Nucleon, INC. By Harvard Business School

This case brings to life concepts from Chapters 3 and 4 by illustrating how one company struggled with vertical co-ordination decisions, including make-or-buy decisions, market versus vertical integration and contracting (licensing).It further examines the interrelationship between these vertical co-ordination choices and corporate strategy(ies).

This case relies on a decision tree, financial forecasting, NPV analysis, and sensitivity analysis.You will need to be able to do some simple Excel work.

1)How to create a decision tree for CRP from current to commercialization / retail.It won't be super complicated.There are only 5 real pathways.

2)For each pathway, put together net cash flow / sales projections for 1991 through 2009.Calculate the NPV for each pathway.Use the same discount rate for each pathway.What is your discount rate?How did you choose it?

a.Hint 1:remember that cash flows can be negative

b.Hint 2:use excel spreadsheet provided

3)What other non-financial considerations would you need to consider with each pathway?Could you model / quantify these in your financial model of #2?

NOTE:HERE YOU NEED TO UTILIZE CONCEPTS FROM THE ADDITIONAL READING.HERE WE ARE APPLYING ECONOMIC CONCEPTS ON VERTICAL COORDINATION AND GOVERNANCE MECHANISMS.

4)What are your recommendations regarding manufacturing of CRP-1 for Phase I&II? For Phase III?Justify your recommendations.

5)How confident are you in your recommendation in #3?Assume I'm the owner (VC or majority stockholders or equity partner, etc).I'm going to challenge you under different scenarios.

6)What is your suggestion regarding long-term strategy?What are the pros of this choice?What are the risks associated with this choice?Does your choice of long-term strategic positioning alter your choice of pathway for CRP-1?