Healthy Rise In GSK Profits Commerce Essay

strong Rise In GSK Profits Commerce EssayThis depict outlines the analysis made at micro and macro level on UK base pharmaceutical troupe, Glaxo SmithKline Plc. In this context the scope of the constancy is analyzed and ground on the threats that the industry can face a critical study is carried out to predict the future market place position of GSK among its competitors.This analysis made is based on various(a) models and frameworks equal Porters five forces, Porters generic strategies and PESTEL analysis. These models help in clearly defining the strategic position, strategic fit and the competitive advantage of the partnership with respect to sustain world power over the future market scenario of the pharmaceutical industry.GSK is one of the market leaders in pharmaceutical industry that comprises of 7% of the worlds pharmaceutical market. It is head quartered at UK and with operation based in US has a long history from 18th century. GSK was a result of two study market holders Glaxo Wellcome (Burroughs Wellcome fraternity and Glaxo Laboratories) conflated with SmithKline Beecham (SmithKline Beckman and Beecham group plc) to form GlaxoSmithKline Beecham during the early 2000 (Glaxo SmithKline, 2009a, 2009a Glaxo SmithKline, 2009b).Pharmaceutical IndustryA pharmaceutical industry in general can be defined as a private organization where dis managey, outgrowth, manufacture and sales of drugs and vaccination into the market takes place (Britannica, 2009). With respect to the case study confederation, GSK proves to be a market leader as a research based pharmaceutical industry providing diversified health c be products to influence humans life towards betterment (Glaxo SmithKline Plc, 2009a FAME, 2009a).Market sh beThe new-fangled statistics (Euromonitor, 2009a Euromonitor, 2009b) shows that GSK by holding 7% worlds pharmaceutical market shargon go alongs to be the second major pharmaceutical company in the world and it is the third largest lea ding OTC health care company with a market share of 3.4% following Johnson Johnson Inc and Bayer AG. Recent report shows that GSK has shown sum up in their sour over market share in vaccinum sales and diversified products in US irrespective of the recession during 2008 (Brian Kevin, 2009). There has been a 10% increase in profit and sales during the third quarter of 2009. This was due to the sales and urgent orders made by various governments around the world for the treating pandemic grippe virus (Milligan, 2009).GSK gives a tuff competition to its major market share holders and generic. The pharmaceutical industry can be classified as an oligopoly market, because two major firms GSK and Pfizer will be working together to capture solution for HIV/AIDS. Thus this will lead in building barriers for the other minor market competitors to reach the top 5. But still the generic industries in the market remain to be a major force of competition for GSK when its products patent exp ires (Jack, 2009).extraneous Analysis on GSKThe external analysis on GSK is done using PESTEL and Porters five force models.Macro environmentThe PESTEL analysis is generally used at the macro environment of an industry to infrastand the reveal drivers for falsify. This frame work tells the managers to get along efficient dodging based on the PESTEL analysis report. Thus a few core factors of change are discussed below,POLITICAL The US Govt by approving the license application for the pandemic vaccine allows GSK to manufacture and supply its unadjuvanted vaccine for the use of US people. Similarly many other European and Asian nations watch also ordered for this vaccine which in turn will hypothecate a hike in GSKs revenue (Milligan, 2009)TECHNOLOGY GSK adopted sourcing technologies from Emptoris solutions to obtain spend analysis, supply and contract management computer software solutions that empowered the company to add up a nonher billion to the profit (Emptoris, 2009). T he result of this was proved with the awards that it received at 2005 Baseline ROI leadership Awards for Supplier coordination and Performance management (Ziff Davis media, 2009)SOCIAL The demographic changes are similar in Africa (Cutler J. Cleveland, 2009) India and China. The changes taking place raises a prerequisite for increase in the standardization of the people and influencing