Unit 7 Business Strategy GlaxoSmithKline Assignment
The following research is a critical analysis of GlaxoSmithKline which is a leader in manufacture and market of pharmaceutical and healthcare products across the globe. The research below intends to analyze the company’s existing policies, strategies, evaluate its strengths, and look at the future strategies of the company.Unit 7 Business Strategy GlaxoSmithKline Assignment utilizes some of the key tools of marketing to evaluate and perform the organizational audit. Further, it gives a holistic view of the company’s present standings and what is in store for the company.
Task 1: Company overview and strategy formulation
GlaxoSmithKline (GSK is among the largest research based pharmaceutical corporations which discovers, develops as well as manufactures a wide range of branded human health products. The company is headquartered in United Kingdom and has another operational headquarters in United States of America. Presently it markets its products to over 160 different countries whereby USA, France< UK, Germany, and Japan are its primary markets. The employee strength of the company is over 1,03,000 and they operate two main business divisions. The divisions are pharmaceuticals and consumer healthcare products. The pharmaceuticals group generates over 85% of the sales by the company and 5 of the largest selling GSK products include Seretide or Advair for asthama and Chronic Obstructive Pulmonary Disease (COPD). The company produces a huge range of other products which are of special importance which includes Anti-malaria drugs, Zentel, Pentosam, Anti-retrovirals, and tuberculosis drugs (GlaxoSmithKline 2013).
Vision Statement: We have been creating a more balanced business and product portfolio, capable of delivering sustainable sales growth. This is centred on our three business areas of Pharmaceuticals, Vaccines and Consumer Healthcare.
Mission Statement: Our mission is to help people do more, feel better, live longer.
Goals and Objectives
The company works on key priorities which act as their holistic goals:
- To successfully launch and commercialize their new products
- Continue investing in key businesses which includes emerging markets, vaccines and consumer healthcare.
- Look forward to future opportunities for increasing the focus and optimizing value of their product portfolio.
Further the business works on different objectives where it aims to:
- Growing as a diversified business
- Deliver more products of value
- Simplify their operating models
- Grow as responsible business
Core Competencies:The core competencies of the company which produce branded products only and has its own development R& D team lies in its expertise and years of experience. The consumer healthcare business of the company comprises of OTC medicines, oral healthcare products (Aquafresh, Sensodyne), along with nutritional healthcare drinks. GSK has its largest pharmaceutical division and has been divided into prescription drugs and vaccines. Pharmaceuticals is the key area which the company masters and its R&D team at more than 20 different sites itself employ over 15,000 people (GlaxoSmithKline 2013).
GSK has a single global network of manufacturing and supplying its products. It has 87 different manufacturing sites and employs over 32,000 employees for production. The company presently has 2 types of manufacturing sites. The primary manufacturing sites are involved in production of active compounds which are used for preparing its drugs. For production the company has 12 of these sites in UK, Ireland, USA, Singapore and Australia. Additionally the secondary manufacturing sites convert the active compounds into finished products. With over 15 of these sites solely in Europe, the company has expanded 6 in North America, 5 in Latin America, 5 in Middle East, and more than 15 in Asia & Australia together. The company has also come up with 4 in China and another one in Japan. Speaking about the vaccine manufacturing units, the company primarily makes it through its 2 different sites which are in Belgium. For the sales division the company has more than 44,000 people and is one of the largest sales force in the pharmaceutical industry today. GSK also has different co-marketing and co-promotion agreements with several other pharmaceutical companies (GlaxoSmithKline 2013)..
B. Factors to be considered for formulating the strategic plans
The priority business goal of the company is to emerge as the world’s largest company in the pharmaceutical industry. For achieving this the company needs to consider several factors before formulating its future strategies. They are:
- Improve R&D pipeline: Although the company has been doing well to come up with effective solutions for various health conditions and diseases, the company has to further enhance its R&D projects and further improve its turnaround time.
- Drug focused portfolio: The focus should majorly concentrate on leveraging from the units the company has today and be pointed at having drug focused portfolio. This needs to be substantiated by in-licensing agreements for external contracting of their R&D division.
- Link closely to commercial operations: The Company has invested and is investing huge for coming up with advanced products and affordable solutions in the field of pharmaceuticals and healthcare. In order to maximize the value of their R&D the company should closely link the R&D efforts with commercial operations.
- Differentiation: The Company differentiates its products by using its integrated marketing strategies. They have also gone creative in terms of product designs and use of different marketing channels especially for its consumer healthcare products.
