New Hampshire University MBA Capstone MBA 705 Dr. Bob Thompson, PhD August 21, 2018 1 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 9-1 Final Submission: Business Implementation Plan Table of Contents Executive Summary ........................................................................................................................ 6 Rationale ......................................................................................................................................... 7 1) New Value for Cancer Patients ........................................................................................ 7 2) Improving Society ............................................................................................................ 8 3) Ensuring Growth and Existence of the Company ............................................................ 8 Justification of the opportunity or problem .................................................................................... 9 Justification of the Target Market ................................................................................................... 9 Competition................................................................................................................................... 11 1) Pricing ............................................................................................................................ 11 2) Performance ................................................................................................................... 11 3) User Experience ............................................................................................................. 11 4) Design Appeal ................................................................................................................ 12 5) Quality ............................................................................................................................ 12 CaPix Drug is a fit for McKesson Corporation ............................................................................ 12 CaPix Innovativeness .................................................................................................................... 13 Planning for physical and technological resources. ...................................................................... 13 1) Physical resources .......................................................................................................... 14 a. Buildings and facilities ................................................................................................... 14 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN b. 3 Supplies and waste...................................................................................................... 14 c. Plant and Machinery....................................................................................................... 15 d. Planned Maintenance and refurbishment ................................................................... 16 e. Emergency provision...................................................................................................... 17 f. Insurance ........................................................................................................................ 17 g. Security ....................................................................................................................... 17 2) Technological resources ................................................................................................. 17 a. Computer equipment and Information Technology ....................................................... 18 b. Intellectual property.................................................................................................... 18 c. Patents and copyrights .................................................................................................... 18 Implementation Schedule.............................................................................................................. 18 Table 1 ...................................................................................................................................... 19 Project review processes ............................................................................................................... 20 a. First project review ............................................................................................................ 20 b. Completion review ............................................................................................................. 21 c. Non-Compliant follow-up review ...................................................................................... 21 Intrapreneurship factor .................................................................................................................. 21 CaPix Implementation and McKesson key competencies ............................................................ 22 Competencies in the field of policy and planning ........................................................................ 22 Competencies in the field of quality assurance............................................................................. 23 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 4 Competencies in the area of producing/ manufacturing drugs ..................................................... 25 Competencies in the field procurement and supply chain management ....................................... 26 Corporate Culture.......................................................................................................................... 27 Internal and External forces that shape McKesson Culture .......................................................... 27 McKesson Values and Culture...................................................................................................... 28 Key roles, responsibilities and qualifications of Key Personnel................................................... 29 Contingency plans ......................................................................................................................... 32 Risk Management ......................................................................................................................... 33 Key Man insurance ....................................................................................................................... 33 Projection of Costs ........................................................................................................................ 33 Costs relating to research and development.............................................................................. 33 Marketing and distribution costs ............................................................................................... 34 General Costs and expenses ...................................................................................................... 35 Assets and Liabilities ................................................................................................................ 35 Sources of Funding ................................................................................................................... 36 The cost of funding ................................................................................................................... 37 Projected Revenue Stream ............................................................................................................ 39 Pro-forma financial statements ..................................................................................................... 40 Statement of Income Statement ................................................................................................ 40 Statement of Cash flows ........................................................................................................... 42 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 5 Statement of Financial statement .............................................................................................. 43 Net Present Value and IRR ........................................................................................................... 45 Assumptions and respective contingency plans ............................................................................ 47 a) Financial Assumption ........................................................................................................ 47 b) Customer base assumption ................................................................................................. 48 c) Human resource availability and Management expertise assumption .............................. 48 Cross-cultural, economic, and geopolitical factors that may impact the business environment and concept .......................................................................................................................................... 49 a) Cross-cultural factors ......................................................................................................... 49 b) Economic factors ............................................................................................................... 50 Ensuring Legal and Ethics Compliant environment ..................................................................... 51 Incorporating stakeholder and customer diversity into the planning and implementation of the concept .......................................................................................................................................... 52 The role that the Corporate Social Responsibility will play in implementing the CaPix Concept52 Conclusion .................................................................................................................................... 54 References ..................................................................................................................................... 