longer life to them for a figure of a price charged at UK. Thus GSK finds the emerging markets like these countries and establishes its brand and products to gain advantage of the changing demographic factors (Financial Times, 2009a).ENVIRONMENTAL The threatening wight rights campaign caused the smaller firms to shift their company headquarter from UK .But GSK with the support of UK govt dissolved the case (BBC parole, 2009a).LEGAL The patent protection has been a major issue while reservation a sales competition with the generic manufacturers (Jack, 2009a).ECONOMIC The recent economic recession that hit the US and UK market made GSK to cut jobs in selected plants (Decision news media, 2009).The analysis has helped in defining the extent of macro environment that supports GSK done it progress by providing few facts that remains to be driving factors to bring change for the companys revenue and brand image. However, accredited environmental issues and legal factors can make the investors to rethink. Finally UK govts dependency on GSKs share towards economy is an added advantage that will remain ideal.Industry and sectorThe Porters five force framework explains the influence of competitive forces surrounding an organisation. The key factors like exit barrier for existing company and submission barrier for new fresher (Gassmann et al, 2004 p21) to emerge as a rival to GSK are discussed below.Power of buyer Power of buyer may not be a major issue for a new potential entrant to consider, scarcely he cant stick to a single supplier. Considering GSK, it maximizes the number o f chemic supplier to avoid supply disruption which results in loss in market share. On the other hand it minimizes the number of machinery and equipment to single supplier for affect products to maintain identical standard (Pierce Lisa McTigue, 2004). Power of supplier The power of supplier is very low in the current pharmaceutical market because procurement by dint of reverse e-auction (Science Direct, 2009) results in low switching salute (Gassmann et al, 2004 p23) and it is being followed effectively by GSK. The high supplier concentration ratio in pharmaceutical industry makes the suppliers to liberate their powers over the buyers.Threat of substitute Threats from generic manufactures (Jack, 2009a) of drugs, have been a major threat to GSK because price competitiveness is always a major attractive force to insurance company, Inter subject area bodies like NICE to approve and for the end customers.Threat of entry by a potential entrant is medium. A new entrant can be former chemical manufacturer or supplier then the complexity for the company to emerge into a pharmaceutical company is sooner easy.Regulative forces The major issue in a pharmaceutical industry can be the patent protection, changing trade legal philosophy and taxation, tort law (Glaxo SmithKline, 2001), approval from FDA (Russell, 2008), European and other regulatory authorities.Rivalry Globalized leaders such as Merck, GSK, and Pfizer have remained as strong rivals in launching new or updated products (Griffiths, 2006).CompetitorsThe critical success factors are influencing aspects of a product that are assessd by the customer/consumers. Thus the organisation has to consider these factors for taking advantage among their competitors (Johnson et al, 2008).As discussed forward GSK deals with prescribed drugs and non-prescribed drugs (OTC). Thus these diversified products that it manufactures have various customer and consumers.There are four critical success factors identified in GSK a s per customers valuation. They are Value, Variety, Share return, Skilled clinical testing,Value OTC products can expect a lot of price sensitive customers buying those in the shops. However, the prescribed drugs which have less price conscious patients and more(prenominal) worldly concern and private hospitals. Drugs purchased by the hospital board are checked for its cost effectiveness by national organisation like NICE. GSK with high brand images looses the market due to low cost generic products after the expiry drugs patent. So GSK has to consider nearly the cost factor to overcome the price war.Effectiveness Generally the drugs with more effectiveness towards the medical problem are preferred by the end customer. GSKs LEVITRA (Glaxo SmithKline, 2009e) which had 25% high efficiency than