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Exam Content
You as the business manager need to be able to determine larger sources of funding by creating a financial plan to help reduce duplication of resources, identify requirements and risks, and determine various financing options. Completing this planning is an important step for all businesses to take if they want to succeed. Larger companies may delegate this process to financial managers, financial analysts, or operations managers.
You decide to create a financial plan for your company to help distinguish between sources, requirements, and risks associated with various types of long- and short-term financing capital structure that your company can potentially use in the future.
Assessment Deliverable
Draft a 3- to 4-page financial plan for your company. This plan should include sections for a business case and profit-and-loss statements. Include the following items:
A business case that includes a description, type of business, and sources of funding
Note: Use your Wk 5 Assessment Prep: Business Case Research assignment and feedback.
A profit-and-loss statement for a 3-year period
Project revenue. State realistic assumptions, such as growth per year, in your projections.
Estimate direct costs, including capital, marketing, labor, and supply costs.
A conclusion that includes an explanation of what working through a financial plan can do for a larger company
Cite references to support your assessment according to APA guidelines.
Submit your assessment.
Assessment Support
Rubric for guidance on deliverable expectations
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Business Case Research
Lakrisha Cheatem
University of Phoenix
FIN 571
Carol Sommer
December 13, 2023
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Business Case Research
Executive Summary
Pfizer, a leading pharmaceutical company, is at the forefront of healthcare innovation. To
sustain and elevate its position, the company is seeking additional funding. The primary
objectives include advancing Research and Development for groundbreaking pharmaceuticals,
facilitating market expansion initiatives, acquiring cutting-edge technologies and companies, and
addressing working capital requirements for operational efficiency. This business case provides a
roadmap for Pfizer’s funding strategy, outlining the sources considered, the requirements of each,
associated risks, and the rationale behind the selected funding sources.
Purpose and Funding
Pfizer, a frontrunner in the pharmaceutical industry, is actively pursuing additional
funding to push its trajectory of innovation in drug development, fortify its global footprint, and
sustain its competitive edge. The company’s strategic allocation of funds encompasses several
pivotal areas. Firstly, a significant portion will fuel cutting-edge Research and development
initiatives, fostering groundbreaking drug discoveries and therapeutic advancements (Pfizer,
n.d.). Simultaneously, a substantial investment is earmarked to facilitate Global Expansion
efforts, target emerging markets, and fortify distribution channels to enter untapped potential.
Additionally, Pfizer aims to enhance its Technological Infrastructure, ensuring
operational optimization and alignment with evolving industry standards. Moreover, exploring
strategic Acquisitions and partnerships is a critical avenue to diversify product portfolios and
strengthen market presence. This infusion of capital signifies Pfizer’s commitment to pioneering
advancements. It is essential in maintaining its leadership position within the industry, driving it
towards sustained growth and firm relevance amidst a dynamic landscape of pharmaceutical
innovation.
Sources of Funding
Pfizer has strategically outlined diverse sources of funding to strengthen its financial
capacity. Firstly, Pfizer aims to tap into self-funding by utilizing reserves accrued from
operational profits. An internal reservoir is a pivotal resource for funding internal initiatives and
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expansion endeavours, ensuring a degree of autonomy in strategic pursuits (Barbuta-Misu,
2009). Additionally, borrowing emerges as a viable option wherein Pfizer plans to seek loans
from esteemed financial institutions. These loans, secured at competitive interest rates, are poised
to complement existing capital, providing supplementary financial backing for the company’s
ventures.
Moreover, Pfizer contemplates Equity as a means of capital infusion without incurring
debt, deliberating on issuing additional shares to garner funds. This would enable the
organization to raise capital while maintaining its financial agility and minimizing liabilities.
Furthermore, exploring partnerships with Venture Capital firms is also viable, especially for
high-risk, high-reward projects or innovations. Collaborations with such entities could offer
access to crucial resources, expertise, and funding tailored for specific pioneering endeavors,
fostering innovation and growth within the pharmaceutical landscape.
Requirements of Funding Sources
Pfizer’s decision-making process regarding funding sources is a nuanced evaluation
shaped by the complex dynamics of the pharmaceutical industry. The urgency of funding needs
is a paramount consideration, recognizing the rapid pace of innovation and the competitive
nature of the sector. Efficient capital allocation, driven by a careful analysis of the cost of capital,
is crucial for sustaining growth and ensuring that financial resources are deployed judiciously
across the company’s multifaceted initiatives.
Control implications form a pivotal aspect of Pfizer’s decision matrix. As a global
healthcare leader, preserving strategic autonomy is non-negotiable. The chosen funding sources
must align with Pfizer’s corporate governance principles, safeguarding decision-making power
within the organization while leveraging external capital. This commitment to control serves as a
strategic safeguard against potential disruptions and upholds Pfizer’s legacy of pioneering
healthcare advancements. Simultaneously, the decision criteria encompass a meticulous risk
tolerance assessment, ensuring that the selected funding sources provide a resilient financial
foundation capable of navigating uncertainties inherent in the pharmaceutical landscape.
