Analysing Business Environments: GSK's Strategies to Achieve Objectives - Essay Sample

Abstract

GlaxoSmithKline (GSK) is a pharmaceutical, consumer healthcare, vaccine, and Biologics Company headquartered in Brentford, London. The firm was established as a result of the 2000 merger between SmithKline Beecham plc and Glaxo Welcome plc. The primary goal of an organisation is to attain the set objectives that rotate around prosperity, survival, and profits. Analysing an external and internal environment of a business is important for the management as it helps them to set up new strategies through evaluation of the firm's resources and preference of the customers in the market. The company has adopted a business strategy aimed at ending development programs that create insufficient returns. And the best opportunity for the company is to boost its online engagement. Another opportunity for GSK is to increase the level of presence and streamline its business relationship with India and China. With the considerable populations in both countries, GSK can leverage it to boost its engagements and partnerships within the region. The GSK Company has increased its efforts towards the active development and research wing. The company has progressed a lot in medicines for respiratory, cardiovascular, and HIV diseases, among others. GSK has provided its products in more than 100 countries all over the globe. The move reduces the risks of over depending on a few markets. The strong market presence across the world has been of great value for the company in terms of boosting its economies of scale. It has been alleged in some countries that GSK has unlawfully promoted drug prescriptions, failed to report safety data, and falsely caused pricing charges. The joint venture between Pfizer and GSK is highly sustainable because it is more geared towards research and development. The experiment opens up a new path that is geared towards a new vaccine company and global pharmaceutical company. The joint venture has received a mixed reaction, especially from the two companies' executives. However, most of them have had affirmative recognition. In terms of possibility, the joint venture will not entirely be feasible because it will separate after three years. The lack of viability for the enterprise comes about with the fact that GSK merged with Pfizer then plans to disengage after three years. GSK stands a great chance to grow its base through technology, which spearheads its research and development

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Introduction

GlaxoSmithKline (GSK) is a pharmaceutical, consumer healthcare, vaccine, and Biologics Company headquartered in Brentford, London. The firm was established as a result of the 2000 merger between SmithKline Beecham plc and Glaxo Welcome plc. As per the 2009 prescription drug sales that were recorded across the nation, GSK was fourth by ranking among the pharmaceutical companies (Bisht, Jacob, and Chandy 2018, p. 16). This paper examines the internal and external factors that affect its growth, as well as the opportunities, threats, strengths, and weaknesses of the company. The merger between Pfizer and GSK is also analysed to understand the results of the strategic evaluation of the joint alliance.

Business Environment

The primary goal of an organisation is to attain the set objectives that rotate around prosperity, survival, and profits. Analysing an external and internal environment of a business is important for the management as it helps them to set up new strategies through evaluation of the firm's resources and preference of the customers in the market. GlaxoSmithKline has managed to maintain a strong customer base across the globe because of a detailed business strategy whose primary goal is decreasing risks, improving the company's financial performance, and increasing growth. The company has aspired to growth a diversified business around the globe, deliver more valuable products, and simplify the company's model of operation.

GSK Company adopted a strategic approach to issues such as the environment, safety, and health that made it outstanding in the market for a couple of years. The stakeholders have been instrumental in achieving the set goals. External stakeholders impact the organisation from outside the premise (Douroumis 2012, p. 13). An example of the key external stakeholders at GSK is the customers and the government, while internal stakeholders are the employees, members of the board, and staff that are involved in ensuring that the business is running seamlessly daily.

Recent Business Strategy

The company has adopted a business strategy aimed at ending development programs that create insufficient returns. The company terminated over thirty preclinical and clinical programs. The company went further to improve the partnership between research and development of its commercial organisation and its department of research and development. The company has made two major announcements in the recent past that include terminating the collaboration with Johnson & Johnson on sirukumab and withholding support for Tanzeum.

Opportunities

The best opportunity for the company is to boost its online engagement. Figure 1 shows the state and the details of social media engagement for the company.

GSK Performance by Dimension

Fig 1: The performance of GlaxoSmithKline by dimension

Fig 1 shows that GSK has a higher percentage of negative sentiments as compared to positive attitudes. In detail, 69.3 per cent represent negative sentiments about the company around the globe, while only 30.7 per cent represent its positive sentiments. According to the figure, GSK has to become keener in the manner in which it engages its customers. The company has an opportunity to identify the reason for the negative sentiments around the globe and establish the right solution. Social media carries a huge potential for marketing products and services (Islam 2018, p. 90). At the moment, many companies are struggling to increase their social media presence. However, the relevance of a vast social media presence comes with a considerable percentage of negative sentiments about the company. With the diagram above, it is clear that GSK has a substantial digital media presence, including social media. Some of the highest percentages of media types include online news, blogs, Twitter, forums, Facebook, and press releases. Therefore, the best path to take is to engage more with customers to find out why they have negative sentiments about the company. It should work toward improving its services based on customers' feedback.

