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Understanding and managing profitability in a competitive environment : an application in biotechnology

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dc.contributor.advisor Charles Cooney and Ernst Berndt. en_US Lin, Amy C. (Amy Chaimin), 1980- en_US
dc.contributor.other Leaders for Global Operations Program. en_US 2010-10-12T17:58:57Z 2010-10-12T17:58:57Z 2010 en_US 2010 en_US
dc.description Thesis (M.B.A.)--Massachusetts Institute of Technology, Sloan School of Management; and, (S.M.)--Massachusetts Institute of Technology, Dept. of Mechanical Engineering; in conjunction with the Leaders for Global Operations Program at MIT, 2010. en_US
dc.description Cataloged from PDF version of thesis. en_US
dc.description Includes bibliographical references (p. 56-57). en_US
dc.description.abstract For many biotech drugs, minimal competition has led to significant margins. Genentech's legacy product, however, faces intense competition from six other competitors. Competition necessitates contracting to ensure patient access to the product but this results in price erosion. An increase in discounting and subsequent price erosion in recent years has prompted a need to better understand account level profitability. Given a highly dynamic and complex payer and distribution network, it is difficult to determine the contribution of each vial that is sold, such that the profitability of some vials is in question. As other biotech drugs begin to face similar competitive market dynamics, an analysis of Genentech's product brings timely insight into understanding and managing profitability in a competitive environment within the biotechnology sector. System dynamics modeling is used to analyze the key attributes of a competitive environment. It highlights two important and related observations: that increased market share does not necessarily lead to increased profitability, and that contract wins do not always result in increased sales. A framework is introduced to determine account level profitability. By using activity-based accounting to allocate costs, the true profit of each account is determined. Results show that the degree of profitability varies widely, further reinforcing the notion that account specific profits rather than average profits are a more accurate measure of performance. Finally, to assist decision makers in the ongoing process of promoting sound business decisions, tools are created that incorporate the insights gained in this analysis. Both an account specific marginal profit model and a dashboard will help to ensure that future decisions lead to long-term profitability. en_US
dc.description.statementofresponsibility by Amy C. Lin. en_US
dc.format.extent 57 p. en_US
dc.language.iso eng en_US
dc.publisher Massachusetts Institute of Technology en_US
dc.rights M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission. en_US
dc.rights.uri en_US
dc.subject Sloan School of Management. en_US
dc.subject Mechanical Engineering. en_US
dc.subject Leaders for Global Operations Program. en_US
dc.title Understanding and managing profitability in a competitive environment : an application in biotechnology en_US
dc.type Thesis en_US S.M. en_US M.B.A. en_US
dc.contributor.department Sloan School of Management. en_US
dc.contributor.department Massachusetts Institute of Technology. Dept. of Mechanical Engineering. en_US
dc.contributor.department Leaders for Global Operations Program. en_US
dc.identifier.oclc 659780829 en_US

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