"GlaxoSmithKline "
Prepared by:
Ehab Ahmed Abu Sabha
Table of Contents
1. Executive summary
2. A brief description - history of the organization.
3. SWOT analysis:
a) External analysis
b) Internal analysis of the organization.
4. Distinctive competencies and capabilities.
5. Differentiation strategy.
6. Strategic alliances.
7. Globalization approach.
8. Major problems / opportunities Glaxo Wellcome and SmithKline Beecham
9. Recommendations
1-Executive Summary
GlaxoSmithKline is one of the best five pharmaceutical organizations in the world. GlaxoSmithKline has used process of growth via acquisitions & mergers as a general strategy, the principal activities of GlaxoSmithKline are manufacturing, developing and marketing of pharmaceutical and consumer health-related products. The company operates in two segments area: Pharmaceuticals and Consumer Healthcare, Major markets include Japan, France, UK, the USA, Germany and Italy. Pharmaceuticals accounted for 84% of 2001 revenue and Consumers healthcare, 16%. The company earns more than half of its sales revenue from US market only.
Concept
The concept of causing Relief is about using humors and innovation to help others.
Mission:
“Our global quest is to improve the quality of human life by enabling people to do more, feel better and live longer” 1.
Vision:
“GlaxoSmithKline’s Environment, Health and Safety (EHS) and Employee Health Management (EHM) Visions align with GSK’s strategic intent: to become the indisputable leader in our industry by helping people do more feel better and live longer”.2
Products & Services
GlaxoSmithKline's broad pharmaceutical product line includes antibiotic, antidepressant, gastrointestinal, dermatological, respiratory, cancer and cardiovascular medications. GSK has a wide variety of vaccine products, including hepatitis A and B, diphtheria, tetanus and whooping cough and influenza.
Bringing oral healthcare, over-the-counter medicines and nutritional healthcare products to millions of people.3
2- A brief description - history of the organization :
GlaxoSmithKline is the best world research pharmaceutical organization with high level combination of resources & skills that provides strong growth in today fast change healthcare environment market
The company was bourn in 1999 and is headquartered in London. In 1988, SmithKline Bio-Science Lab acquires International Clinical Laboratories Inc., increasing the group size by half. In 1989, SmithKline Beckman and The Beecham Group plc merge from Beecham plc & SmithKline. In 1994, SmithKline Beecham acquires Diversified Pharmaceutical Services Inc., a pharmaceutical benefits manager, and Sterling Health. This makes SmithKline Beecham the third-largest over-the-counter medicines company in the world and number one in Europe and the international markets. Focusing on human healthcare, SmithKline Beecham sells its animal health business. In 1995, Glaxo and Wellcome merge to form Glaxo Wellcome. Glaxo Wellcome acquires California-based Affymax, a leader in the field of combinatorial chemistry. In 1998, Glaxo Wellcome acquires Polfa Poznan and becomes the largest pharmaceutical company in Poland. In 1999, further sharpening its focus on pharmaceuticals and consumer healthcare, SmithKline Beecham divests SmithKline Beecham Clinical Laboratories and Diversified Pharmaceutical Services. In 2000, GlaxoSmithKline is formed through the merger of Glaxo Wellcome and
SmithKline Beecham. 4
3- SWOT analysis:
A- External analysis with Four Building Blocks
Strengths
• Greater financial resources (Glaxo Wellcome)
• good competitive position (Glaxo Wellcome & SmithKline Beecham)
• strong R&D department (Glaxo Wellcome) - quality
• product/service innovation abilities (Glaxo Wellcome & SmithKline Beecham) innovation , quality
• proven management -customer responsiveness
• market leader (Glaxo Wellcome)
• access to economies of scale (GSK) - efficiency
• Management corporate culture (SmithKline Beecham) quality
• strong science (Glaxo Wellcome)- efficiency
• charismatic leadership (GSK) -
• Monopoly Power (GSK) - customer responsiveness
• Fully independent, with world leading marketing capabilities (GSK) customer responsiveness.
• Acquisition - efficiency
• Ability to modify the strategy - customer responsiveness
• Cost efficient research - efficiency
Weaknesses
• too narrow a product service/line - customer responsiveness , quality
• weak marketing (Glaxo Wellcome) customer responsiveness
• laissez-faire (Glaxo Wellcome) innovation
• Development of a world-leading oncology franchise – customer responsiveness
• Working to improve pipeline productivity with the introduction of genomics to the drug discovery process - customer responsiveness
B- Internal analysis of the organization with Porter Five Forces
Opportunities & Threats
Competitive Rivalry
• Very strong competition (price, coverage, customer services, new product & services - technology) . its also Threat
• Very big competitor like Pfizer, Novartis AG , Schering –Plough Corp . its also Threat.