Another opportunity for GSK is to increase the level of presence and streamline its business relationship with India and China. With the considerable populations in both countries, GSK can leverage it to boost its engagements and partnerships within the region. For instance, it can develop cooperation with a company like Jiangsu Walvax Biotech Company or Walvax. Walvax is a large manufacturer of vaccines in China and was inaugurated at the beginning of January. It is dedicated to manufacturing, research and development, and sales of human vaccines. Walvax is a hi-tech company with full-certification and operates in Yunnan Province, boasting of more than US$11M registered capital. The company, launched in 2009, is dedicated to developing viral vaccines in the province of Jiangsu (Douroumis 2012, p. 29). Thus, GSK can increase its market presence in China through its partnership with Walvax. The fact that there are leading pharmaceutical companies in China opens up a massive opportunity for GSK to strike engagements. Despite GSK having a huge opportunity to grow its market in India and China, it has mishandled its business engagements in recent times with those countries. For example, the allegations of the Chinese police regarding massive bribery at GSK should be tackled as they strain the rate of business growth for GSK.

Another reason why China and India provide the best opportunity for GSK market growth is that there is healthy growth in the pharmaceutical market in those countries, based on the report issued by the Pharmaceutical Drugs Market Global Report of 2017. The Business Research Company (TBRC) offers a projection of a fast pace of growth of about 10 per cent in the periods between 2016 and 2020. The growth rate projection is the fastest among the countries that were presented in the report. The situation is also similar in India, where the market is expected to grow by 1.5 times by the year 2020. The rapid change is mainly driven by shifting lifestyles (Mahin, 2018, p. 19). As a result of the increasing sedentary job profiles in India, the country is expected to have a total of about 100 million patients living with diabetes by 2030. The fast-ageing population in the Asian countries, coupled with a busy lifestyle as the leading cause of cancer and diabetes, adds to the reason for GSK market opportunity.

Porter's Five Forces

Competitions

The competition in healthcare is increasingly becoming intense. Companies frequently pursue collaborations and acquisitions to give strength to their portfolios and pipelines. An example relevant to GSK is the 2018 notable M&A activity that included the purchase of $59 billion of Shire Pharmaceuticals by Takeda. The momentum continued to rise at the beginning of 2019 with the announcement by Bristol-Myers Squibb of its intentions to purchase Celgene for $74 billion.

Potential of New Entrants

Over time, the over-the-counter (OTC) sector in consumer healthcare has experienced the most considerable consolidation. Additionally, the fast-moving consumer goods (FMCG) have encountered few hurdles in regulations and lower entry barriers. The move has then led to a rise of niche and companies that are e-commerce based on the fast-adapting consumer trends. It has opened up the massive potential for new entrants (Said, Sevic, and Phillips, 2019, p. 67). Therefore, GSK should be prepared to face the challenges of competing for the market with the new entrants. Thus, GSK should employ some strategies, such as innovating new services and products to tackle the problem of new entrants effectively. The move will attract new customers and provide a reason for the old customers to stick around. This action will allow it to build on its economies of scale to lower the fixed cost of every unit and building capacities for research and development.

Power of Suppliers

Most of the companies in the drug manufacturing sector purchase their raw materials from many suppliers. Thus, the suppliers who are in dominant positions can lower the margins which GSK can earn in the market. Powerful suppliers in the sector of healthcare can utilise their power of negotiation to extract higher prices from firms in the industry. The move will then lead to an overall impact of higher bargaining power of suppliers, thus lowering the drug manufacturer's overall profitability. Therefore, GSK should tackle the suppliers' bargaining power through multiple suppliers. For instance, it can build efficient supply chains and experiment with product designs by using different materials, in case the price for raw material price goes up. Besides, the company can opt for dedicated suppliers who depend on GSK for business.

Power of Consumers

One outstanding characteristic of consumers is that they always want the best quality products with the lowest prices possible. This aspect increases the profitability pressure of GSK in the long run. The better and smaller the power held by GSK consumers, the higher the customers' bargaining power. It also increases the chances of customers to seek increasing offers and discounts (Kishore, 2015). GSK can, therefore, tackle that problem by introducing new products, which will serve to reduce the chances of the defection of GSK customers to its competitors. Besides, carrying out a rapid innovation of ne...