it competitors drug Viagra gained an edge.Skilled Clinical testing It is a major concern for NICE and NHS in UK. They are more concerned about the side effects that a drug can cause if it is not properly tested. (Glaxo SmithKline, 2001).Variety diversified products with high variation are always judge by the consumers globally. GSK haves OTC products, prescribed drugs and orphan drugs (FAME, 2009). So this factor is not an issue for GSK since it has a high to make further improvements.Internal Analysis on GSKThe internal analysis on GSK has been basically carried out by analysing the strategies of the company.Strategies of GSKTo make a general analysis of competitive advantage the company is facing through with(predicate) its strategies, Porters generic strategy tool is been used (Porter, 1998a Porter, 1998b). Porters generic strategies consist of 3 basic subdivisions such as Cost leadership, Differentiation and Focus strategy. GSK use certain strategies to create an unassailable position or outpace the competitors in the pharmaceutical industry. Considering the past 5 years GSK has effectively chosen and implemented several strategies to recreate its goals. But no t all those strategies have produced expected results.Cost leadershipAccording to porter risk outcome from having cost leadership distracts a company from possessing diversified products (Porter, 1998a). GSKs strategies have never aimed for having a cost leadership. Their major concern was to produce cost effective drugs by sourcing globally through reverse auctioning and not producing low cost drugs like the generic manufacturers who wish to position themselves in low-cost position in the industry. So GSK cut and save expenses in output and procurement to avoid the risks in differentiation as mentioned by porterDifferentiationGSK follows the strategy of MA on various biotech firms around the globe to make a use the latest technology for its drug discovery and study. This adds value to the product and the people pay the premium price fixed by the company. GSK invests more on Research Development for adding more value to the product. Recent alliances with Harvard Stem Cell Institu te (Glaxo SmithKline, 2008a) and acquisitions such as that of Stiefel Laboratories and Genelabs (Glaxo SmithKline, 2008b) provide added advantage to the research and development of drugs. combative AdvantageResourcesThe resources can be classified into patent, intangible and human resources.Tangible This can be diversified into pecuniary and physical tangible resources. The financial resources are cash, securities and borrowing capacity (Hitt et al, 2009). Financial resources and physical assets are identified and valued in the firms financial statements. Database (ORBIS, 2009) reports GSKs balance sheet tangible asset value to be $14,108,592. The physical assets include labs owned and leased, land space for offices, manufacturing plant, medical equipment, non-medical equipment. However, the primary objective of resource analysis is not to value a companys assets, entirely to understand their potential for creating competitive advantage. Hence therefore GSKs tangible resources ar e threshold resources.Intangible The intangible resources are the most important rather than tangible resources (Hitt et al, 2009). This is because the company introduces its premium price with the confidence to the brand image it has. And the people who have no idea about the same product from an unknown company prefer the branded product at the premium price. The intangible resources of GSK are generally the brand image, Government support to protect the patent, good will of the company, public relation.The global public policy in Glaxo SmithKline (2007) states that,Patent protection stimulates and fundamentally underpins the continued research and development for new and better medicines for diseases including those which occur in the develop world. Without adequate intellectual property protection, the medicines that are needed in the developing world are far less likely to be developed. (2007p.2)And a cover story from Business week (2007), states that,GlaxoSmithKline discovere d that, by investing to develop drugs for poor nations, it can work more effectively with those governments to make sure its patents are protected.Thus its clear from the above statement that GSK which finds the