56 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 6 Executive summary This paper presents a business plan of the McKesson Health Corporation, which is one of the largest healthcare providers in the United States. The organization intends to introduce a new product named Capix which is a drug used in the treatment of cancer. The business plan will encompass a justification of the concept of introducing the new product. The business plan also explores the implementation plan of the business idea where it focuses on planning for the physical and technological resources essential for the business. Some of the physical resources include buildings and the facilities, the supplies and waste, plant and machinery, emergency provision, insurance, security, maintenance as well as refurbishment. The technological resources include intellectual property, patents and copyrights, computer equipment and information technology. The implementation plan also involves an implementation schedule, project review processes and intrapreneurship factor of the business idea. The third section of the business plan is an analysis of the company and its key personnel who will ensure that the Capix project becomes successful. In this section the business plan will discuss Capix implementation and the key competencies of McKesson Corporation. The competencies are in the fields of policy and planning, quality assurance, producing drugs, procurement as well as the supply chain management. Moreover, the business plan will discuss the corporate culture, the internal and external forces that shape McKesson culture and the values as well as the key roles, qualifications and responsibilities of the key personnel. It will further discuss the contingency plans, risk management and key man insurance. The business plan also highlights the financial analysis and the funding plan of Capix. It outlines the projection of costs for implementing the Capix concept, costs relating to research and development, marketing and distribution costs, general costs as well as expenses, assets and 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 7 liabilities, sources of funding, the cost of funding and the projected revenue stream. The business plan also highlights the pro forma financial statement, which in this case are the statements of cash flows, the income statement and the financial position and also look into the Net present value as well as the IRR. The fifth milestone that the business plan will consider is the assumptions and contingency planning of the business idea. These plans include financial assumption, customer base assumption, human resource availability and management expertise assumption. It further looks into the cross-cultural, economic and geopolitical factors that may impact the business environment as well as the Capix concept. The business plan looks into the incorporation of stakeholder and the customer diversity into the planning and the implementation of the Capix concept. Conversely, it discusses the legal and ethics compliant environment and the roles that the CSR plays in implementing the Capix concept. Rationale As noted in the Operations management plan, Producing CaPix drug is accompanied with various risks as it is true for producing any other product. Such risks include unwanted market cannibalization, Expensive, product failure, technical and operations challenges, and losing other opportunities. McKesson Corporation must, therefore, have imperative reasons for going ahead to produce CaPix. Such reasons include; 1) New Value for Cancer Patients 2) Improving the Society 3) Ensuring the growth and Existence of McKesson Corporation. 1) New Value for Cancer Patients CaPix is expected to bring a new value for cancer patients. It is unfortunate that the existing cancer drugs apparently have not been successful in providing visible benefits to the 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 8 patients. CaPix, by combining three drugs, promises a unique value proposition in the sense that it will deliver maximum value to the target customers. The three different drugs are designed to treat cancer differently. For instance, while carboplatin is convenient for treating advanced Ovarian Cancer, Capecitabine is appropriate for treating metastasized breast Cancer. Again, carboplatin is used as a first-line treatment with other chemotherapy while Capecitabine suits stage III cancer, specifically for patients who had undergone surgery before to eradicate cancer in infected organs. To sum it all, CaPix will definitely work better relative to a single drug use. 2) Improving Society Developing CaPix goes beyond just the gratification of customers, but also plays a big role in improving the society. For instance, the pricing of the product shows that the CaPix drug will be offered at a price of $ 6,000 per month. According to Reuters (2016), the average monthly price for branded drugs in the United States is $ 8,694. CaPix will be $ 2,000 more affordable than most drugs on the market, therefore, saving the society a great deal. Real median family income for the year 2016 was $72,707 translating to $6,059 per month (Thebalance, 2018). CaPix price falls slightly below the median family income which is better compared to other cancer drugs whose price fall above the real median family income. McKesson by providing CaPix will be saving a lot for the families and the saved dollars will be transferred to improving the society. 3) Ensuring Growth and Existence of the Company McKesson Corporation is one of the largest and the oldest healthcare companies in the United States, serving more than a half of the nation. However, just like any other Company, developing new innovative products and services is its lifeblood. Without being innovative and 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 9 bringing new drugs to the market place, the relevance and the revenues of the company will certainly wither and finally, the company will succumb to absorption by other corporations or even death. It is therefore in the best interest of the company to keep producing new drugs to keep competing and boosting its revenue, in this case, CaPix is the current hit for McKesson Corporation. Justification of the opportunity or problem Research indicates that most Cancer respondents do not contemplate all effective drugs to be of a good price (Nadler, 2018). Majority of the cancer doctors are subtle to cost, believing that it should factor in clinical assessments. One way of reducing the cancer treatment costs is by reducing the costs of drugs. Moreover, (Harding, 2018) of Reuters stated that “to validate the swelling prices of innovative oncology drugs, an equivalent increasing movement in clinical benefit would be expected to make sure that the value of these new drugs is maintained over time”. This means the society, more so the health care system needs to introduce some approaches that try to restore normal market forces. McKesson Corporation, therefore, saw the need to do something; we just can’t allow the persistent escalation in prices and costs without attempting to nexus it with the benefit the drugs deliver. CaPix drug will be able to address this problem because, in addition to the fact that it will be more affordable than the other drugs, the product is designed to meet several needs such as the treatment of colorectal and breast cancers which are among the most cancer diagnoses among survivors (Valdivieso et al., 2012). Justification of the Target Market Research by Valdivieso et al., 2012) shows that most cancer survivors are adults. The study further shows that sixty-one per cent of cancer survivors are 65 years or older meaning that a probable one of every six adults above the age of 65 is a cancer survivor. From the above 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 10 analysis, CaPix target market is for people aged 65 and above. The product is meant for all genders regardless of their household size, ethnicity, occupation, profession among other disparities. Most of the people in the target market have retired although some of them are still working. Almost all of them are literate having attained a basic level of education. The adult generation is also considered not to be too emotional as opposed to the younger generation. It will be easier to retain the target market since a study on the cognitive psychology of the elderly shows that the mature buyers are not only more probable to repurchase a brand but also vigorously repel from switching brands after they have recognized it as a favourite (Karani & Fraccastoro, 2010). Reaching out to the older buyers is easy and cheaper because they stick to the mainstream media such as Televisions and magazines as their main source of information and products they need, unlike the younger buyers who have embraced new technology. They only buy to fulfil their needs and wants hence making them easily identifiable. In addition, the target market hobbies include entertainments such as watching sports. A percentage of them, however, prefer staying indoors and watch the news or movies. Competition CaPix will be competing with other products in the market. However, due to its defining features, CaPix is expected to stand apart from other competitors. As noted earlier, CaPix is a combination of several drugs which combine Capecitabine, Oxaliplatin and Carboplatin medications. 1. Capecitabine- Also referred to as Xeloda. Capecitabine can treat colon or rectal cancer, metastatic breast cancer and even unknown primary cancers. 2. Oxaliplatin –Also trades as Eloxatin. It treats metastasized rectal and colon cancer. 3. Carboplatin – Also trades as Paraplatin. It is approved to treat ovarian cancer. 