Buyers Bargaining Power
• less bargaining power of large buyers since other products are less attractive. .its also Opportunity
• Very strong Byers with low price , high quality, variety of choices can be Threat
• Buyer volume is very big which make them very important to the company . .its also Opportunity
• Buyer switching costs is less relative to firm switching costs which make buyers less power its also Opportunity
• Availability of existing substitute products in the pharmaceutical industry. its also Threat
• Buyer price sensitivity is reasonable with quality Glaxo is offering which makes buyers less power . its also Opportunity
Suppliers Bargaining Power
• Increasing the number of licensing agreements. its also Opportunity
• Increasing other supplier power due to Merger . its also Threat
• Adverse government policies . its also Threat
• British and European Complex regulators . its also Threat
• Supplier switching costs relative to firm switching costs . its also Threat
• Degree of differentiation of inputs that Glaxo use makes it difficult for suppliers to have power. its also Opportunity
Threats of new Entrants
• Low due to enormous entry cost and could be high due to expensive R&D wanted (Threats)
• The existence of barriers to entry like British and European Complex regulators ,government policies. (Threats)
• Economies of scale increase the quantity of all input factors by some amount , if costs increase proportionately, there are no economies of scale . (Threats)
• Switching costs is very less , but for unique product will be very high (Threats)
• Access to distribution due to big geographical markets . (Threats)
Threat of Substitute
• US Smoking-cessation has caused strong barriers to Substitute (Threats)
• Slow market growth or market decline may make customer to Substitute to different solutions (Threats)
• informational complexity and asymmetry may cause a strong reason to switch to other products. (Threats)
4- Distinctive competencies and capabilities.
5- DIFFERENTIATION STRATEGIES
GlaxoSmithKline objective start with differentiating features to cause customers to prefer the company product and service over rivals’ brand. They concentrate on differentiate them self by saying people to do more, feel better and live longer (Glaxo mission). The Keys to Success at GlaxoSmithKline was finding ways to differentiate and create value for customer that are NOT EASILY COPIED by rivals in addition , GlaxoSmithKline was Not spending more to differentiate than premium price to be charge , this was supported with Cost efficient research .
The Successful differentiation allows GlaxoSmithKline over their competitor to Command a premium price witch result great Financial position , on other hand ,they Build brand loyalty over time by producing stable medicine, customer can trust which positioned GlaxoSmithKline away from their competitor , Strong R&D department , Strong science with charismatic leadership has been great value to create different product , have different cost with unique quality ,important use differentiate GlaxoSmithKline on the pharmaceutical industry which help them to produce over 1,400 different brands which make them different .
They also has APPROACHES TO DIFFERENTIATION to improve human life by encouraging people to do more, live longer and feel better, While GSK Vision has identify and understand its relationship to society and the environment
6- Strategic Alliances
In GlaxoSmithKline case, it was Cooperation amongst pharmaceutical firms aimed to achieve a common goal using merge strategy. These taken cross licensing of technology, sharing of production, marketing, R&D facilities which was basically combining of two or more entities from GlaxoWellcome and SmithKline Beecham in to one, through a purchase acquisition.
Glaxo aimed from Alliance to cover the High cost of R&D , reduce the High cost of market diversification ,Technology , Economies of Scale ,Rapidly globalizing market Convergence of Consumer needs and preferences.
