Financial modelling and price setting strategy for the Department of Veterinary Tropical Diseases at the Faculty of Veterinary Sciences at Onderstepoort

Abstract

Financial feasibility justifies any business institution from an economic point of view. Cost analyses and pricing strategies assist in the investigation into the financial feasibility of an institution, whilst a financial model contributes to the innovation of a business in order to reach the desired financial feasibility. Financial modeling can be implemented as a business tool to analyze a business’ reactions to economic events, as well as to estimate the outcome of financial decisions, prior to any decisions being implemented. With regards to this project a financial model plays an important role in quantifying the financial impact of the institution’s policies and current price setting methodologies. The Laboratories of the Department of Veterinary Tropical Diseases (DVTD) at the Faculty of Veterinary Sciences at Onderstepoort, currently provides a service to three key service categories; the Commercial, Interdepartmental and Research settings. The laboratories are wholly self-sustainable and generate an income mainly from these service settings. However, the manner in which the services are charged for are set on no scientific model or formulations whatsoever. Management is also uninformed regarding the cost-to-company of the activities and services provided by the laboratories. This poses a problem as the laboratories are currently fully unaware of their financial standing and it is unknown whether the laboratories are profitable or breaking even. By applying operations, demand, and financial management techniques incorporated with operations research techniques, an in-depth study of the activities and processes taking place at these laboratories can be done and as a result a comprehensive operational, financial and cost analysis will be presented and integrated with a suitable pricing model to enable the formulation of an appropriate financial model.