The common goal of any organization is to achieve its objectives which revolve around profit, survival and prosperity. Robert M. Grant (1991:22) identifies two routes to achieve their objective which includes the location of an industry favorable to earn a rate of return above the competitive level and attain a position of advantage over its competitors within the industry, allowing the company to earn return more than the average return of the industry. Duane Ireland et al (2005) mentioned that internal and external analysis is important for the managers in order to develop and the implement the best strategy by evaluating the capabilities and resources of the firms and customer preferences in the market. Glaxo SmithKline (GSK) with a long history dating back to 18th century produce 9 billion Tums tablet, 6 billion Panadol tablets and 600 million tubes every year with more than 200 million customers worldwide and spends more than £300,000 every hour into research and development for innovation in medicine. The company has been able to compete in the industry with strong customer base all over the world, just because of its business strategy which is aimed at increasing growth, reduce risk and improve GSK’s long term financial performance which include growing a diversified global business, deliver more products of value and simplify GSK’s operating model. The present study aims at identifying the key drivers for change, critical success factors, key business strategies over the past five years using Porters generic strategies and resource and capabilities of GlaxoSmithKline over the past ten years so as to analyze the business strategies.
Core Elements of the Glaxo Smith Kline
GSK Company, being a global healthcare company, engages in the development, marketing and manufacturing of pharmaceutical and health related products. The company’s products are target towards treating three major diseases. These diseases are malaria, HIV/AIDS and tuberculosis. The company mainly operates through two major segments which are Consumer Healthcare and Pharmaceuticals. The Pharmaceutical segment includes prescription pharmaceuticals and vaccines. On the other hand, the Consumer Healthcare segment provides over-the-counter medicines, nutritional healthcare products and oral care. Its operations are concentrated in Italy, Spain, United States, Japan, France, the United Kingdom, and Germany. (Drinks Business Review, n.d).
GlaxoSmithKline is one of world’s largest pharmaceutical company which came into existence through merger between Glaxo Wellcome Plc and SmithKline Beecham Plc in 2001.(www.corporatewatch.org) In pharmaceutical industry there are about 200 company and they divide the market between them and there is no one company that control the market share. The biggest market share it is for Pfizer which owns 8.7% from the global market share and GSK came the second largest global market share with 6.3% of it and other companies have the rest , GSK the second largest market share in this industry is located and it's product in more than 160 market, although it is UK company and the headquarter in UK but about 39% of GSK's sale in USA which it's biggest market because the operation based is located there then Europe 31 % second market for to GSK and UK just 3% of their sales.(GlaxoSmithKline,2008)
GSK Company has a number of factors that make it very outstanding in the current market. The company published a strategic approach to most aspects of its business performance in 2003 with an intention to ensure a competitive advantage over its rivals and simultaneously satisfying the consumers. The strategic approach related to issues pertaining to the environment, health issues and safety related to stakeholders in order to propel the company into higher levels of better performance. An analysis of the GSK Company reveals that the company’s strategic plan for excellence was meant to prove the GSK’s effort for gaining excellence aligning with environment, health and safety of the company's vision, strategic intent and key business drivers which is important keeping in view the future climatic situations and the effort taken by the various countries to create norms for companies to take measures towards sustainability of environment (GlaxoSmithKline, n.d.)
Level and intensity of market competition
GlaxoSmithKline is one of the world’s largest pharmaceutical companies with over 100,000 employees and more than 42,000 employees work at 107 manufacturing sites in forty countries and over 16000 employees involved in R&D process.(Maria Pinto et al, 2003) As the pharmaceutical industry is highly competitive market, the company’s strategy can be analysed through Porters Five Forces. Michael Porter provided a framework which helps in analyzing the factors that influence its strategy. (www.quickmba.com) GSK is working hard to increase the diversity of its supply chain by giving opportunities to small, diverse businesses to provide goods and services, the policy which is enforced by the US government to provide livelihood to these sector in order to create employment. GSK sponsors Roanoke Online, a technology company which holds the database for diverse suppliers allowing the company to have access to suppliers and bargain the costs of products. Besides GSK has strong presence in 40 countries with 600 million people using GSK toothpaste worldwide and supplies 1/4th of the world’s vaccines. The company also makes nearly four billion packs of medicines and healthcare products every year which eliminates the fear of duplication from its competitors as it innovates new medicines by the help of its 15000 employees who work at R&D Division screening about 65 million compounds in search of new medicines. (www.gsk.com) GSK's major competitors are international pharmaceutical companies like Novartis, Pfizer and Sanofi Aventis wherein GSK held second position in the world pharmaceutical market with 5.9% market share behind Pfizer with a market share of 7%, as on September 2007. With presence in 40 countries, GSK’s further expansion in new markets would be hurdled due to the presence of big players in the industry, exclusive agreements with the distributors or retailers, facing new policies and laws of that government, economy of scale, etc. (Deshapriya, 2008) There are competitors in specific products like vaccines but the main competition in this industry is to produce and develop new medicines and drugs because introducing of new products and processes by competitors may affect pricing and product replacement. (GlaxoSmithKline, n.d.) Thus it is evident from the porter’s five forces analysis that company needs to invest huge resources, finance and human, in research and development to innovate new medicines to minimize the competition in areas of CNS disorders, respiratory problems, anti bacterials, anti virals, metabolic and gastro intestinal and vaccines. (www.gsk.com)