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 11 CaPix by combining the three drugs will be able to treat metastasized breast, metastasized rectal and colon cancer and ovarian cancer among other cancers as doctors may feel appropriate. The drug will add value to customers, therefore, giving it a competitive advantage. However, for McKesson to be able to withstand that position, and be positioned relative to competition when it finally invariably arrives, several competitive factors have been considered. Such factors include the price, performance, user experience, Design appeal, Quality, and reliability. Pragmatism was applied when allowing for a tradeoff between these factors. The factors are further explained here below: 1) Pricing The price element has been discussed in other sections of this paper. CaPix is expected to sell at $6,000, $2,000 dollars less than the average price of branded cancer drugs in the US. Offering a lower price than alternatives while maintaining the best value for money will ensure that CaPix remains competitive in the market for as long as possible. 2) Performance CaPix is a blend of three drugs that are already permitted by the U.S Food and Drug Administration. Its performance will, therefore, be superior to that of alternative drugs thus making CaPix competitive. 3) User Experience McKesson Corporation will not overlook the factor of user experience. It will consult widely with doctors, pharmaceutical stakeholders and customers on how to improve ease of use and ease of purchase. 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 12 4) Design Appeal The first impression is important to win the customer. McKesson is, therefore, consulting widely with biologists, chemists and manufacturers on the visual appeal, texture, size and colour. The steps towards making a competitive design include; Specifications step, make prototype step, test prototype, step, Review design, and step and approve design step. 5) Quality McKesson Corporation is an established healthcare company with enough resources, including skilled labour, technology and enough equipment. Adequate funds have been allocated for research and development to ensure that CaPix will be manufactured with the fewest initial defects. CaPix Drug is a fit for McKesson Corporation Successful companies begin with a strong philosophy. The staff nowadays are not just motivated by a paycheck, neither are customers and stakeholders just satisfied with a quality product. People need to feel attached to a deeper drive or mission. McKesson’s face motto reads “we stand for better health” (Mckesson.com, 2018). The dream is to build important networks that lead to a smarter healthcare, crafting intellectual systems that magnify contact, minimize waste, and fetch people and data closer together. The spirit is carried through the mission that states “Together with our customers and partners, we are creating a sustainable future for health care. Together we are charting a course to better health” (Mckesson.com, 2018). It is our welldefined mission that gives us direction. CaPix drug aligns itself with what McKesson stands for in the following ways. ✓ CaPix is designed to bring better health to its patient by bringing new value to cancer patients. 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 13 ✓ CaPix brings McKesson together with partners and customers since its development is based on feedback from the organization’s customers and stakeholders. ✓ McKesson will prove its concern for the customer since CaPix is not designed to exploit customers. It will retail at an affordable price. The above reasons prove that despite McKesson being a for-profit company, it is not only maximizing profit, but also accomplishing its mission of creating a sustainable future for health care. CaPix Innovativeness CaPix will be selling in a highly competitive market and the best way to establish a competitive advantage is innovation. CaPix itself represents innovation in the following ways; ✓ CaPix addresses a real challenge – There is a real challenge where prices of cancer drugs are escalating sharply while value addition remains relatively low. CaPix addresses this challenge by offering money for value. ✓ CaPix brings new Value to customers – One drug will be used to treat what three separate drugs have been treating. We can call it a three in one drug. ✓ CaPix adds value to the company – CaPix brings a new market segment which will generate more revenue for the company. ✓ CaPix represents a different perspective – CaPix is a combination of three drugs. This challenges pharmaceutical companies to rethink their strategies. Planning for physical and technological resources The availability of resources necessary for the manufacture of this product will be the ‘heart and soul’ for the implementation of CaPix concept. Resources are categorized into 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 14 physical, technological and human resources; however, the human resource requirement will be detailed later within this plan. Physical and technological resources are discussed below: 1) Physical resources Just like any other organization, McKesson will need to avail physical resources to be able to meet the running costs result from the introduction of CaPix to their product portfolio. In this case, McKesson will need to put in place building structures and facilities, supplies and waste, plant and machinery, Apparatus, planned upkeep and refurbishment, insurance, security and emergency provision. a. Buildings and facilities McKesson will have to put aside a place from where the production, packaging and warehousing of CaPix will be done. One of the idle building blocks at the company headquarters will be modified to make them convenient for production and packaging of CaPix. For storage, CaPix will share the same warehouse with Capecitabine, Oxaliplatin and Carboplatin drugs. The idle building block will be modified to resemble McKesson’s standard architectural and layout designs as recommended by the engineers and health safety officers. The buildings must equip with facilities that ensure environmental conservation when it comes to releasing of gases and waste. b. Supplies and waste Manufacture of any product requires materials and it is not different with CaPix. The outcome of any manufacturing process is the desired product, co-products if any and waste. McKesson’s aim is to have the adequate CaPix product in stores at all times to meet the anticipated high demand of the product. This will be possible, if and only if, the correct 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 15 proportions of necessary material or supplies are availed in time. In the process, McKesson will work to employ the use of renewable sources as much as possible in the campaign for ‘green energy’. McKesson will also ensure that relevant workers account for the materials under their control to avoid wastage and reduce costs. Some of the material requirements include; • Industrial chemicals – Biological and mineral chemicals will be raw supplies that will serve as reactants, reagents, catalysts and solvents. McKesson will ensure to adhere to the threshold limit values set by the government (Tait, n.d.). • Drug-related substances – These materials include the pharmacologically active substances which are either natural product from plants and animals or synthetic drugs from microbiological and chemical technologies. In this case, McKesson will need antineoplastic substances which include adjunct therapy, alkylating agents, antibiotics, antimetabolites, hormones and immune modulators (Tait, n.d.). McKesson will also need to identify an environmentally friendly means to get rid of waste. We will abide by the Environmental Protection Agency (EPA) regulations and the Resource Conservation and Recovery Act (RCRA) of 1976. c. Plant and Machinery Existing plant and machinery are already involved in new capacity. McKesson will need to acquire new machinery relevant to the production of CaPix product. Acquisition of new plants and machines is preferred to leasing because production is in bulk and hence will be more beneficial. McKesson will also have entire control of the facility which is not true for a leased facility. Thirdly, for a long-term asset, a purchase is usually cheaper than the lease and finally due to the element of tax savings. McKesson will set aside the capital for acquiring the following machinery: - 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN • A chemical reactor • A sparkler filter • A high steam granulator • A rotary vacuum dryer • A vacuum shelf dryer • A machine for coating tablet’s • Customized vans to transport drugs to the warehouse 16 d. Planned Maintenance and refurbishment McKesson will ensure a regular upkeep of the buildings; the plant and machinery provided so to keep them up to date and as per safety check requirements. Time will be allocated for safety checks and for appropriate adjustments. Control procedures will also be put in place to ensure that the machine operators are well supervised. Any negligence may lead to the breaking down of machines which would result in a loss of profits. e. Emergency provision Some of the materials to be used are classified as hazardous (Tait, n.d.). It is, therefore, the duty of McKesson to ensure the safety of its employees and customers. Provisions will be made to inform the workers of the necessary actions to take in case of an emergency. Drills will also be carried out periodically to ensure that these provisions succeed. Together with Occupational and health safety officers, McKesson will create an emergency and disaster preparedness and response plan as well as work hand in hand with the state legislature and other relevant government organizations. 