- Market Penetration: GSK presently accounts for more than 9% of the European OTC pharmaceuticals market value. Also it accounts to over 7% of the global share in the pharmaceuticals. It has a stronghold as a player in its industry and is regarded as the 4th largest pharmaceutical company in the world today. The advantages which the company has is its own robust distribution channel, partnership with strong retailers, tie-ups with universities health care centers, GPs, partnership, etc.
- Product Development: The Company has had 6 significant approvals last year on which it has started working. There are more than 40 different medicines where GSK is working on and are in the phase II or II of their development stage. Further, the company is looking to develop new needed pharmaceutical products for increased concerns regarding ageing and obesity. They also plan to develop its specific products based on different business segments (GlaxoSmithKline 2013).
- Market Development: In terms of market development the company has reported a 60% increase in volumes of medicines which are supplied to the least developed nations since 2010. It has also attained the title of being the 1st pharmaceutical company for signing AllTrials campaign for their research transparency in different parts of the world.
- Diversification: As a group the turnover of the company is £26.5bn. As mentioned above the company has over 50 different units for different products across the world. They are continuing to invest in key businesses which includes the emerging markets, vaccinnes, and consumer healthcare (Daniel Kipley, Alfred O. Lewis, Jau-Lian Jeng 2012).
C. Effectiveness of strategic planning techniques for developing a strategic business plan
- Market Research: It is a process which gathers information regarding a particular market which includes the preferences of the potential customers, the existing competitors, and the present condition of the market. It is an important tool as it provides insights for the requirements of the customers which can facilitate the managers for creating the mission, goals as well as strategies.
- Cost Benefit Analysis: This is a common kind of strategic decision making tool which comprises of costs as well as the potential benefits which are associated with several courses of action and further choosing the best course of action which could yield the best profitability for the company.
- SWOT Analysis: A simple yet an effective tool which is widely used across industries comprises of a summary of the strengths, weaknesses, opportunities and threats of the company. This facilitates the managers to take advantage of the strengths and implement strategies which would reduce the weaknesses and turn them into strengths. While opportunities and threats aid in making the strategic decision making process by facilitating the managers to plan for things well in advance.
- Feasibility Study: This tool is regarded as a business planning tool which includes assessment of the possibility of a project to generate enough profits. This essential helps entrepreneurs in the very beginning of launching a company to decide whether they could pursue certain opportunities or not (Andy Hines 2012).
Task 2: Organizational audit
A. Audit Tools
In order to analyze the current standings of GSK we would use 2 different tools and conduct the organizational audit. These tools are:
- Porter’s Five Forces: This would provide the external competitive environment and the degree of impact which each players have on the business (EY 2013).
- SWOT Analysis: As mentioned before it would offer a summarized details about the strengths, weaknesses, opportunities and threats to the company.
Porter’s Five Forces
The Diagram below summarizes the different levels of impact which each of the elements have in the operations of the company.
- Bargaining Power of the Customers: The bargaining power of the customers is quite low due to the fact that pharmaceuticals and healthcare are very few in number and most of them charge almost similar pricing.
- Threat from New Entrants: Entering the industry requires huge amount of capital and technology. Thus it is low as it is not possible for any other company to enter the markets and offer its services.
- Competitive Rivalry within the industry: GSK presently caters to 12% of the total market in UK. Hence, there is a considerable market share which it could expand and cater to. However, the number of competitors is quite low which makes the competition to be medium.
- Bargaining Power of Suppliers: The bargaining power of suppliers is medium as there are limited suppliers for the ingredients which the company uses to produce its products.
- Threat of Substitute products: There is no close substitute to medicines of pharmaceuticals products as produced by the company. Thus the threat is on the lower side when it comes to substitute products.
- GSK has one of the largest and the strongest R&D capabilities in the industry today.
- The company dominates the market of medicines for cough and cold which accounts to over 40% of the total market.
- In UK it is 3rd in terms of sales of OTC medicines.
- One of the key strengths of the company is its financial position which is very good and has helped it grow and invest in larger potential markets and products. It has helped it to develop the largest and strongest R&D team as well (Adaptimmune 2014).
- There have been instances where the company has been reported to adopt illegal practices for production of its products.
- The company also lacks presence of competitive products in the largest segment of OTC pharmaceuticals market across United Kingdom.
- They have also been reported to fire employees at sudden decline in sales. This has created an image of anti-employee image for the company on various occasions.
