According to Company Spotlight, GlaxoSmithKline (2011), GlaxoSmithKline (GSK) is a renowned UK-based pharmaceutical and healthcare company. GSK is rated as the second largest among the biggest pharmaceutical and healthcare companies in the world. This company engages in a range of business activities including manufacturing of pharmaceutical products such as the anti-infectives, medicines used for central nervous conditions, respiratory conditions, oncology issues and gastrointestinal conditions. GSK is also famous for producing vaccine products. In addition, it is concerned with the management of the consumer healthcare operation. This service is mainly focused on the production of nutritional drinks, over the counter drugs and other healthcare items (Weise, 2013). GlaxoSmithKline (GSK) SRL (2012) reports that this company had been formed after unity between Glaxo Well come company and SmithKline company. Since its inception, GSK has remained a pertinent player in the pharmaceutical industry where it has researched on medicines and vaccines that have been rated as the top priority by the World Health Organization. This company owns 7% of the total global pharmaceutical products. It has penetrated many countries including developing the world where its products sell cheaply. Noteworthy, this company enjoys the strongest global presence, as it is available in 70 countries.
GSK sells its products in three distinct categories such as consumer healthcare, prescription medicines and vaccines (GlaxoSmithKline (GSK) SRL, 2012). Therefore, this report has focused on medicines and vaccines business unit in GSK. Both internal and external business environment affecting the company is also considered, with reference to appropriate theoretical frameworks. In addition, the current strategies deployed are also considered. Eventually, this report gives proposed strategies, vital in enhancing the business unit’s performance. 2. External Environmental Analysis on Vaccine and Medicine Production2.1 PESTLE AnalysisPESTEL analytic tool is a model used in conducting analysis on a business organization in regard to the external environmental factors. This tool helps the business organizations in identifying some of the potential environmental aspects that affect their operations and performance. The factors of analysis in this framework include Political issues, Economic issues, Socio-cultural issues, Technological issues, Legal issues and the Eco-Environmental issues (Pestle Analysis, 2014). Figure 1: PESTEL Model
Figure: PESTEL model
Source: Arnold & Oakley, 2013
2.1.1 Political FactorsGSK depends on the UK-government legislation on production and trade. Although the government of United Kingdom is one of the stable governments, GSK has experienced significant political challenges that have affected the rate of operation. For instance, the implementation of GSK marketing strategy depends on the trade laws in the UK (Andersen, Denrell & Bettis, 2007). It has been noted that some of the trade regulations on the pharmaceutical products, mainly introduced by China and India affect the competitive nature of the company. Introduction of legislation by the government of UK has also affected the operations of GSK in manufacturing of vaccines and medicines. Ideally, UK laws that focus on consumerism, taxation, environmental issues, health and safety measures and consumer protection laws have influenced the activities of the company (Arnold & Oakley, 2013). 2.1.2 Economic FactorsThe biggest economic challenge to GSK Company is the trend in international trade on pharmaceutical products. The high rate of economic growth in countries such as China and India remains a bigger challenge to GSK in UK (Datamonitor: GlaxoSmithKline Plc, 2011). This is because India and China have both joined the market with highly competitive ambition.
In addition to this, the current economic changes in the UK that have affected GDP continue to suppress the performance of GSK on their production of drugs and vaccines. On the other hand, high inflation rates have affected the sale and production of pharmaceuticals. For instance, while China and India are enjoying a robust economic growth, UK experiences an economic slump. This makes the UK-based companies such as GSK less competitive when it comes to manufacturing of vaccines and medicines (Shakhshir, 2014). 2.1.3 Social-Cultural FactorsSocial, cultural issues include consumer lifestyles, shift in the consumer attitudes towards a particular product as well as consumer opinions. Since the UK-population comprises of the aging majority, the choice on pharmaceuticals is greatly affected. One of the major problems that GSK faces is the issue on the large profits that they have made from sales of their medicines and vaccines. Customer resentment by GSK is a major social problem that affects the performance of GSK despite the fact that it is one of the major pharmaceutical companies in the UK. On the other hand, availability of the other pharmaceutical products has also influenced the competitiveness of the company (Bass, 2008).
2.1.4 Technological FactorsThe trends in technology used in the pharmaceutical industries affect the operations of GSK in producing vaccines and medicines. Due to the unwavering changes that occur in drug manufacturing plants, GSK meets stringent regulations that in turn, influence their performance. On the other hand, GSK experiences hard time when it comes to licensing and patenting of newer drug production technologies. The government also ensures that the levels of developing the industry technologies meet the standards that are required. This major hurdle affects the development of the industry technology for GSK (Shakhshir, 2014). 2.1.5 Environmental FactorsSince GSK is a manufacturing company, it faces the challenges that most of the industries face. For example, GSK faces the challenges of global warming as well as the challenges attached to industrial waste disposal. One of the main problems that this company faces is the reaction of the stakeholders on the impact of wastes produced by GSK (Ienciu, 2012). 2.1.6 Legal FactorsLegal issues affecting GSK include the direct and indirect regulations and laws that affect the company’s operations as well as the local markets where this company sells its products. The European and international trade rules, regulations and agreements affect the operations of GSK in production of medicines and vaccines (Robson, 2013). 2.2 Porter’s 5 ForcesPorter’s Five Forces model is a tool used by various companies to study the external forces that affect a company’s competitive position. Porter’s five-force diagram is shown below in figure 2.
