Advantages of Starting a Company Inside a Bigger Company
Saving on the cost of research and development (R&D) – Large companies are usually stable, and possess the necessary facilities and technology for carrying out research and development. Therefore, developing a company within an established and big company exposes a small company to these research facilities, hence saving on the cost of hiring them externally.
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Reduction in time lag needed before products are brought to market – as per the case study on Genzyme, it normally takes nearly 19 to 26 months before the US Food and Drug Administration (FDA) approves patents for products and other technologies. Therefore, products of a small company could take long to reach its projected market. Establishing a company within a big company gives the small company an opportunity to sell its products using the known brand of the big company.
Reduced frustrations of constantly seeking for funds – through a big company, a small company can easily access sponsors and investors in its line of business. This leads to the possibility of adequate funding for running their viable projects, or for general company operations.
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What Level of Resources Has the New Product Manager Been Given?
In this case, Genzyme gave the product manager, Nancy Levy, just a few resources. Genzyme had sold some diagnostic kits to the research. Hence, the company felt that it was pointless to expand its assembly and sales of diagnostic kits. Most of its dedicated R&D resources were dedicated to the development of cardiovascular pharmaceutical products, leaving only a few resources for the clinical diagnostics department.
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Disadvantages of Starting a Company Inside a Bigger Company
Direct control of vital resources – Small companies developed within a big company mostly rely on resources of the big company since they are readily available. However, the big company could feel that allocating its resources to a small company is unprofitable. Hence, it would limit the level of resources that the small company uses. Just like the case with the clinical diagnostics department at Genzyme, the company provided only a few resources and majored on cardiovascular pharmaceutical products.
Human resource challenges – most workers would opt to work for a big company since the worker compensation rate would palpably be higher in a big company than in a small one.
What Should Be Her First Steps?
The clinical diagnostics project manager believes that the technology of the R&D group is enough in testing her infectious disease products. The R&D group is relaxed towards her idea. She could convince the CEO of Genzyme that her product could fund the activities of the company in the fourth year before the pharmaceutical launch. Possibly, the CEO could give a directive requiring allocation of R&D resources to her clinical diagnostic segments.