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 17 f. Insurance It is important for organizations or businesses to buy insurance policies to transfer the risk of an event that amounts to an uncertain loss in return for paying a given premium (Surminski, 2014). McKesson will place every insurance policy possible with their existing insurance policies. A building insurance already exists, but we will have to review the terms to accommodate the new modifications and renovations. The newly acquired machines will be added to the existing plant and machinery policy at the purchase price. All the motor vehicles and electronic equipment will also be insured comprehensively. An all-risk policy will be put in place for materials and finished products. New employees will be added to the group personal accident to protect them from accidents that result in bodily injury. g. Security It will be in the interest of McKesson to provide security for all their assets. McKesson will employ full-time security personnel who will be discussed further within this implementation plan. In addition, McKesson will install CCTVS and alarms in the relevant buildings and warehouses to keep 24/7 surveillance (Appleton & McColgan, n.d.). 2) Technological resources Technological resources involve things like computer hardware, including monitors, central processing units, uninterruptible power supplies, servers, routers and modems. The resources, however, go beyond these resources to non-physical resources such as software and text. For instance, intellectual property, software licenses, patents and copyrights, goodwill, accumulated experience and skills are all considered as technological resources (Appleton & McColgan, n.d.). 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 18 a. Computer equipment and Information Technology McKesson will ensure that the employees have the relevant technological equipment provided to ensure smooth production of CaPix. The equipment will be connected to McKesson’s main server so that employees can be able to store and access important data in the company database. Employee rights on the server will be regulated to ensure data security (Appleton & McColgan, n.d.). b. Intellectual property McKesson’s role will be to ensure that all the employee's ideas regarding CaPix production are heard and improved to make all the workers feel comfortable. A proper channel of communication will be adopted so that employees can channel their thoughts with ease (Appleton & McColgan, n.d.). c. Patents and copyrights McKesson will use the existing legislation to protect the idea of CaPix. We will secure a patent with the U.S Trademark and Patents office. (Uspto.gov, 2018) Implementation Schedule An implementation schedule provides McKesson with a means of planning for our time so that all tasks are undertaken within a specific timescale. It will furnish the users of the business plan with an image of what we intend to do in developing the new product CaPix. See the table below for the implementation timeline which shows what needs to be done, by when, and tentatively, by whom. The schedule also aims at identifying the critical path to success. 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 19 Table 1 Task/Activity Team Member Responsible Status of the activity The month of completion for the task assigned July 2018 Justification of the business plan Implementation plan Additional personnel acquisition Acquisition of loan preparation of buildings and facilities and warehouse Acquisition of new plant and machinery and installation Acquisition of computer equipment and IT Acquisition of raw materials Insurance for buildings, machinery, personnel and equipment Installation of alarms and Ben Schwerzler – Business development Ben SchwerzlerBusiness development Completed 07/07/2018 In progress 15/07/2018 Mariana Clarke-Human resource Michelle Ford – CFO Planned 31/07/2018 Planned 31/07/2018 Thomas Brody- Planned Engineer Jene Olivia – Procurement August 2018 07/08/2018 Planned 15/08/2018 Planned 15/08/2018 Planned 22/08/2018 Planned 31/08/2018 Thomas Brody- Planned Engineer 31/08/2018 Thomas Brody -Engineer Jene Olivia Procurement Jene Olivia Procurement Jene Olivia Procurement September 2018 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN security cameras Acquisition of patent Launching of CaPix Ben Schwerzler – Business development John HammergrenCEO 20 1 5/09/2018 31/09/2018 Michelle Pope –Project manager Project review processes The project manager will set up a project review team of 10 members. The project team functions include compiling together materials that will help the product manager informed as to the review procedure and requirements that the manager will be asked to avail relating to the project. The team also does research, particularly in the form of interviews and surveys. Lastly, the team will provide a report to the project manager with findings and recommendations. The project will entail three types of review processes; the first project review, completion review, non-compliance reviews, and stakeholder requested review. The reviews should be undertaken after control points are elicited (Briscoe et al., 2000). a. First project review This review process aims at identifying if the project is compliant with the prerequisite described as essential to kick off the project. The following phases will be reviewed: • Project planning and initiation phase • Project requirement analysis phase, • Project management system acceptance testing phase 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 21 b. Completion review The review process will examine whether all the requirements were met, and deliverables as described in project scope and that process complied with all set standards. Success indicators will include the correct completion of technical, financial and contract closure events have been completed correctly (Briscoe et al., 2000). c. Non-Compliant follow-up review McKesson will hold a non-compliant follow-up review within two weeks after the previous review found the project not to be on the right track. Success indicators will be a correction of previous non-compliance (Briscoe et al., 2000). The project reports will either identify the project as either compliant or non-compliant or at risk. The Non- Compliant report will be labelled red to indicate that major findings show the project is failing. Reports with minor findings that do not affect the performance of the project will be labelled green. Reports confirming compliance will be labelled yellow Intrapreneurship factor Intrapreneurship is the capacity to create or discover new ideas or opportunities for the purpose of creating value (Lexicon.ft.com, n.d.). CaPix idea generation is enough evidence of McKesson Intrapreneurship aptitude. The Intrapreneurship factor affects the implementation plan because it involves generating ideas and inventions, in our case CaPix. The CaPix invention needs to be protected through a patent as discussed in the physical and technological resources sections. A patent is an amortizable, intangible asset that awards a business the sole right to manufacture and sell an invention (lumenlearning.com, n.d.). McKesson will have to register a utility patent with the U.S Patent and trademark office which lasts for 20 years. McKesson will 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 22 also have to value the patent and amortize it for the next 20 years. The invention has been developed internally, therefore, its value includes the research and development costs which are recorded as expenses in the books of accounts. The process of amortizing involves dividing the value of the assets annually by the useful life of the asset which in this case is 20 years. CaPix Implementation and McKesson key competencies Competent personnel with the necessary skills, attitude, knowledge, and habits are crucial in ensuring a safe, quality, the effective and affordable CaPix drug as well as ensuring a lucid medicine use (General Directorate of pharmaceutical affairs, 2012). Fortunately, McKesson has done well to equip its human resources with fundamental competencies in its fields, including policy and planning, rules and regulations, drug production, quality assurance, supply chain and drug distribution. These competencies have been achieved through education and training that is geared towards achieving the same. Faiz (2014), likens any corporation to a tree that breeds from its roots, core products are nurtured by competencies and stimulated business units, whose fruits are products. McKesson Corporation has the following competencies that are important to manufacture of CaPix. Competencies in the field of policy and planning 1) McKesson will be able to develop policies and strategies relating to CaPix drug production through: ✓ Analyzing the drug situation and identification of issues. ✓ Collecting relevant data regarding CaPix situation ✓ Describing relevant national laws and regulations, national and World Health Organization (WHO) guidelines and how to access them. ✓ Developing policy objectives in relation to identified issues. 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 23 2) McKesson will be able to develop a good operational plan through: ✓ Finding information on Cancer health care regarding medicine consumption from relevant stakeholders and using that data to develop operational plans. ✓ Effectively disseminating the operational plan. ✓ Setting appropriate budgets and forecasting budgetary requirements based on the project needs. ✓ Organizing activities appropriate manner to ensure a logical flow of data. 3) The key personnel identified is also competent in monitoring the progress of activities as per the task schedule since they are able to: ✓ Monitor the implementation process against the implementation schedule. ✓ Analyze the project review reports and act on the recommendations suggested in the project review team. 4) McKesson management has the required capacity to raft the required standard operation procedures (SOPs) for implementation through: ✓ Revising and finalizing guidelines and SOPs grounded on reviews by the project team. ✓ Submitting policies to the U.S ministry of public health for approval. Competencies in the field of quality assurance The project team must be able to ensure production of the CaPix drug. Competencies must, therefore, be exhibited in the following tasks. 