Risk & Reward
Worst Case Scenario
Kent (2008) discusses risk and notes that entrepreneurs seek to reduce risk. Entrepreneurism is risky because entrepreneurs do not know what they are doing. This may have been something Peter Drucker said, but the reality is a little more complex. Entrepreneurial activity is risky because there are few established givens -- sales are not well-established, products and process may not be refined -- and building a business from scratch is quite challenging when there is nothing in place. In this instance, Capellon's risk is not as great at that of entrepreneurs, because it has existing products. In the pharmaceutical business, many products are covered by patent protection that ensures a baseline level of demand. So the worst case scenario here is not total business failure. The worst case scenario is probably what the company is experiencing now, or something slightly worse. There is organizational dysfunction, sales are declining and none of the objectives are being met.
Another important takeaway from Kent's discussion of risk is that the company needs to take more risk in order to succeed, in particular if it has good people who can execute strategy effectively. The company needs to make some changes to the existing strategy because it is struggling, but because it can only screw things up so badly (so to...
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