Figure 2: Porter’s Five-Force Model
Source: Koo, Koh& Nam, 2004
2.2.1 Threat of New EntrantsGSK enjoys competitiveness since the costs of producing vaccines and medicines are too high for most of the companies in the UK. This phenomenon has made entrants into the pharmaceutical industries too small. It has been noted that development of newer medicines and drugs, involves painstaking research and investment that most of the companies in UK may not afford. The action of the federal laws together with the influence of Food and Drug Administration (FDA) have also created barrier for most of the companies that intend to join pharmaceutical industry. In addition to this, new entrants avoid the recurrent renewal of the patents that expire after every 20 years. Since GSK is an old player in the pharmaceutical industry, it has garnered insurmountable trust and connection with the customers on its brand names. This makes it hard for newer entrants in the market to compete against GSK (Azadi & Rahimzadeh, 2012). 2.2.1 Threat of SubstitutesThe introduction f many generic drug medicine has been a threat to GSK medicines and vaccines. Such generic drugs have substituted some of the GSK products thus creating replacement for the medicines produced by GSK. Complimentary Alternative Medicine (CAM) is also considered as a reliable substitute for the GSK medicines.
Given individuals in UK, believe that the effects of the medicines and vaccines produced generically are similar to the GSK medicines; people often prefer the generic products whose costs are relatively cheaper (Koo, Koh & Nam, 2004). 2.2.3 Bargaining Power of CustomersAlthough GSK is one of the pharmaceutical companies that produce vaccines and medicines, it does not rely much on the power of buyers. This is because GSK has a large customer base that translates to lower bargaining power. Noteworthy, vaccines and medicines have lower number of customers. This makes GSK to experience high customer bargaining power. GSK focuses on research and development of newer vaccines and medicines, which are then consumed, by the doctors, patients, pharmacists and other healthcare facilities (Azadi & Rahimzadeh, 2012). 2.2.4 Bargaining Power of SuppliersGSK supply market comprises of labour, raw material suppliers, trial staff, patients in clinical trials, investigators and other marketing distributors. Contrary to customers, the suppliers have strong bargaining power that can affect the operation of the company. Whenever the suppliers withhold the supplies or change the quality of the supplies that they trade to GSK, the company risks losing the quality of its medicines and vaccines.
This will in turn affect the competitiveness and the performance on the company in the pharmaceutical industry (GlaxoSmithKline Plc SWOT Analysis, 2012). 2.2.5 Intensity of RivalryPharmaceutical industry has many players leading to increased rivalry. Since there is unending patterns of newer products in the pharmaceutical industry, firms and companies forced to thrive competitively for market shares. Product differentiation has also led to introduction of alternative products that are cheaper. This has led to competitive advantage for certain firms. This trend propagates competitive rivalry that leaves only the strongest and adherent company in the market.
However, reports indicate that GSK uses an accurate forecast that helps it in positioning itself at a point where it can sustain rivalry in production of medicine and vaccines from the other companies for a long time (Juliano, 2013). 3.0 Value Chain AnalysisGlaxoSmithKline value chain is a resourceful tool that is applied by the managers to identify major activities that are operational within the firm. The primary activities that are undertaken at GlaxoSmithKline have potential capabilities of defining the firm competitive advantages (Griffin, 2012). The competitive advantage of the company lies within the capability to undertake some of the vital activities that are carried across the value chain with the aim of being better that the business rivals.
Figure3: Value Chain Analysis Model
Source: Ienciu, 2012
Firstly, GlaxoSmithKline value chain has been able to combine values of the firm key activities with the functional parts. The assessment that is undertaken in the principal activities defines the organization overall additional values that are created. Under its value chain, the company has been able to differentiate its main primary activities that are directly related to the production and the supporting activities that are directly related to effectiveness and efficiency of GlaxoSmithKline operation. GlaxoSmithKline primary and support activities are discussed in details (Shakhshir, 2014). The company has taken a consideration of its inbound activities. Inbound activities in GlaxoSmithKline are concerned with the process of receiving materials from suppliers that are used in the production of drugs and medicines. As well, storing of these raw materials in the warehouse and handling them within the company is an art of the essential activities that play a crucial role in the value chain. In addition, GlaxoSmithKline has a consideration of operation activities. This incorporates all activities that have direct relationship with production, services and product that are within the firm. Outbound logistic is another primary activity that the company has highlighted its concern.
