Constantino, Annika Kim
CNBC.com
Posted 07/26/2024
Key words and Definitions
Earnings guidance – a financial forecast for the near term that is issued by a corporation.
Layoffs – the termination of employees due to weaker economic conditions, to create efficiency gains, or simply to reduce the size of the organization.
Efficiency – increasing the level of output without adding additional resources or minimizing wasted efforts and expense.
Summary: Key Points of the Article
Pharmaceutical firm Bristol Myers Squibb announced that its second quarter 2024 earnings exceeded expectations. The firm raised its forecast of 2024 earnings accordingly amid the company's cost cutting efforts. Bristol Myers issued new earnings guidance and now expects to post earnings in the upper range of the single digits for 2024.
Bristol Myers is in the midst of slashing $1.5 billion in costs by 2025. The firm intends to invest the savings in new key drugs and expanded research and development. Part of the cost-cutting efforts will involve eliminating over 2,000 jobs by completely ending some drug programs, consolidating some of its physical facilities, and other efforts to lower costs.
The company is making these changes to increase net income. Second quarter 2024 net income is down about $390 million from the same period in 2023. However, revenue was higher in the most recent quarter indicating a decline in efficiency. Bristol Myers will need to introduce new drugs soon given it will lose pricing power on several products stemming from mandatory declines Medicare reimbursements.
News Topic
#22 Management Practice
Exercise 1 Multiple Choice Questions
- Which of the following groups of managers is responsible for making organization-wide decisions?
a. Top managers
b. Middle managers
c. Frontline managers
d. all of these
Answer: Top managers are the ones responsible for making decisions that affect the entire organization. Middle managers manage the frontline managers who in turn manage the nonmanagerial employees. - Which of the following is one of the four primary functions of management identified by Henri Fayol?
a. staffing
b. planning
c. recruiting
d. all of these
Answer: Fayol identified four primary functions of managers including planning, organizing, leading, and controlling. Recruiting and staffing are the responsibility of the human resources department. - Bristol Myers Squibb intends to cut $1.5 billion in costs over the next ten years.
True
False
Answer: Bristol Myers Squibb intends to cut $1.5 billion in costs by 2025. The firm is attempting to generate funds to invest in additional research and development.
Exercise 2 Critical Thinking Questions
- What factors make some of the actions taken by Bristol Myers' management difficult?
Answer: When decisions involve laying off workers it can be difficult given it will upend lives and may force some workers into a job market at a time when demand for employees is slowing down. This can result in former employees being forced to move to find new jobs. The human cost is sometimes overlooked when top management is removed from the workers who will lose their jobs. - Why is it sometimes necessary to lay off workers?
Answer: Sometimes firms are forced to lay off workers to return to profitability and survive. At other times managers have more discretion and may choose to lay off workers to increase efficiency. When times are prosperous firms may increase employee headcount beyond what is necessary for operations. Reducing employee headcount may occur in these firms if economic or firm conditions deteriorate. - What does Bristol Myers Squibb intend to do with the funds saved from the cost cutting efforts?
Answer: The company intends to invest in additional research and development and increased commitments to new key drugs. Eventually this should generate additional revenues. Given the expected reduction in revenue from some drugs the firm will need to replenish their pipeline.
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