emerging countries like India, China and under developed markets for its drugs. The company uses the strategy of preferential pricing system to obtain goodwill, patent protection from the government and to boost itself as a monopoly in the market. Thus brand image and UK Government support are the unique resources of the company. kind Resources The human capital of GSK measures to be the highest among all other competitors like Pfizer, Roche and Johnson and Johnson. There are 101,133 employees working as a part of GSK worldwide in various departments of research, development, and production. GSK alliance with state owned university carries out its research with the scientists and students there at the labs (ORBIS, 2009).CapabilityPrahalad and Hamel state that the term organi zational capability can be coined as firms capacity to deploy resources for a desired end result . (1990 p 79-91). According to (Prahalad Hamel, 1990) Core competences are those that contribute to customer value, and to enter new market. The key capability factors are,Ability to merge and acquire GSK has the capability to merge and acquire firms of same or different industry for lateral and vertical integration. The company has the ability to work along with rival market holder Pfizer(Pharmaceutical marketing, 2009) and it has merged with dermatology specialist Steifel.MIS managing information system is one of the functional capabilities obtained through vertical integration with software solutions organisation like ORBIS. GSK choose to use a Lean Sigma approach to analyze the issues and develop a long term solution that supports the needs of a global company of their size (Orbis, 2008).Vertical Integration GSK advisor uses the services of PricewaterhouseCoopers (Pricewaterhousecoo pers, (2009), which provides Human Resource Services to manage compensation, pensions, share schemes and wider reward, technology, training and tax.Research and development as a part of organisational capability GSK possess the ability to make research various drugs according to changing market demand (Glaxo SmithKline, 2009f). GSK has the ability to integrate the functional capabilities to form the value chain.Aligning Resources and CapabilitiesThe capability and resource together form the key competitive advantage when exploited together to execute the strategy (Prahalad Hamel, 1990). In the process of aligning the resources and capabilities it is necessary to understand the companys superfluous strength that is the RD and effective vertical integrating capability.GSK finds emerging market like China and India and under developed countries of Africa. Then the management members along with the team that analyzed the market (cross functional capability i.e, developing new product) discusses about the demand of the country and decides on a perfect product to market in that country. GSK gained popularity of horlicks in India by late 1930 itself. Horlicks was launched a sleeping aid in Britain (Telegraph, 2005) and as a supplementary malt drink in India, where it holds a market share of 75% in health drink sector (Somvanshi, 2009). It also supplies drugs of great demand like H1N1 vaccine as per order made. GSK makes an agreement with the government for protecting its patent to provide the drugs at a lower cost. As these are emerging countries that are ready to allow large foreign investment accepts the deal for patent protection. Thus GSK with its financial resource targets enters the developing market with the objective establishing its brand as well as avoids the threat of generic industries.By acquiring, merging or by creating alliances with other existing firms who are specialized in other fields, the noesis and skills of the employee are used to develop n ewer products under its ownership of GSK (Ruddick, 2009). Generally the pressure to merge with other firms builds up, when a companys block baby buster drug is about to expire. By this practice GSK builds up its strength to compete the challenge with newer and innovative products.However GSK has failed to exploit the resources and capabilities to its strategies at its maximum extent to attain regulatory approval from U.S. victuals and Drug Administration (Russell, 2008).ConclusionIt can be argued that the GSK is perfectly in the growth stage. However company has to concentrate on innovation, developing block