Abbreviation and definition

INTRODUCTION

Background

The Russian Pharmaceutical company has a chain of drug-shops. The company hasn’t got any separation between the ownership and management .In other words, the top manager and owners are the same people who are also decision makers. In structure the government of the company key position is occupied in the department of cross-border transaction. This department accomplishes all cross-border transactions. The huge part of these transactions is purchasing drugs abroad. Crucial amount of assortments and big quantity of drugs provide the enormous number of cross-border contracts. The decision makers’ responsibility is to handle this process. They are interested in delegating a part of responsibility concerning routine contracts to junior management. A very important point is that a new system of delegation responsibility decision can give an opportunity to monitor, control and correct decision, if it’s needed.

Problem and research questions

The first question is to create simplicity, clearness and logics in the system which can help owners and top managers to solve problems of delegation of responsibility decision part to junior managers, but reinforce their monitoring, control and correct decision functions.

What are the indicators to provide it?

The second question is to define the methods and tools of investing decision for choosing the cross-border contracts (projects). Which of the investing decision methods are more appropriate for the contracts?

The third question is if it’s possible to find out the same branch standards of risks, capital structure, rate of return or something else which are distinctive for pharmaceutical branch.

The fourth question is if we can use the dates, which we are collecting and analyzing during the contract (project) decisions to conclude with the problems of short-term financing planning and budgeting process of the company?

Aim and Limitation

The aim of my research is to create an algorithm to estimate the effectiveness in cross-border operation of junior management by methods and tools of investing decisions. The effectiveness of junior management is estimated as a level of contract (project) effectiveness, which has been chosen by junior management, and effectiveness of decision which has been made.

To control the results of my research I’m creating the practical simulation model which has the same limitation. The contract which I’m examination has a common term of payment and delivery (common for our pharmaceutical company). I realize that a contract with different terms of payment and delivery gives the same prediction of cash flows. I’m estimating risks and industrial beta according to the standards of statistical dates of countries BRIC.

Outline of thesis

The thesis consists of four chapters and conclusion. The thesis is organized in the following way:

The first chapter is “Methods”. This chapter presents the method – case study.

The second one is the main “Theories”. The second chapter presents the relevant theory used for the analysis. There are the bases for choosing the method of estimation the contracts. The chapter also includes the same key of theoretical basis as well as of Capital Asset Pricing Model (CAPM), Arbitrage pricing Theory (APT), and WACC.

The third chapter is “Own Research”. The research creates the roadmap of decision as the main logical construction (seven steps) where Step1 is considered as the brief juridical analysis. The analysis includes the most important terms of contract and common mistakes. Steps 2 and 3 present the transformation contract dates to invest project and solution of some predicted cash flows problems. This chapter gives the description of each method of making invest decision with practical example, advantages and disadvantages of these methods in real situations.

The fourth one is “Results”. This part presents the result of practical calculations, analysis of the simulation models of decision and scenario analysis of calculations. A special attention goes to the main methods of estimation investment projects and analyses of their possibility to estimate the contracts.

And the last one is “Conclusion” where we are eager to demonstrate the main conclusion of research, in Appendixes we can see the Excel tables and the same materials.

Abbreviation and definition