- The illness related to aging and obesity is on the rise. The company has and is making several products to cater to this growing markets.
- GPs along with Pharmacists are seen to be keen for recommending OTC products.
- There is an anticipated long term growth in the OTC market aided by the current steady market
- The company has the resources and opportunities to expand in emerging markets and offer pharmaceutical and healthcare solutions (Pip McCrostie (2014).
- The pharmaceutical industry is believed to be very complex and dynamic.
- The cuts in government spending and impacts of global recession has had an impact in the business of the company across continents.
- There has been an increase in regulatory controls over the pharmaceutical products, its pricing, and loads of governmental restrictions.
- Competition has increased from both the existing an new players who have entered the market.
B. Significance of Stakeholder analysis for formulating a new strategy
Stakeholders play a crucial role when it comes to setting up of priorities and objectives for any company. A stakeholder analysis offers the degree of importance of how someone is concerned regarding an initiative. Also influence of a stakeholder has the ability of affecting the success of failure of a business. The following diagram lists down the internal and external stakeholders of GSK in a global scale (Ronald K. Mitchell, Bradley R. Agle, Donna J. Wood (1997).
In the annual corporate responsibility report, GSK offers a short description of communication and interaction with different types of stakeholders. They have regular communication in between employees, healthcare professionals, governments and other authorities, investors, NGOs, communities, UN agencies, etc (Pierre Chandon 2003).
C. Future Strategies for GSK.
- More Restructuring: The Company looks forward to restructure and achieve the annual cost savings of $1.6 billion by 2018. With its new policies and programs the company expects to result in costs of $2.4 billion mostly in case. Further, initial savings this year from its program would be utilized to offset the earnings impact from the declining sales through the respiratory drug called Advair.
- Grow a diversified global business: As per the top management, the company seeks to generate future sales growth through supplementing the strengths in the core small-molecule pharmaceutical business and proceed with newer investments in the rapidly growing areas like vaccines and consumer healthcare. The company also focusses on investing huge for biopharmaceutical products and actively seeking for unlocking the geographic potential of their different business especially in the emerging economies.
- Deliver products which add value: GSK has been known to be highly involved in pharmaceutical R&D and has been constantly working towards impleming its efforts for R&D productivity and it is one of the reasons why they have started to implement a new vision of R&D organization which initiates and targets to stay focused on creating valued products which is science led.
- New Centers of drug discovery and healthcare development: GSK presently has 8 different research areas where it has been focusing. It includes Immuno-Inflammation, Neuroscience, Metabolic Pathways, Oncology, Respiratory, Infectious Disease, Ophthalmology and Biopharmaceuticals. The future plan of the company is to establish its new Drug Performance Units within its Centers of Excellence for Drug Discovery. These units would focus on providing biological pathway like schizophrenia as a part of Neuroscience CEDD. (Adelaide Addison, Virginie Lawson 2012).
Task 3: Appropriateness of alternative Strategies
A. Alternative Strategies
GSK business is already a known name and has diversified into various avenues of pharmaceutical and healthcare products. The future strategies which the company needs to look forward to as alternative strategies from the current line of business would be substantive growth facilitated by sustainable forms of healthcare products which are affordable.
Diversification and globalization is the next step which the company needs to look at as an alternative strategy to its existing business operations. It is well known that the next century would focus on healthcare products, which is why the company would need to proceed and start its production of various products which offers solution for new age diseases and health disorders.
B. Diversification, globalization and sustainable energy development
The future strategy of the company would be based on three important pillars. They are:
- Diversification:The Company is present in most of the common and complex pharmaceutical and healthcare products has diversified a lot over the years. In the coming years the focus would now be shifted on innovating the production techniques by usage of more cost effective products through their new setup (GlaxoSmithKline 2014).
- Globalization:Till present times the company has majorly been operating in UK and a few other countries.. With its expertise and a range of healthcare solutions it would be now focused to expand and offer its solutions to other countries in EU along with venturing out to newer countries.
- Sustainable healthcare products:A primary focus would now be to offer sustainable products to the customers. It should be such that it is available at cost effective rates and reduces any forms of pollution. This is a growing need of the future and it would definitely need the company to invest in such technologies which can help it expand its operations and cater to a much wider audience.
Task 4: Implementation of the above strategy
A: Steps to implement the plan
The proposed strategy is to diversify, globalize and offer sustainable solutions to the customers. Before the strategy is implemented and the plan is proceeded with, it would be very important to define the roles and responsibilities for strategy implementation at GSK.