GlaxoWellcome and SmithKline Beecham used Strategic Alliances to expand R&D cooperation , acquires more Licensing and target more Sales for Cooperation which aimed to enhance the quality of human life
GlaxoWellcome and SmithKline Beecham choose the Merge alliance to include one of the most important type of alliance R&D activities in this field to Sharing Technology Resources to maintain cutting edge which is result in good output by Accelerating Technology Development ,share of High Development Cost and Short Product Life Cycle which Benefits the new organization to have Ease of market entry , reduce entrenched competition , Shared Risk ,Synergy and competitive advantage , Shared Knowledge and expertise
After GlaxoSmithKline was born, the new company start to do many type of Strategic Alliances to enhance there position the world wide, the strategy was successful and as example : MedImmune and GSK agree on strategic alliance on research and development activities to developing a vaccine against human papillomavirus and this was Under the terms of the 1997 agreement.5
7- Globalization approach
The globalization of markets, products and businesses has been a driver of major change over the past years6, Given the enormous costs of developing new products like drugs ,single model development in each category or single centers for the development of ethical pharmaceuticals in particular disease categories seem very attractive as we see this in GlaxoSmithKline , with many alliances achieved by GlaxoSmithKline they has reached the globalization GSK R&D is based at 24 sites in 11 countries. The company has a leading position in genomics/genetics and new drug discovery technologies all over the world
GSK has 80 manufacturing sites in 37 countries with around 35,000 employees , with is big number of world wide capabilities GlaxoSmithKline able to exceed the maximum number know of alliances in the pharmaceutical industry to Enabling Work in the Networked World and as evidence to can see “ Every SECOND... more than 35 doses of vaccines are distributed by GSK all over the world ,Every MINUTE... more than 1,100 prescriptions are written for GSK products. ,Every HOUR... GSK spends more than £277,000/$450,000 ,Every DAY... more than 200 million people around the world use a GSK brand toothbrush or toothpaste. ,Every YEAR... our factories produce 9 billion TUMS tablets, 6 billion Panadol tablets and 600 million tubes of toothpaste.” 7
8- Major problems / opportunities Glaxo Wellcome and SmithKline Beecham
One of the big opportunities in The merge between Glaxo Wellcome and SmithKline Beecham that created the world leading pharmaceutical organization with largest R&D organization . The merger represented an opportunity for both organizations
in addition, merger was the opportunity to provide and produce an R&D organization fit for the 21st century and take a good opportunity of Increasing number of licensing agreements, expand more and make sales more during geographical explanation which has become more one of the major problem was Very strong competition in this industry from Pfizer, Zeneca, Astra and Roche which was making good environment Availability of existing substitute products in the pharmaceutical industry ,from other side the government policies and British / European Complex regulators was one on the major problem faced Glaxo Wellcome and SmithKline Beecham after merge , it was about to destroy the deal because it was against the monopoly in the market as they thought . one more major problem faced is to seeking to recruit R&D staff , which was less in the market due to the large demand on the UK for R&D activities but No surprisingly the slowdown in new drugs coming to market was a major concern.
9- Recommendations
reduce the increasing cost complexity of pharmaceutical R&D through more mergers are to be the future of GlaxoSmithKline , seek to build more effective R&D operations. the UK is well placed as a result of its long tradition of scientific and technological , however GlaxoSmithKline need to take advantage of successful worldwide globalization . try to do more strategic alliance to jump to the market leading position to expand the market share more and expand the R&D units which will lead to large Product diversification with in the near future , in addition they need to do more deployment of improved and innovative technologies within GSK which will improve process efficiency and this will come from Better process design via innovation and science
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10- References
1- GSK.2005 .”About GSK” ” [online], September 6, 2005 .Available: http://www.gsk.com/about/about.htm, [Accessed 3 November 2005].
2- GSK.2005 .”GSK Vision” ” [online], March 24, 2005.Available http://www.gsk.com/corporate_responsibility/cr_issues/ehs_mf_vision.htm , [Accessed 4 November 2005].
3- GSK.2005 .”Our Heritage” [online], February 3, 2002.Available .http://www.gsk.com/about/background.htm , [Accessed 6 November 2005]
4 - Rachel T.A. Croson, Armando Gomes, Kathleen L. McGinn, Markus Nöth. 2004. ‘ Mergers and Acquisitions: An Experimental Analysis of Synergies, Externalities and Dynamics’ , Review of Finance, , [online], Vol. 8, No. 2. P.481 Available: Proquest 5000, [Accessed 11 November 2005].
5- Hill, C.W.L. & Jones, G.R. ,2001.” Strategic Management: An integrated approach “ 5th edn. , Houghton Mifflin , Boston.
6- Johnson, G., Scholes, K, & Whittington, R. ,2005, “Exploring Corporate Strategy, Text and Cases” 7th edn, ,NJ,Prentice Hall .
7- Bruce W. Piasecki, Kevin A. Fletcher, Frank J. Mendelson .1999, ” Environmental management and business strategy : leadership skills for the 21st century” 3rd edn, NY ,John Wiley.
8- Access Czech Republic Business Bulletin. Bethesda, 2005. “GlaxoSmithKline begins buying biotechnology firms” , Review of Finance, , [online], Vol. 3, P.20 Available: Proquest 5000, [Accessed 11 November 2005].
9- “UK pharmaceuticals; [LONDON 1ST EDITION]”, Financial Times. London (UK): Oct 28, 2005. p. 18 “
Ehab Ahmed Abusabha