Finally, the overarching criterion is aligning with Pfizer’s strategic objectives, creating a
synergy between financial strategies and broader corporate goals for sustained innovation,
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market expansion, and technological advancements. In essence, Pfizer’s decision criteria form a
robust framework that positions the company as a resilient and visionary force in the dynamic
landscape of global healthcare.
Risks Associated
Pfizer recognizes and examines the inherent risks linked with each possible funding
source. While autonomy is appealing, self-funding runs with the risk of limiting immediate funds
for other strategic initiatives. A delicate balance must be struck between maintaining and
providing reserves for operational needs for expansion projects. Borrowing while delivering
quick capital exposes Pfizer to interest rate volatility and the looming threat of financial
constraints during economic downturns. This risk assessment drives Pfizer to plan for
eventualities and maintain a solid monetary stance.
While Equity allows for capital acquisition without incurring debt, it carries the risk of
diluting ownership and causing disagreements in decision-making with incoming shareholders.
Pfizer rigorously designs issuance to avoid such conflicts, assuring alignment with overall goals.
Partnerships with Venture Capital firms risk losing autonomy and being subjected to strict
performance expectations from these entities (Farroq et al., 2022). This inspection highlights the
importance of a balanced relationship that aligns Pfizer’s innovative efforts with the expectations
of venture capital firms, avoiding potential conflicts while supporting joint growth initiatives.
Best Fit Sources and Justification
After a thorough review, Pfizer implements a sophisticated and balanced strategy,
combining multiple funding sources to maximize advantages and reduce risks. The hybrid
method establishes a strategy roadmap for maximizing fund utilization. Self-funding a portion of
reserves answers acute requirements while assuring continued operational stability without
hindering essential resources. Simultaneously, opting for long-term loans at favorable rates
allows Pfizer to embark on large-scale initiatives while minimizing immediate financial burden,
allowing for continuous growth.
The consideration of Equity entails the regulated issuance of additional shares, allowing
Pfizer to access new cash while carefully preserving ownership control. This deliberate strategy
protects against future power dilution and clashing interests with new shareholders. Exploring
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Venture Capital partnerships for high-risk, high-reward enterprises also represents an intentional
choice to protect core operations while venturing into creative projects. These strategic
agreements provide access to specialized resources and knowledge, supporting innovation
without jeopardizing Pfizer’s core activities. The diverse funding sources balance financial
stability, growth prospects, and risk management, presenting a comprehensive approach that
matches Pfizer’s underlying strategic objectives and maintains the company’s innovation and
industry leadership trajectory.
Cost of Capital Estimation
Pfizer’s financial planning includes a detailed calculation of the cost of capital, which
determines the company’s financial approach. Short-term loan funding is expected to have an
APR of 3.5%, demonstrating a balance between accessibility and careful financial management.
Long-term bonds, intended to fund the company’s long-term ambitions, have an expected APR of
4.2%. This rate considers the prolonged period and is consistent with Pfizer’s commitment to
strategic, long-term growth. Furthermore, the expected APR for equity issuance, a critical
component of Pfizer’s long-term funding plan, is 5.0%, representing the expense of raising
external capital while maintaining the company’s share structure. The tabulated representation of
the estimated cost of capital offers a concise view of the financial landscape Pfizer is navigating:
Table 1: Tabulated representation of the estimated cost of capital
Funding Source
Estimated APR Terms
Additional Fees
Short-term Loans 3.5%
1-3 years
Long-term Bonds 4.2%
10-20 years Issuance Fee
Equity Issuance
–
5.0%
Processing Fee
Underwriting Fee
Table 1 not only provides clarity on the projected APRs but also highlights associated
terms and fees for each funding source. Pfizer’s careful consideration of these rates and terms
underscores a strategic approach, ensuring that the cost of capital aligns with the company’s
financial objectives, balancing growth aspirations with fiscal responsibility.
Conclusion
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Pfizer’s funding strategy is a meticulous blend of short-term and long-term solutions,
providing immediate capital infusion and ensuring sustained financial health. The chosen
funding sources minimize risks, ensuring financial stability while providing the necessary
resources for transformative initiatives, aligning with Pfizer’s commitment to advancing global
healthcare.
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References
Barbuta-Misu, N. (2009). The enterprise self-financing – the taxation impact upon self-financing
decision. Euro Economica, 1(22).
Farooq, M., Humayon, A. A., Khan, M. I., & Ali, S. (2022). Ownership structure and financial
constraints–Evidence from an emerging market. Managerial Finance, 48(7), 1007-1028.
Pfizer. (n.d.). Research and development. https://www.pfizer.com/about/programspolicies/working-with-healthcare-professionals/research_development
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