buster drugs, and efficiently restructuring the pipeline, rather than concerning about the off-patent. The key issues that the GSK face now is, the low returns provided to the investors and share holders. The increasing cost of the production and development of drugs increases the possibility of higher drop costs. The outlook of pharmaceutical industry as a whole suggests t hat the industry may run out of highly skilled scientists in the future but still remains to be the most attractive industry with high barrier to entry. Thus GSK considering the future issues and changing factors in mind has to progress through this economic downtime to prove its capability.ReferencesBBC news (2009a). Glaxo wont be driven out of UK. Online lendable from http//news.bbc.co.uk/1/hi/ trade/4988858.stm decision accessed 18th November 2009.BBC news (2009b). Healthy rise in GSK profits. Online Available fromhttp//news.bbc.co.uk/1/hi/business/8331080.stm last-place accessed 18th November 2009.Brian Kevin (2009). Flu factor adds zest to healthy GSK results. Online Available fromhttp//www.ft.com/cms/s/0/d4d9d664-76f1-11de-b23c-00144feabdc0.html?nclick_check=1. Last accessed 18th November 2009.Britannica. (2009). InEncyclopdia Britannica -UK Online Available from http//www.britannica.com/EBchecked/topic/1357082/pharmaceutical-industry. Last accessed seventeenth November 20 09.Business Week. (2007). Beyond the Green Corporation. Online Available http//www.businessweek.com/magazine/content/07_05/b4019001.htm. Last accessed 28 November 2009.Cutler J. Cleveland (2009). environmental change and socioeconomic factors in Africa. Online Available from http//www.eoearth.org/article/Environmental_change_and_socioeconomic_factors_in_AfricaSocial_change. Last accessed 22nd November 2009.Decision news media (2009). GSK axe begins to fall. Online Available fromhttp//www.in-pharmatechnologist.com/Materials-Formulation/GSK-axe-begins-to-fall. Last accessed 18th November 2009.Emptoris (2009). Company Over vision. Online Available from http//www.emptoris.com/company/overview.asp Last accessed 19th November 2009.Euromonitor. (2009a). Company shares-Euromonitor from trade sources/national statistics-UK Online Available from http//www.portal.euromonitor.com/Portal/ResultsList.aspx. Last accessed 17th November 2009.Euromonitor. (2009b). Company factfile-UK Online Available from http//www.portal.euromonitor.com/Portal/DocumentView.aspx. Last accessed 17th November 2009.FAME. (2009a). Overview-UK Online Available from https//fame.bvdep.com/version-20091031/cgi/productselect.dll?newproduct=1context=CJQ1H0kick=1logoutonswitch=9ROG9P. Last accessed 17th November 2009.Financial Times (2009a). Lucozade hits the cold drinks to China. Online Available from www.ft.com/cms/s/0/1fe7fa22-ac5e-11de-a7540044feabdc0.html. Last accessed 22nd November 2009.Gassmann et al (2004a). Leading pharmaceutical innovation 2nd edition. Online Springer-Verlag Berlin Heidelberg. Last accessed from http//books.google.co.uk/books?id=iry1nJHAc_sCprintsec=frontcoverdq=leading+pharmaceutical+innovationei=8K0KS92gBIKgMtSt9KYPv=onepageq=f=false. Last accessed 18th November 2009. (p23).Glaxo SmithKline. (2001). Outlook and Risk factors. Available http//www.gsk.com/financial/reports/ar/report/op_finrev_prosp/outlook/outlook.html. Last accessed 28 November 2009.Glaxo SmithKline. (2007). Gl obal Public Policy and Issues. Online. Available http//www.gsk.com/policies/GSK-on-IP-and-access-to-medicines-in-developing-countries.pdf. Last accessed 28 November 2009. (p-2)Glaxo SmithKline. (2008a). GlaxoSmithKline and the Harvard Stem Cell Institute announce a unique quislingism to enable the discovery of new medicines. Available http//www.gsk.com/media/pressreleases/2008/2008_pressrelease_10089.htm. Last accessed 28 November 2009.Glaxo SmithKline. (2008b). GlaxoSmithKline to acquire Genelabs Technologies to increase focus on novel small molecule therapies for Hepatitis C. Available http//www.gsk.com/media/pressreleases/2008/2008_us_pressrelease_10145.htm. Last accessed 28 November 2009.Glaxo SmithKline. (2009a). Our Company -UK Online. Available from http//www.gsk.com/about/company.htm Last accessed 17th November 2009.Glaxo SmithKline. (2009b). Our History -UK Online Available from http//www.gsk.com/about/history.htm. Last accessed 17th November 2009.Glaxo SmithKline (2009c). GSK and Shenzhen Neptunus