1) Competencies in Control of good manufacturing processes, which is displayed through: ✓ Ability to efficiently inspect the production process and identify non-compliance. 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 24 ✓ The ability to demonstrate adequate knowledge of the good manufacturing practices (GMPs) 2) Competencies in inspecting the production equipment, which is exhibited through: ✓ Ability to identify and describe the type of equipment necessary for the production of CaPix. ✓ The personnel is able to interpret documentation and maintenance records of the production equipment. 3) Competencies in inspecting professional competence of staff to be involved in the production of CaPix. ✓ McKesson has the capacity to assess the professional capability of the staff to be involved in the production of CaPix. ✓ The personnel is able to demonstrate practical knowledge of the Oncology drug manufacturing. 4) Competencies in the inspection of raw materials capability. The McKesson staff is well equipped with: ✓ Ability to describe relevant quality control tests on procured raw materials. ✓ Ability to demonstrate good management practices regarding the raw materials. 5) Competencies in conducting quality control tests on drugs by demonstrating the ability to: ✓ Have Adequate knowledge of good laboratory practices and good management practices. ✓ Conduct a quality review of the certificate of analysis. ✓ Have Knowledge and ability in instituting testing standards of procedures. 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 25 Competencies in the area of producing/ manufacturing drugs The most critical part of the project involves manufacturing of the CaPix drug. The personnel selected by McKesson for this project have great knowledge and ability regarding the following: 1) Knowledge and ability in handling and cleaning of production equipment. The following competencies must demonstrate: ✓ Adequate understanding of pharmaceutical manufacturing equipment and machinery. ✓ Ability to comprehend and explain equipment cleaning standard procedures. ✓ Ability to conduct a cross contamination test as well as analyze the results. 2) Knowledge and ability in organizing raw materials for production. The staff are able to demonstrate the following competencies: ✓ Describe specifications regarding raw materials and information on where to access the same. ✓ Ability to use appropriate methods in choosing, organizing, extracting, and collecting active compounds from natural resources. ✓ The ability to weigh raw materials as specified and as well as to maintain proper records. ✓ The ability to exercise, occupational and safety measures while handling chemicals. 3) Knowledge and ability in managing the production process from the start to the end. Personnel must demonstrate competencies such as: ✓ Ability to understand and apply GMPs. 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 26 ✓ A thorough understanding of the production process activities. 4) Knowledge and ability of packaging CaPix through proper understanding and management of packaging process. 5) Knowledge and ability regarding quality control while producing CaPix. The personnel capabilities include: ✓ Sufficient knowledge of Analytical chemistry. ✓ Ability to describe and apply quality control testing procedures and sampling techniques in both production and post-production practices. ✓ The ability to put into account the elements of market risk and value, as well as the therapeutic range while developing standard operating procedures. ✓ Higher knowledge and understanding regarding the microorganism level in the production of cancer drugs as well as proper hygiene standards. Competencies in the field procurement and supply chain management Competencies in the procurement and supply chain management include: ✓ Ability to describe procurement rules and regulations and also understand and explain different procurement methods. ✓ The ability to pre-qualify or assess suppliers where necessary as well as identify suppliers who have the capacity to meet emergency procurement needs. ✓ The ability to issue a procurement contract, oversee the contracting process, receive procured raw materials, procured machinery and equipment etc., and finally make payment for the contract. ✓ The ability to make and implement distribution plans. 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 27 ✓ The ability to maintain records, appropriate storage of CaPix, to monitor and evaluate the stock as well as disposing of the expired and damaged stock. Corporate Culture The company corporate culture is essential in shaping the organization’s decision patterns as well as driving the individual behavior of all stakeholders. Corporate culture incorporates shared beliefs, values, norms, and attitudes that infuse all parts of the corporation. However, Culture is intoxicating (Suda, 2007). Other than catalyzing the project strategy, a strong culture sometimes can also erect barriers to getting the desired results. In the CaPix manufacturing project, McKesson has selected rational project leaders that have a strong connection with the company culture, as it is the case for other projects. Internal and External forces that shape McKesson Culture The vision, mission, and strategy of McKesson are well considered and communicated so that they are well understood by members with the aim of creating a positive impact with regards to company projects. McKesson’s strategy is to command the market through providing better business, health, better care and better connectivity (Mckesson.com, 2018). Through this strategy, all the employees are able to understand their roles in creating innovative technology, new services and innovative ideas such as CaPix necessary for improving businesses and patient’s outcomes. The company’s mission which states “Together with our customers and partners, we are creating a sustainable future for health care. Together we are charting a course to better health” (Mckesson.com, 2018); further emphasizes the importance of this strategy. Other factors include able leadership with McKesson boasting of leaders who highlight in rewarding and providing incentives. Leaders who foster collaboration and synergy by encouraging individual and group competitions. The Human resource has also done a wonderful 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 28 job in hiring, promoting, demoting, training, coaching and counseling employees. The financial performance of McKesson also plays a big role in determining the corporate culture. McKesson is also involved in various external activities which have a big impact on the corporate culture. Such activities include the McKesson Foundation, Environmental sustainability activities, volunteering and philanthropy activities, supplier diversity, social diversity and involvement in the fight against Opioid use (Mckesson.com, 2018). McKesson Values and Culture Same as any other successful companies, at McKesson, we have our own shared principles commonly known as ICARE. Chairman John Hammergreen states that “The spirit of ICARE is embodied in the innumerable, every day, unobserved actions and decisions that we choose to execute diligence and integrity” (Mckesson.com, 2018). It is through this set of unifying values that we believe the implementation of CaPix project will be a success. The ICARE shared principles mean: • Integrity – McKesson employees are required to adhere to ethical standards in making both big and small decisions. More importantly, our employees are devoted to the greater good of the company, for the customers and for the healthcare industry at large. • Customer first- McKesson’s success is founded on the customer’s success. Our focus is always to offer follow-through and customer-focused services. • Accountability- All McKesson employees are individually accountable for delivering promises that they have committed to customers vendors or even colleagues. • Respect – Our employees. the customers, vendors treat each other with reverence, dignity, concern, and open-mindedness. 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN • 29 Excellence – Every action that McKesson takes must have success and results in humility. We are always looking for new ways to innovate and progress, and we severely measure our progress. Key roles, responsibilities, and qualifications of Key Personnel A satisfactory structure of quality assurance, accurate manufacturing processes and maintenance of CaPix heavily depends upon the people. Therefore, recruitment of adequately qualified personnel to carry out the necessary tasks responsible to McKesson is not an option. The personnel is recruited on the basis of core competencies discussed in the previous section. The key personnel as specified by GMP will include: - Position Project Manager Experience 20 Years in the field of pharmaceutical industry. Qualifications -Project management professional - Project management institute certification - Certified Associate in Project Management - Responsibilities % Commitment -Gathering and leading the project team. -Planning project resources -Budgeting for the project -Ensuring time management - Ensuring quality and satisfaction - Managing risk and other issues -Monitoring progress. 100% 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 30 -Reporting and documentation regarding the project. The Head of the production department 21-in a pharmaceutical industry Bachelor of Engineering (Chemical) -Authorization of on paper procedures among other documents. -Control and monitoring of the manufacturing process. -Ensuring plant hygiene is maintained -Validation of the manufacturing process. -Monitoring storage conditions and compliance to GMP. -Withholding of records -Taking, investigating and inspecting the samples Head of Quality control department 15- in a pharmaceutical industry Bachelor of Engineering( Mechanical) -Responsible for control of licenses. 