- As general manager of the Astros, Jeff Luhnow is responsible for player-related operations. Owner Jim Crane is responsible for organizational strategy. Describe a few circumstances under which nonpro-grammed decisions made by Crane might affect Luh-nowâs system of highly programmed decision making.
- What conditions contribute to the state ofcertainty under which Luhnow does his job? What conditions contribute to the state of risk under which he does his job? What conditions might contribute to the state of uncertainty under which he does his job? (Remember: Risk and uncertainty are not the same thing.) Be as specific as you can in giving examples of each set of conditions.
- According to Luhnow, âitâs our job in player develop-ment to turn the raw material that the scouts provide into Major League players. The more efficient and effective we can be at doing this, the bigger the edge we might have over other teams.â Recall the distinc-tion that we make between efficiency and effectiveness in Chapter 1. What must Luhnow do in order to make sure that his system is as efficient as possible? What must he do in order to make sure that itâs as effective as possible?
- What about you? Is your decision making susceptible to any of the following behavioral tendenciesâbounded rationality, intuition, escalation of commitment? Do you prefer to gather information or to accept recommen-dations? Have you ever made a decision that youâd like to undo and reconsider? What steps might you take to improve your overall decision making?
Sample Solution
Although costs have increased, the development of new drugs has seen a decline since the 1990s (True cost). The process of pharmaceutical development is long, costly, and uncertain. According to the Food and Drug Administration, the average cost of developing a new drug is $2.6 billion dollars (FDA). Approximately 50% of developed medications reach screening while a low 5% of medications are approved (FDA). With these risks, pharmaceutical companies have fixated on the promotion of their current drugs as opposed to the release of new medications. However, pharmaceutical companies have long justified their pricing by defensively arguing that revenue goes towards the research and development of new medication. In a six year review (2011-2017) of thirteen of the large pharmaceutical companies, 17% of total revenue was spent on research and development with a staggering 60% spent on the marketing of their current products (True). Over the years, pharmaceutical companies have been able to allocate their profits towards their gains. After all, the pharmaceutical industry is a lucrative business that have thrived under the laxity of regulations and have figured out ways to further increase profit margins. As these problems have become more apparent, bills such as Californiaâs drug transparency bill of 2017 have been enacted. This bill mandates these companies to provide 60 day warnings of greater than or equal to 16% price increases (Upenn). Although the idea behind this bill is a step towards better regulations, it has yet to be adapted on a national level. As mentioned previously, the Food and Drug Administration is the sector that awards market exclusivity while the US Patent and Trademark Office is responsible for patent exclusivity. Despite having a specific timeframe for patents, pharmaceutical companies actively seek extensions through many ways. Some of their methodology includes simply applying for and extension and submitting patent applications for non-therapeutic aspects of drugs such as coating and formulation (JAMA). The delay of the patent expiration prevents the release of generic medication. Generic drug manufacturers are direct competitors of brand-name companies; therefore, these larger companies have began to offer financial inc>
Although costs have increased, the development of new drugs has seen a decline since the 1990s (True cost). The process of pharmaceutical development is long, costly, and uncertain. According to the Food and Drug Administration, the average cost of developing a new drug is $2.6 billion dollars (FDA). Approximately 50% of developed medications reach screening while a low 5% of medications are approved (FDA). With these risks, pharmaceutical companies have fixated on the promotion of their current drugs as opposed to the release of new medications. However, pharmaceutical companies have long justified their pricing by defensively arguing that revenue goes towards the research and development of new medication. In a six year review (2011-2017) of thirteen of the large pharmaceutical companies, 17% of total revenue was spent on research and development with a staggering 60% spent on the marketing of their current products (True). Over the years, pharmaceutical companies have been able to allocate their profits towards their gains. After all, the pharmaceutical industry is a lucrative business that have thrived under the laxity of regulations and have figured out ways to further increase profit margins. As these problems have become more apparent, bills such as Californiaâs drug transparency bill of 2017 have been enacted. This bill mandates these companies to provide 60 day warnings of greater than or equal to 16% price increases (Upenn). Although the idea behind this bill is a step towards better regulations, it has yet to be adapted on a national level. As mentioned previously, the Food and Drug Administration is the sector that awards market exclusivity while the US Patent and Trademark Office is responsible for patent exclusivity. Despite having a specific timeframe for patents, pharmaceutical companies actively seek extensions through many ways. Some of their methodology includes simply applying for and extension and submitting patent applications for non-therapeutic aspects of drugs such as coating and formulation (JAMA). The delay of the patent expiration prevents the release of generic medication. Generic drug manufacturers are direct competitors of brand-name companies; therefore, these larger companies have began to offer financial inc>
