GlaxoSmithKline plc - Multinational British Pharmaceutical (Research Paper Sample)

GlaxoSmithKline plc
Name
Institution
GSK (GlaxoSmithKline) plc is a globally leading multinational British pharmaceutical, biological, vaccines and consumer healthcare company. Currently, the firm is ranked fifth in the FTSE 100 Company as grounded on market capitalization. The firm was formed in the year 2000 after SmithKline Beecham plc and Glaxo Wellcom plc merged. The current headquarters of the company are in the United Kingdom, London. The company specializes in manufacturing and research of consumer and pharmaceutical health linked products and operates through this two main business fractions in over one hundred and fourteen nations. One of the segments is the pharmaceutical part, which included vaccines and prescription pharmaceuticals and the other is the client healthcare fraction which offers OTC medicines, nutritional and oral care healthcare products.
The pharmaceutical fragment contributed eighty three point seven percent to GSK’s income in 2008. However, the turnover of healthcare products has been going up over the last couple of years currently contributing up to seventeen percent. GSK takes a four percent global market share in the pharmaceutical fragment. GSK holds an eight point nine percent market share in the UK market. In the vaccines market Sanofi-Aventies is the largest player having twenty one percent markets share, Merck & Co is the second with a sixteen percent market share and GSK comes in third place holding fifteen percent of the market share. GSK’s main competitors include AstraZeneca, Novartis, Sanofi-Aventis, Roche and Pfizer.
Process of strategic Management of GSK: Internal and external factors that have affected the company and influenced the strategies it has employed to date
According to the GSK Chief Executive Officer (C.E.O) Sir Andrew Witty, the pharmaceutical industry is quite dynamic and complex in nature (Steven, 2010) a number of various extraordinary encounters are met by players in the industry. There is a continuous upsurge from patent expatriates, regulatory issues and healthcare providers. Koenig (2006) says that these factors are factors that lead to a business environment that has been exposed to high threat factors and lower growth. GSK has focused its energy on three main priorities including simplifying the operating model, transporting more value products and increasing a differentiated global business. Jon et al (2008) points out that through these priorities they aim to reduce risks, increase long-term financial performance, to provide sustainable growth and hence stick to their mission of increasing the value of human life that allows people to live longer, feel healthier and do more.
SWOT Analysis:
According to (2007) Hill and Westbrook the SWOT analysis is a structured planning technique used to measure the threats, opportunities, weaknesses and threat involved in a business. Threats are the factors in the environment that could cause trouble for a business. Opportunities are factors that the business could use to its advantage (Thomas et al., 2007). Weaknesses are traits that place a business at a disadvantage when compared to other businesses. Strengths are traits of a business that give it an advantage over other businesses.
Internal strengths
Highly reliant on competitive and vigorous Central nervous system and respiratory economy.
The company is able to make strong Sales because of its established market.
A vigorous marketing setup is another strong element that the company has.
The company is part of the industry’s’ top R&D team.
The company can be able to cut down on expenses.
The company also has a good financial statements and balance sheet.
GSK is able to effectively implement and execute its business fundamentals, growth management approaches and strategic priorities.
The firm has been able to uphold its competitive advantage by the success of its R&D team, and its ability to meet original commercial anticipations.
Weaknesses
Armstrong (2006) says that in spite of the early focus on emerging markets and Asia, GSK is still very dependent on European and American markets. Those markets are still accountable for about eighty percent of the GSK turnover. Many of GSK’s profitable products like Lamictal, Valtrex and Advair are facing expiry of their patents. For instance, Advair which accounts for four point one billion euros on turnover is bound to expire by the end of the year. Newton (2012) points out that it is unclear whether the following products can be able to balance the expected decline in sales. In addition, GSK is going through a harsh broad competition to a number of established brands particularly in the European and American markets. The most current example is the drop in Avandia sales in America. Avandia has had a serious impact on GSK’s turnover, and this shows that the company is still too dependent on particular products.
External
Opportunities
The company has to deal with the effects which generic products, these products offer a competitive streak, the sales of GSK.
Changes in federal and governmental laws as it relates to healthcare will help the company to gain competitive advantage.
Strong cash and assets position helps to boost the value of the company.
The company has the potential to grow its business by getting into emerging markets.
Another opportunity is the potential to bring strong development by R&D team.
The entry of biologics and antibodies segment into the market could greatly benefit the company.
Threats
The company’s two segments face a lot of competition in their markets whether through upcoming biotechnology and generics companies or well-known competitors. Steven et al. (2011) points out that the serious competition may restrict how products can be marketed and it can also lead to rapid technological shifts. In addition, the future price control regulations by governments may have enduring influence on the limits of pharmaceutical products. GSK’s operations are international and this makes it vulnerable to the risk of foreign exchange and this may also threaten the company’s profits.
GSK’s hedging strategy to produce in the nation that it is selling in may not be very practical in emerging markets. Europeans Medicines Agency and FDA have set more strict parameters on pharmaceutical companies. More severe Standards will result in decreased margins, high product disasters and higher cost of carrying out research. It is important to note down that GSK has capitalized on its strong points and existing prospects over the years and has effectively reduced weaknesses and reduced threats.
Growth share matrix:
 

Relative Market Share.


Low

High

 
Market Growth Rate.

Low

  Dogs.

 Cash Cows


High

 
Question Marks.

 
 Stars.

(The above table has been obtained from the 2014 GlaxoSmithKline Plc Annual Report)
The table shows that GSK has relatively high growth rate and high market share in the market together with decent cash flow. According to the BCG matrix this puts the company in the “star” group which means that is doing very well (Scott et al., 2004).
 Porter’s Five Forces
Porter’s five forces is a framework that tries to analyze the level of competition within a business strategy and the industry the business is in. GSK does not face the threat of fresh entrants in the market because of the great costs require to get in the healthcare and pharmaceutical industry. According to Michael (2008) the peril of fresh entrants is quite small. Though the economies of scale which play a crucial role in the production process do not play a significant role to new entrants but they are additional obstacles of entry into the pharmaceutical market. Gottinger et al. (2010) points out that developing fresh products is a very costly and timely process because of the extensive development and research involved in the process.
FDA (Food and Drug Administration) and federal and government laws impose strict standards and rules on pharmaceutical companies and this has acted as an obstacle to entrants in the market. Kasapi (2011) states that expiry of patents is a huge obstacle for the fresh entrants in the pharmaceutical industry, because the patents are viable for a period of twenty years and so the products are secured by their corresponding companies. New companies trying to get into the industry find this aspect to be very discouraging. Kasapi (2011) says that established companies such as GSK have established loyalty within their clients and creating huge brand awareness for themselves as a result making it hard for new companies to create strong brand awareness.
The existence of substitutes is another threat facing GSK. The company faces an enormous risk from medication that is generic branded which is the chief substitute of products made by pharmaceutical companies. Another alternative for GSK products is CAM (Complementary Alternative Medicines). Kasapi (2011) points out that the brand names, CAM and generics are typically the analogous product being transported to the clients, the only change being price and name.
According to Rainer and Turban (2009) the bargaining ability of consumers is another threat that faces companies. However, consumers do not pose an important threat to GSK, because the corporation uses the greatest part of its R&D to create different orders for the patent. Newton (2012), states that the majo...