100% 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN - Liaising with the research and development team. -Overseeing the batch release -Managing the internal audit system -Managing the document management system -Coordinating the GMP training system. -Evaluating customer feedback and satisfaction. -Managing the validation process. -Controlling sub-contractors, auditing suppliers and assuring vendors. -Gathering, trending, and storage of quality-related data -Managing the quality control review process, the corrective 31 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 32 action system, and preventive action system. Head of Quality control 27 Bachelors of Engineering( Mechanical) -Approving or rejecting materials. -Evaluating batch records. -Ensuring that all tests are carried out. -Approving specifications, -Ensuring validation is efficiently done, -Maintaining premises and equipment -Supervising initial and ongoing training. Contingency plans Contingency plans are used by organizations to help them combat the human resource risk that a company faces from death, disability, dismissal or quitting of an employee (Herman, 2014). If any of the key personnel leaves the project will be greatly affected in terms of finance requirement and implementation delays. McKesson has therefore adopted the following strategies to mitigate this risk: - 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 33 Risk Management This strategy seeks to reduce the chance of any of the key personnel leaving and reducing the negative implication if the staff actually leaves by: • Rewarding them with handsome remuneration. • Ensuring on-going training of replacement personnel. Key Man insurance McKesson will pay premiums in exchange for the key man insurance policy. This policy mitigates the risk of death or disability of employees such that in case of the eventuality, McKesson will use the proceeds to keep the project on the run until a replacement is found. Projection of Costs Costs relating to research and development Manufacture of any new drug involves intensive research and development. The cost projections for research and development of the CaPix drug total of 2.3 billion. The cost is high, but it is equally important because these studies ensure that the drug is safe and effective enough for securing approval from the regulatory authority. The market trend for the same is 2.9 billion. The costs include: Details Actual out-of-pocket costs Opportunity Costs Cost of Post-Approval Studies Total Budget Amount ($)"000 000" 1,200.00 800.00 300.00 2,300.00 A breakdown of research and development costs: - Details Discovery and development Amount ($)"000 000" 90.00 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN Preclinical Research Clinical Trial Design, IND Application, FDA Approval Clinical Research phase Phase 1: Phase 2: Phase 3: FDA Review and registration FDA Postmarket safety and monitoring Opportunity Cost Total Research and Development Budget 34 450.00 5.00 160.00 200.00 285.00 10.00 300.00 800.00 2,300.00 Marketing and distribution costs After the launch of CaPix, its success will depend on whether McKesson will be able to convince the customer to buy the new product or not. McKesson must, therefore, allocate enough funds for marketing to facilitate brand awareness. The major target population for CaPix is the patients aged 65 years and above. According to the consumer profile discussed in milestone two, the main channels of advertising will include Television and print media. The total cost of advertising estimation is $ 15,000 in the first year. The distribution costs amount to $ 50,000 which includes the cost of fuel and maintenance of distribution vans. The total marketing and distribution costs’ total to the tune of $ 65,000. Details Advertising: Amount ($)"000" - Television 5.00 -Print Media 5.00 - Social Media 5.00 Distribution Costs 50.00 Total Marketing Costs 65.00 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 35 General Costs and expenses These costs include start-up expenses incurred but do not relate to research and development, marketing, selling, and distribution or even procurement of assets. These costs involve salaries of employees, including the key personnel discussed in milestone three, insurance premiums for insurance policies discussed in the milestone two and three, Payments of electricity, water and telephone bills and other costs relating to securing of contracts. The total cost estimates for general expenses are $ 1,001,313,000. Details Amount ($)"000" Legal Costs 13.00 Salaries of employees (Monthly) 1,000,000.00 Insurance Premium 800.00 Payments of bills 500.00 Total other Costs 1,001,313.00 Assets and Liabilities McKesson has put in place several assets that are mandatory for the manufacture of CaPix. These assets featured the physical resources’ section of milestone two. This section seeks to give start-up cost projections on the same. The Assets include the costs about purchasing of patents, procurement, and the installation of the production plant, refurbishment and designing of buildings and facilities, Procurement of distribution vans, purchase and repair costs of furniture and fittings as well as the computer and electronic equipment. Of special interest in this section 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 36 are the costs related to purchasing of inventory because these costs form the cost of sales and have a direct connection to the price of CaPix drug. Another Asset is the cash that McKesson is willing to provide for funding the projects. The total cost of the Asset budget is $ 1,091, 650,000 as shown in the table below: - Notably, McKesson predicts no start-up liabilities for the CaPix concept. Assets CaPix Patent Production Plant Building and facilities Inventory - Mixing Material - Blending Material - Compounding Material -Packaging equipment and material Distribution Vans Fixtures and Furniture Electronic equipment Store Equipment Cash Total Assets Cost Amount ($) "000) 10,000.00 67,000.00 60,000.00 Liabilities Amount ($) "000) Accounts Payable 1,000.00 800.00 200.00 750.00 300.00 400.00 900.00 300.00 950,000.00 1,091,650.00 Sources of Funding Budgeting is important for the successful launch of CaPix. However, the budget will be useless is useless if financing the same is not possible. For the above reason, McKesson has a clear plan on how to source for funding of CaPix. Fortunately, CaPix is a profitable company with goodwill and respect from suppliers, banks and credit institutions. McKesson will use some of its savings to fund the project while the remaining portion will secure through a long-term - 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 37 loan from a credible credit institution. The total funding required includes the sum of research and development costs, marketing and distribution costs, General expenses and the cost of Startup costs. The total sum is $ 4,393,610,000. McKesson will fund $ 950,000,000 of the cost while the long-term loan will finance $ 3,443,610,000. The assumption for the cost of capital rate is 11%. Funding from McKesson 950,000,000.00 Funding from a long-term loan 3,443,610,000.00 Total 4,393,610,000.00 Breakdown Details Total Funding - Research and development costs - Marketing and Distribution Costs - Other Costs - Total Cost of Assets Amount ($)"000 000" 2,300.00 0.65 1,001.31 1,091.65 Total Funding Required 4,393.61 Funding from McKesson Funding from a long-term loan Total Funding The loss at CaPix launch - Other Costs -Research and development costs -Marketing and distribution costs Total Capital Total Capital +Liabilities 950.00 3,443.61 4,393.61 The cost of funding (1,001.31) (2,300.00) (0.65) 1,091.65 1,091.65 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN The Cost of capital rate per annum The cost incurred per annum 38 11% 378,797,100.00 The cost of funding equals the amount of interest on the loan to be paid to the creditor annually, which amounts to $ 378, 797,100 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 39 Projected Revenue Stream The table below presents the sales forecast for four years after CaPix launch. The projections show that CaPix will make sales worth 12,600,000,000, in the first year, 16,200,000,000, in the second year, 19,800,000,000 and 23, 4000, 000,000. 25,000,000,000.00 20,000,000,000.00 15,000,000,000.00 Series1 10,000,000,000.00 5,000,000,000.00 Year 1 Year 2 Year 3 Year 4 Figure 1 Graph showing the sales growth projection in the first four years Assumptions • The number of projected cancer patients will grow by 200,000 each year. • A quarter of the cancer patients will purchase CaPix each year. 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN • 40 The sale price of CaPix per unit per month will be $ 6,000 (from final submission and pricing in milestone two. Year 1 Year 2 Year 3 Year 4 700,000 900,000 1,100,000.00 1,300,000.00 175,000 225,000 275,000.00 325,000.00 72,000.00 72,000.00 72,000.00 19,800,000,000.00 72,000.00 12,600,000,000.00 16,200,000,000.00 Projected Number of Patients projected Number of CaPix units sold Price of CaPix per unit (USD) per annum @ 6,000 per month Projected Sales (USD) Pro-forma financial statements Statement of Income Statement Assumptions • All the inventory costs make the cost of sales for the first year. • Costs of sales will multiply by 1.5 every year. • Marketing and distribution costs will multiply by 1.5 every year • Insurance premiums will increase by a multiple of 2.5 every year with an increase in inventory. • Depreciation and bills will remain relatively the same. • Corporation tax is at 30% of gross revenue. 