Managing Financial Resources MFR

Managing Financial
Resources MFR

Table of Contents
INTRODUCTION...........................................................................................................................3
PART A...........................................................................................................................................3
Discussion of Pricing issue and its impact over the Novartis South Africa PTY Ltd using the
porter five forces model...............................................................................................................3
PART B............................................................................................................................................6
Uses of Ratio Analysis and decision-making within Novartis South Africa PTY Ltd................6
PART C..........................................................................................................................................13
Benefits and Limitations of Budgeting to Novartis South Africa PTY Ltd..............................13
CONCLUSION..............................................................................................................................15
REFERENCES................................................................................................................................1

INTRODUCTION
Managing financial resources is basically an important role of the finance manager of the
company with the help of which the complicated issues related to financial planning and
controlling is being addressed. The present report will be based on the Novartis South Africa
PTY Ltd which is a branch of Novartis International AG organization. Novartis is one of the
largest Pharmaceutical companies in the world which was founded in the year 1996. The
company has its headquarter in Basel, Switzerland and US and provide Pharmaceuticals, generic
drugs, over the counter drugs, diagnostics, contact lenses, animal health medicines etc. The
physical resources and financial resources of the company is quite strong. Revenue earned by
Novartis from its South Africa operation in the year 2021 was US$ 20.96 million while in the
2020 was US$ 28.38 and 84.38 (Gronde, Uyl-de Groot and Pieters, 2017).
On the other hand, the total number of employees in the same year is 360 total employees
across its all locations. Basically, Novartis South Africa Pty Ltd is a corporate family of 774
companies. My role in the organization is finance manager which are responsible for maintaining
the financial health of the business. This report will discuss the economic issues and ratio
analysis of the company, Lastly, the report will also cover the benefits and limitations of
budgeting in the context of Novartis organization.
PART A
Discussion of Pricing issue and its impact over the Novartis South Africa PTY Ltd using the
porter five forces model
The various forces are as follows:
Competition in the industry
The pricing issue is basically a part of economic issues which affects the overall economy
and companies operated in that industry. Price is the cost plus mark up value of the products and
services that offered by the company to its industry. Pharmaceutical company such as Novartis
offers variety of products to their national as well as international customers. The prices set by
the company for its drugs and medicines products are quite high in market and the impact of
which the low and middle income customers unable to afford it. The competition in the
pharmaceutical industry is high. It is found out in the researched that, Novartis incurred large
amount of research and development expenses in order to bring that particular drugs in the

market (Mulcahy, Hlávka and Case, 2018). This is one of the main reason behind the high prices
of new drugs. The treatment facility and medicines of cancer and heart diseases are popularly
provided by the Novartis all over the world including South Africa.
The impact of which they charge high prices for these products and services from the
local as well as international customers. That's why the high pricing of the pharmaceutical
products and services is the main economic issues all over the world. The pharmaceutical
companies have the pricing power, the impact of which the companies basically sets high prices
of their products in order to keep themselves in competition. The impact of which Novartis
company also set their prices of the medicines and generic drugs very high. The reason behind
the high price of the drugs is that drugs uniqueness, competitions, drug effectiveness, research
and development cost etc. Thus, Novartis company also charge high prices for the vaccine from
its customers after the pandemic and Covid-19 (Wouters, Kanavos and McKee, 2017).
Potential of new entrants:
The impact of pricing issues over the Novartis company is that it causes difficulties for
the company to make presence in the highly competitive market. The customer base of the
company get highly affected because of its pricing strategy. For example, because of the
government has provided free Covid vaccine to their people, the sales of the vaccine is get
drastically reduces. However on the other side, In order to address with the pricing issues, the
government of country such as US, South Africa etc. keep their eye over the companies that what
prices are set by them. It is because in South Africa, the price of the prescription drugs are
relatively unregulated. The new entrants in the pharmaceutical industry is a low force. The
impact of which Novartis company are always under scrutiny of the government that whether
they are charging unnecessary high prices from the customers or not. The government
intervention over the pharmaceutical companies related to high price issues affects the Novartis
company to large extent (Tran and Zafar, 2018).
Beside this, it is also identified that the consumers of ordinary and patented medicines are
not in a position to avoid the product's consumption until the price of the medicines and drugs
decreases. The impact of this inflated prices over the Novartis company is that they able to
generate more revenue that they will further use it for the purpose of drug development. The
majority of the revenue of Novartis company is generated from its steadily increasing prices of
drugs beyond the inflation and demand of the customers. But, it is advisable to the Novartis