Roles and Responsibilities
- Top Management:The role of the top management would be to supervise and ensure that the proposed strategies do not get interrupted due to lack of funds or resources. For its project of development of key medicines which are created to fight certain complex diseases and other kinds of health disorders, the top management needs to delegate and communicate with the partner companies to make the overall objectives achievable in the next 5 years. Moreover, in order to commercialize the usage of cost effective and highly effective solutions, the management would be responsible for making arrangements for funds, space, and other transport resources so that it could soon start distributing across its markets.
- R&D:GSK has its own R&D team which has been working consistently to innovate and offer effective and efficient healthcare solutions. Besides their roles in production of pharmaceutical and health care product distribution, they would play a crucial role when it comes to expanding across the retail sector.
- Transportation:In distribution of its medicines and other healthcare products, the transport systems play a crucial role. The company would need to further invest and create its own transport systems for both local and international delivery to its power generation units. Transportation is one of the major portions of the costs when it comes to operating in the power sector.
Resource Requirement for implementation of new strategy
The resources required by GSK for implementing its new business strategies would include a continuous efforts and collaborative efforts by the entire GSK team and its employees. The basic elements of the resources required and their roles could be summarized as below:
- Environmental scanning: GP as well as pharmacists are playing an important role which is why GSK would need to embed them and keep focus while making their strategies. The social trend seems to drift towards self-medication which is why the company would need to offer universal and affordable solutions as well. For its product development and further expansion of the medicines for the cold and flu health concerns, the company would need to focus on adding convenience and accessibility as primary factors.
- Strategic Thinking and Management: The top management and the managers across the world for GSK would need to further develop products which are in the pipeline along with a range of other healthcare solution in order to penetrate the existing market.
- Delivering: GSK would further need to integrate each target in its communication tools and make it a part of the integrated marketing strategies. Further it would need to enhance its accessibility and convenience of the product on offer for the new as well as emerging markets.
B. SMART targets to achieve the above strategies
- By the year 2018 the company plans to increase its market share within UK.
- It also plans to increase the sales of its market leading product for cold and flu.
- Develop cooperation with universities and other higher education institutions.
- Increase the investment in R&D in the sector of cold and flu medicines.
- Target customers within the new products markets.
- Launch vending machines in London.
- Increase their CSR activities and social contribution.
The company aims at capture of 10% market share by increasing its sales by over 18% within UK.
- The target for increase in sales of cold and flu medicines is by 10% within a period of 3 years.
- It aims to tap over 70% of the universities and education institutions in a period of 3 years.
- The investment in production of cold and flu medicines is set to increase by 5% and reduce the production costs by 3% by 2018.
- It aims to target 10% of the heavy users market share for its new products within a span of 3 years.
- It targets to launch over 300 vending machines across London.
- They also aim to donate 3% of their profits as a part of corporate social responsibility and increase their contribution to the social sector.
Realistic: All the above aims are based on the existing base of the company and the growth it has had over the last few decades. The company would further have to implement aggressive marketing strategies and ensure that they back it up with quick turnaround of their production of medicines. The demand of critical medicines such as the ones for cancer or other critical disease is more and has been on the rise. Therefore the above goals are pretty realistic and it just needs the company to move ahead in the right direction.
Time: As mentioned above the targets which the company has set is for a period of 3 years starting 2015. The company would need to continuously evaluate its strategies and track it against the set goals. In case of any discrepancies they would need to add the required corrective measures from time to time.
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To conclude we can say that GSK has enough potentials to leverage upon its experience and facilities to emerge as the top company in the field of pharmaceutical products. However, there is a long way till the company emerges as a substantial player in the field of Consumer Healthcare products. Additionally, its other focus areas such as production of vaccines is a exclusive domain which is less explored by others across the world. Overall the company needs to focus on the above strategies and make sure adequate implementation and control mechanisms are in place.
GlaxoSmithKline (2013), Annual Report 2013, available at http://www.gsk.com/media/325156/annual-report-2013.pdf
Adaptimmune (2014), Adaptimmune enters strategic cancer immunotherapy collaboration with GlaxoSmithKline to develop and commercialise novel cell-based therapies, Adaptimmune Limited
Pip McCrostie (2014), Global Corporate Divestment Study: strategic Divestments drive value, Transaction Advisory Services
Pierre Chandon (2003), Innovative marketing strategies after patent expiry: The case of GSK’s antibiotic Clamoxyl in France, International Journal of Medical Marketing, Vol. 4, 1 65–73