23,400,000,000.00 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN • 41 Cost of sales/Inventory is a percentage of sales. Projected Sales (USD) Cost of Sales Costs in consumption of raw materials, consumables and goods for resale Total Cost of Sales Gross income R& D costs Other Expenses Marketing and Distribution Costs Legal Costs Salaries of employees Insurance Premiums Year 1 Year 2 Year 3 Year 4 12,600,000,000.00 16,200,000,000.00 19,800,000,000.00 23,400,000,000.00 (2,750,000.00) (4,125,000.00) (6,187,500.00) (9,281,250.00) (2,750,000.00) (4,125,000.00) (6,187,500.00) (9,281,250.00) 12,597,250,000.00 16,195,875,000.00 19,793,812,500.00 23,390,718,750.00 (2,300,000,000.00) (2,300,000,000.00) (2,300,000,000.00) (2,300,000,000.00) (65,000.00) (97,500.00) (146,250.00) (219,375.00) (13,000.00) (13,000.00) (13,000.00) (13,000.00) (12,000,000,000.00) (12,000,000,000.00) (12,000,000,000.00) (12,000,000,000.00) (800,000.00) (2,000,000.00) (5,000,000.00) (12,500,000.00) 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 42 Bills Depreciation Expense Total expenses Profit/Loss before tax Tax @ 30% Profit/Loss after tax (500,000.00) (500,000.00) (500,000.00) (500,000.00) (10,290,000.00) (10,290,000.00) (10,290,000.00) (10,290,000.00) (12,011,668,000.00) (12,012,900,500.00) (12,015,949,250.00) (12,023,522,375.00) (1,714,418,000.00) 4,182,974,500.00 7,777,863,250.00 11,367,196,375.00 1,254,892,350.00 2,333,358,975.00 3,410,158,912.50 4,182,974,500.00 7,777,863,250.00 11,367,196,375.00 (1,714,418,000.00) Statement of Cash flows Year 1 Year 2 Year 3 Year 4 (1,714,418,000.00) 1,318,082,150.00 3,834,504,275.00 6,347,037,462.50 10,290,000.00 - 10,290,000.00 10,290,000.00 564,892,350.00 1,643,358,975.00 3,834,504,275.00 (188,000.00) (282,000.00) (423,000.00) 152,000.00 228,000.00 342,000.00 Cash flow from operating activities Profit before tax Adjustments Depreciation, amortization and Impairment of losses Corporation Tax paid Change in inventory 10,290,000.00 - Change in Trade Payables Cash flow from Financing activities 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 43 Investment in Patents (10,000,000.00) (10,000,000.00) (10,000,000.00) (10,000,000.00) (67,000,000.00) (67,000,000.00) (67,000,000.00) (1,267,000,000.00 ) Investment in plant, property, and equipment Investment in Securities (4,000,000,000.00 ) Cash flow from Financing activities Changing in Bank debt - Total Changes in cash flows Cash and cash equivalent at beginning (1,781,128,000.00) 950,000.00 Cash and cash equivalents at the end (1,780,178,000.00) 372,197,100.00 372,197,100.00 372,197,100.00 2,188,425,600.00 5,783,296,350.00 5,286,947,837.50 (1,780,178,000.00) 408,247,600.00 6,191,543,950.00 408,247,600.00 6,191,543,950.00 11,478,491,787.50 Statement of Financial statement Year 1 ($ '000") Year 2 ($ '000") Year 3 ($ '000") Year 4 ($ '000") 10,000.00 8,571.00 7,142.00 5,713.00 67,000.00 56,950.00 48,407.50 41,146.38 60,000.00 51,000.00 43,350.00 36,847.50 Fixed Assets Intangible Assets Patent Long-Term Assets Production Plant Building and Facilities 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 44 Fixtures and Furniture 400.00 340.00 289.00 245.65 300.00 255.00 216.75 184.24 900.00 765.00 650.25 552.71 300.00 255.00 216.75 184.24 2,750.00 4,125.00 6,187.50 9,281.25 2,358,460.06 3,093,257.62 1,307,434.80 2,662,799.28 1,010,768.59 1,325,681.83 560,329.44 1,141,199.70 408,247.60 6,191,543.95 11,478,491.79 3,510,878.65 4,949,448.05 8,165,767.94 15,376,645.73 417.00 569.00 797.00 1,139.00 Distribution Vans Computer and electronic equipment Warehouse equipment Current Assets Inventory Raw Material and Consumables Finished CaPix Work in progress Cash Total Assets Current Liabilities Trade payables Bank overdraft - - - 1,780,178.00 Corporate tax 564,892.35 1,643,358.98 2,720,158.91 3,064,812.90 2,686,015.80 2,307,218.70 Long-Term Liabilities Loan 3,443,610.00 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 45 Capital 1,091.65 1,091.65 1,091.65 1,091.65 Investment in Equities 4,000,000.00 Profit/loss after tax (1,714,418.00) 1,318,082.15 3,834,504.28 6,347,037.46 3,510,878.65 4,949,448.05 8,165,767.70 15,376,645.73 Total Capital and Liabilities Net Present Value and IRR The Net present value is positive meaning that the project is viable according to the NPV decision rule. The IRR is twice the 11% cost of capital indicating we should proceed with the project. Cost of Capital Cost of the project/ Initial outlay 11% (4,393,610,000.00) Return Year 1 (1,714,418,000.00) Return Year 2 1,318,082,150.00 Return Year 3 3,834,504,275.00 Return Year 4 NPV 6,347,037,462.50 $1,906,667,539.75 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN Cost of Capital Cost of the project/ Initial outlay 11% (4,393,610,000.00) Return Year 1 (1,714,418,000.00) Return Year 2 1,318,082,150.00 Return Year 3 3,834,504,275.00 Return Year 4 IRR 6,347,037,462.50 22% 46 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 47 Assumptions and respective contingency plans a) Financial Assumption The project team feels that the CaPix sales will be enough to support the manufacturing, marketing, and distribution operations. The assumption in the sales forecast is that CaPix will bring in profits in its second year after launch. McKesson assumes that sales forecast will grow by 28.6% in the second year, 22.2% in the third year, and 18.22% in the third year. Another important assumption made is that the cost of sales in the income statement will always be a percentage of the total sales as it is the trend in the market. McKesson also assumes that the funding required to make the physical and technological resources including mandatory assets will be easily available through securing a loan from a credit institution. Assumptions for balance sheet items are conventional and base on realistic expectations of asset procurements in the next five years. The cash flow projections assume that the CaPix project will be able to repay the sourced investors from profits. A scenario analysis identifies that even after making profits, it often takes years to offset the initial investment. The sales forecast may be short of or more than what is in the projections. It is also possible that unforeseen events might happen, thus escalating the percentage projections made about sales volume. Imagine also a scenario whereby the profits generating from the sale of CaPix are not adequate to repay the creditors. Economic forces may also interfere with the price estimates of asset acquisition consequently affecting the balance sheet projections. Of much importance, the projections made consider, or those threats and the figures given are as reasonable as possible. For example, the selling price for CaPix of $ 6,000 per month is reasonable and verifiable using the existing drugs on the market as a benchmark. A provision of $ 1,500 is included in the price to take care of possible adverse deviations. The number of units 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 48 sold per projections is also lower than most of the existing oncology drugs in the market to offset future adverse deviations on actual sales. An insurance policy will be put in place to mitigate the risks of machinery, breakdown or inventory loss b) Customer base assumption The second major assumption in the implementation plan of CaPix is the conjecture that consumers will be keen to buy CaPix and maintain sufficient sales to generate profits in the long run. CaPix drug is a combination of three oncology drugs, that is, Capecitabine, Oxaliplatin, and Carboplatin. McKesson believes that the drugs that the drug offers a better value proposition for customers than the existing drugs. There is, therefore, the threat that there may be a bigger customer base than required. There is also the risk that the customers may not be keen as we believe. (Mukherjee, 2017) Proposes that business plans should reveal more figures as potential customers than necessary, as many will buy from competitors and will not buy from you. c) Human resource availability and Management expertise assumption CaPix will not be manufactured automatically and neither will the processes run themselves. Proceeding with the plan relied on the belief that McKesson management has the necessary competencies and that the human resource recruited is well talented and experienced in the pharmaceutical industry. However, according to McKesson, this may not always be true. Sometimes members in the management may leave the project to circumstances attributing to either quitting or death. As a contingency, McKesson will involve in the continuous in-house training program that will ensure every key management position has an assistant manager position and a trainee in waiting. Moreover, McKesson will pay premiums for a key man insurance policy, such that in case of an event, the corporation will use the proceeds to cover the financial implications of the loss. 