create new alliance to develop and manufacture influenza vaccines in China. Online Available from http//www.gsk.com/media/pressreleases/2009/2009_pressrelease_10061.htm. Last accessed 19th November 2009.Glaxo SmithKline (2009d). US FDA approves GSKs pandemic H1N1 vaccineOnline Available from http//www.gsk.com/media/pressreleases/2009/2009_pressrelease_10129.htm Last accessed 19th November 2009.Glaxo SmithKline. (2009e). THE IMPACT OF ED ON ERECTILE FUNCTION. Available http//www.levitra.com/about-erectile-dysfunction.html. Last accessed 27 November 2009.Glaxo SmithKline. (2009f). H1N1 influenza responding to a pandemic. Available http//www.gsk.com/infocus/influenza-A-H1N1.htm. Last accessed 27 November 2009.Griffiths, K. (2006). Glaxo medicine beats older diabetes rivals. Available http//www.telegraph.co.uk/finance/2951867/Glaxo-medicine-beats-older-diabetes-rivals.html. Last accessed 28 November 2009.Jack (2009a). Generics make a dent in GSK sales. Online Available from http//www.ft.com/cms/s/0/dbd75fce-7b59-11d9-9af4-00000e2511c8.html. Last accessed 18th November 2009.Michael A Hitt,R.Duane Ireland, and Robert E. Hoskisson. (2009). Strategic ManagementInput. In Strategic management competitiveness and globalization concepts cases. United States Cengage Learning Academic Resource Center. p76-80.Milligan (2009). Healthy rise in GSK profits. Online Available from http//news.bbc.co.uk/1/hi/business/8331080.stm. Last accessed 18th November 2009.ORBIS (2008). GSK case study. Available http//www.orbisglobal.com/SiteMedia/w3svc815/Uploads/Documents/GSK%20Case%20Study%202008.pdf. Last accessed 27 November 2009.ORBIS. (2009). Balance sheet. Online Available http//orbis.bvdep.com/version-20091125/cgi/template.dll?checkathens=1kick=1product=13user=oxb.b5ce71006d6c243cpw=asGpiegbTuqWNfAr1N6v4A%3d%3d. Last accessed 28 Novenber 2009.Pharmaceutical marketing . (2009). GSK LINKS WITH PFIZER STIEFEL Company moves to advance in HIV and dermatology . PHARMACEUTICAL MARKETING -DORKING. . 20 (12), p6-7.Pierce Lisa McTigue (2004). GSK breathes easy with new inhaler line robotics and adaptable equipment help GlaxoSmithKline meet demand for the markets No. 1 asthma inhaler. Online Available from http//www.allbusiness.com/plastics-rubber/plastics-product-manufacturing/298291-1.html Last accessed 18th November 2009.Prahalad, C.K. and Hamel, G. (1990) The core competence of the corporation, Harvard Business Review. p. 79-91.Pricewaterhousecoopers. (2009). GlaxoSmithKline. Available http//www.pwc.co.uk/eng/services/glaxosmithkline_case_study.html. Last accessed 28 November 2009.Porter, M. (1998a). Generic Competitive Strategy. In competitive strategy- Techniques for analyzing industries and competitors. New York free press. p35.Porter, M. (1998b). Generic Competitive Strategy. In competitive strategy- Techniques for analyzing industries and competitors. New York free press. p37.Ruddick, G. (2009). GlaxoSmithKline buys Stiefel for $3.6 bn . Available http//www.telegraph.co.uk/finance/newsbysector/epic/gsk/5186751/GlaxoSmithKline-buys-Stiefel-for-3.6bn.html . Last accessed 28 November 2009.Russell, J. (09 Apr 2008). GSK rebuked by FDA over Avandia trials. Online Available http//www.telegraph.co.uk/finance/markets/2787811/GSK-rebuked-by-FDA-over-Avandia-trials.html. Last accessed 28 November 2009.Science Direct (2009) Getting the most out of reverse e-auction investment. Online Available from http//www.sciencedirect.com/science?_ob=ArticleURL_udi=B6VC4-4H7THJ8-1_user=558526_rdoc=1_fmt=_orig=search_sort=d_docanchor=view=c_searchStrId=1105992232_rerunOrigin=google_acct=C000028481_version=1_urlVersion=0_userid=558526md5=0136d63f7d9ff73367852ba539382bb0bbib12Omega Volume 35, Issue 4, August 2007, Pages 403-416. Last accessed on 21st November 2009Somvanshi, K. (2009). GSK Consumer Healthcare A classic defensive stock. Available http//economictimes.indiatimes.com/Features/Investors-Guide/GSK-Consumer-Healthcare-A-classic- defensive-stock/articleshow/4303094.cms. Last accessed 28 November 2009.Telegraph. (2005). A wake-up call for Horlicks. Available http//www.telegraph.co.uk/finance/2928124/A-wake-up-call-for-Horlicks.html. Last accessed 28 November 2009.Ziff Davis Media (2009). Baseline Magazine Announces 2005 ROI leadership Award Winners. Online Available from http//ziffdavis.com/press/releases/050706.0.html Last accessed 19th November 2009.