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 49 McKesson also ensures rigorous recruitment in the project team to ensure that proper talent (Mukherjee, 2017). Regarding the complex rule and regulations, McKesson will outsource legal services wherever necessary. Cross-cultural, economic, and geopolitical factors that may impact the business environment and concept The parameters that would impact the CaPix business environment and consequently the assumptions mentioned above include:a) Cross-cultural factors The meanings use, and associations that will attach to CaPix will vary from one population to another and will often differ for sub-classes within a particular populace. Also, the effects of drugs vary, meaning they are not intrinsic in the biochemical impact they have on humans (Heath, 2018). The associations, meanings, and the uses keep on varying as well. Culture is, therefore, an essential element of the CaPix environment about the choices’ individuals will make about the drug, how they will use it and the outcome of the use. Although the control model is dependent on formal legislation and regulations, the cross-cultural factor is a powerful informal social control (Heath, 2018). According to (Alomar, 2014), different cross-cultural factors affect the occurrence of Adverse Drug Reactions (ADRs). Such ADRs could lead to a change of opinion regarding CaPix. Such factors include; Age where older adults with multiple problems who take multiple drugs are more prone to ADRs (Gurwitz, 2018). The second factor includes race and ethnicity with studies showing that ethnic background is controlled by genetic factors which affect genes encoding drug transporters, receptors, and metabolizing enzymes (Alomar, 2014). Other factors 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 50 include polypharmacy, drug dose, and frequency, smoking, alcoholism, and allergies (Alomar, 2014). Other than the Adverse Drug Reactions, ethical and green issues can also play a role in changing people’s opinion on the drug. Some of the reagents to make CaPix will involve active substances from natural plants and animals. Sometimes people may become sensitive about killing rare species to manufacture a drug (Ricupero, 2002). b) Economic factors The economic environment poses risks for the development of the CaPix drug through several factors. Such factors may end up affecting the demand and supply of CaPix, its marginal and total utility, income and employment of consumers, General price levels of CaPix and even trade cycles about CaPix include: o Interest rates – As mentioned earlier, cash flows will be an imperative aspect of CaPix business’s health, especially because we have based them on estimates for changes in demand, revenue, and expenses. However, rising interest rates could lead to overall consumer spending, therefore affecting demand through the increasing price sensitivity of consumers (Ricupero, 2002). In our business plan, the maximum interest rate is fixed at 11%. o Inflation- Sometimes the supply of money in the economic environment is too much (Ricupero, 2002) while not equally supported by the availability of goods and services. Increased money will either increase the cost of raw materials needed for the production of CaPix thus affecting the retail price. Consumers’ purchasing power also will decrease, thus affecting the demand for CaPix (Ricupero, 2002). c) Geopolitical factors 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 51 Geopolitical changes across the globe, particularly in the US are set to make things for McKesson and CaPix more uncertain. For instance, we expect major changes in the US under the Trump government, such as the repeal of Obama Care, abridged taxes and regulations and dropped drug prices. The UK and Europe also face their challenges revolving around Brexit which could result in delayed drug approvals and imports (Datt, 2017). According to McKesson, the following factors are important: o Licenses and approvals – Importing raw materials for production as well as importing machinery could require particular attention with regards to approvals and licenses. Otherwise, there may occur unkind surprises in the box (Ricupero, 2002). o Tariffs and Quotas – Governments of different countries new import quotas raw material importation or importation of CaPix drug. o New regulatory requirements – It is possible for new regulations on environmental protection, safety, customer protection and free competition that may affect the concept of CaPix. o Other factors include government grants, increase in taxes, and exchange rate controls. Ensuring Legal and Ethics Compliant environment The McKesson goal in developing CaPix is to improve health and prolonged life of cancer patients. Research and development of any drug that is brought to the market are usually costly and must adhere to strict regulations and code of ethics in the United States. McKesson will be keen to ensure legal and ethics complaint, to ensure a safe manufacturing environment, reduced environmental effects, secure the workplace for employees and production of a safe CaPix that will succeed all the necessary approvals as well as avoiding hefty penalties and jail 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 52 terms. To ensure the same, McKesson will ensure, a compliance strategy is in place. The compliance strategy will ensure a top-down strategy, a process, and tools that will ensure compliance across all stages of CaPix development. The strategy will ensure that all employees understand that it is within the company culture and core values to build a reputation for the corporation by ensuring there is ethical and legal compliance. The strategy will also ensure continuous training to employees about laws, rules, regulations, and compliance guidelines regarding research and development, manufacturing, marketing and distribution of cancer drugs. All the key managers are well equipped with good management practices regarding procurement, measurement of reagents and reactants, maintenance and cleaning of machinery etcetera. Lastly, there is a process review team in place which will prepare timely reports on compliance with rules, laws, regulations, and code of ethics. In addition to the strategy, McKesson has put in place a product a Product Data Management (PDM) system that will help employees with the requirement of CaPix drug. The PDM software will centralize CaPix data in a single vault, including manufacturing instructions (Barkai, 2014). Incorporating stakeholder and customer diversity into the planning and implementation of the concept McKesson is aware of the importance of incorporating stakeholders in the planning and implementation of CaPix concept. Project stakeholders are persons who will be dynamically involved in the project or who will be affected by the implementation and execution of the CaPix drug including company employees and customers. McKesson, therefore, looks forward to actively giving and getting stakeholders’ support through devising, planning and developing new ideas regarding the implementation of CaPix drug. The images below outline how McKesson will engage with stakeholders and customers to ensure customer diversity. 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 53 Figure 2 Stakeholder engagement. Source: Researchgate.com Figure 3 Stakeholder groups to involve The role that the Corporate Social Responsibility will play in implementing the CaPix Concept McKesson, as usual, will take responsibility for how its operations regarding the implementation of CaPix will impact society and the natural environment. McKesson will ensure that it applies sustainability principles in the way that it will run its project implementation operations. By sustainability, we mean voluntary activities that demonstrate the inclusion of environmental and social concerns while interacting with stakeholders and customers. In the 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 54 main, Corporate Social Responsibility (CSR) will be an integral part of the CaPix implementation strategy and CaPix drug identity. McKesson will partner with stakeholders to: o Invest in good health for relevant employees, while creating inclusivity in workplaces and providing opportunities to grow. o Sponsoring volunteering and philanthropy programs to ensure a healthier community o Ensure minimum emissions with the aim of creating a better planet. o McKesson will be involved in delivering corporate governance and business ethics. o McKesson will be involved in leading in corporate citizenship. Conclusion The idea of CaPix very timely. It comes at a time when the demand for cancer treatment is very high while it remains equally expensive. The economic conditions are also very tough, and only a few households are able to afford. CaPix addresses that problem by ensuring value for money. It is thus essential to have proper planning for the success of the concept. McKesson has designed an implementation schedule which outlines the physical and technological resources that McKesson needs to put in place to enable the production of CaPix. The implementation of the production of Capix can be difficult if McKesson lacks qualified personnel. In this regard, it has equipped its employees with vital competencies in the fields of policy and planning, rules and regulations, drug production, quality assurance, supply chain and drug distribution. The competencies have been achieved through education and training which is geared towards the successful production of Capix. McKesson has ensured that it employs a good corporate culture so as to shape its decision-making pattern and drive the individual behavior of its stakeholders. McKesson has selected rational project leaders that have a strong 9-1 FINAL SUBMISSION: BUSINESS IMPLEMENTATION PLAN 55 connection with the company culture, as it is the case for other projects. The culture of McKesson is greatly affected by the internal and external forces. They include the vision and mission of the organization, able leadership, environmental sustainability activities, McKesson Foundation, volunteering and philanthropy activities, supplier diversity, social diversity and involvement in the fight against Opioid use. McKesson has prepared a budget and a funding plan to facilitate it in the implementation of the concept. Moreover, it has conducted a financial analysis where it has assessed its assets and liabilities, prepared financial statements such as the sales forecast, income projections, statement of cash flows and the balance sheet. Lastly, the business plan has outlined some of the assumptions and contingency plans regarding the Capix Idea. One of the assumptions is the financial assumption, and the team responsible for the Capix project feels that the sales of the drug will be enough to support the manufacturing, distribution as well as marketing operations of the drug. It is assumed that McKesson will start earning profits in the second year after the drug has been launched. Another assumption is the customer base assumption. It is assumed that the customers will be keen to buy Capix and maintain sufficient sales that generate profits in the long run. 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