These activities involve distribution of the medicines and vaccines (final product). This has been entailing the manner at which the company has been distributing its products to the customers, distributors, chemists, hospitals and other business-related areas (Juliano, 2013). Additionally, GlaxoSmithKline has a functional area that relate to sales and marketing. This is a crucial area that analyze all the need and wants if the clients. As well, this operational are is wholly responsible for the creation of awareness of the firm product among the target group. The company has been using some marketing techniques such as advertisements and sales promotion to ensure they attract more customers to use their products (Koo, Koh& Nam, 2004). Finally, GlaxoSmithKline has undertaken a vital supporting activity that considers the function of procurement. Procurement incorporates functions that are directly accountable for purchases of materials that are significant for the production. GlaxoSmithKline has an efficient procurement department that is capable of obtaining the highest quality raw materials at the best prices that are favourable for the company (Shakhshir, 2014). 4. SWOT Analysis
Some of the internal strengths and weaknesses affecting GSK can be analysed using the SWOT analysis tool. This tool will identify and analyse some of the internal environmental opportunities as well as the strengths that GSK has. This SWOT analysis will ensure that GSK’s maximum strength and opportunities are highlighted. However, this analysis will minimise on the threats and the weakness that the company has. This analysis will help in explaining GSK’s position in the market, the reason for its position and the possible plans and strategies that can be used to improve the company’s position in the market (GlaxoSmithKline Plc SWOT Analysis, 2014). Below is a diagram of SWOT analysis.
Figure 4: SWOT analysis
Source: GlaxoSmithKline Plc SWOT Analysis, 2014
4.1 StrengthsGSK being a large company has robust resources and funds that can fuel both the sales, as well as strong marketing mechanism. GSKs strong marketing and sales mechanism has placed it at an accessible ground for the customers. This company has richly invested in both tele-visual and printed media to promote its products. This has placed GSK on top of the other smaller pharmaceutical companies. GSK is rated as the biggest financier of most of the research and development projects in the UK. This places it at a dominant position in the pharmaceutical industry. It has also ensured proper resource utilization with over 97,000 employees who help in the exploration of newer markets. 4.2 WeaknessDespite being a pharmaceutical major in the UK, GSK also has weaknesses that affect its operations. With its robust production of medicine and vaccines, this company make losses due to expired pharmaceuticals. In addition, some sporadic cases of safety affect the company’s image in relation to their customers. The research and development issues have also affected the quality of some pharmaceuticals that this company produces.
Ideally, some cases of poor quality, expiry dates and quantity of products have affected the production of medicines and vaccines. Therefore, these weaknesses continue to dent the image of this big company in the UK (GlaxoSmithKline Plc SWOT Analysis, 2012). 4.3 OpportunitiesGSK has the opportunity of engaging into the production of oncology products, biologics as well as the preparation of various antibodies. Through its robust existence, it can facilitate productive mergers, as well as acquisition using its influential financial stance. On the other hand, the increase in demands for healthcare products such as medicines and vaccines has placed GSK at a greater opportunity ground. With its resources and significant fund, GSK has better laboratories that give them the opportunity for expanding and leveraging the production of medicines and vaccines (GlaxoSmithKline Plc SWOT Analysis, 2014). 4.4 ThreatsIn as much as GSK thrives to be a pharmaceutical major in the UK, reports have indicated that this company faces threatening situations. Ideally, the risks involved in the introduction of newer products affect the ability of the company to maintain its image. With the introduction of more regulations, this company finds it hard to maintain precision in its operations (Research, 2012).
On the other side, slowdown in the European markets remains a serious threat in the marketing of the medicines and vaccine products from this company. In addition to this, the availability of conventional medicines has affected the demand for the medicines produced by this company. Overall, the cases of complacency, subject to the marketing leadership that the company has earned in the past years have placed it under thorough scrutiny by the UK government. This makes it difficult for this company to be able to follow all the stringent rules and regulations (BBC, 2012). 5. Current StrategyGSK is a large business that relies on the strategic priorities such as increasing the growth of the company, reducing the risks as well as increasing the long-term financial performance. This company has focused on growth of the company as their main idea of improving their performance. This large company has ensured their second place in the pharmaceutical industry. It has managed to leverage its production where it produces up to 7% of the global pharmaceutical products. Their large scales and resources have provided them a robust growth in the pharmaceutical sphere. With their growth strategy, GSK has created balanced businesses and product portfolio that have leveraged their sales growth mainly centred on vaccine and medicines in United Kingdom (Azadi & Rahimzadeh, 2012).
GSK has also relied on the successful commercialising and launching of newer products. They have targeted the emerging markets for vaccines and medicines. GSK have improved their performance in developing newer oncology medicines, antibiotics as well as vaccines. GSK has increased investments in emerging markets for Medicine and vaccines as a strategy to remain viable. Moreover, this company seek further opportunities for optimisation of the product value (Shakhshir, 2014). Additionally, GSK has managed to improve the research and development organisation making it able to handle robust products whose effects have changed lives. Their efforts have injected newer medicines and vaccines that have also increased the rates of return. GSK also uses its resources to invest in many parts of UK to improve their returns and penetration of the markets. Responsibility remains a central strategy in GSK, making them able to ensure success in delivery of vaccines and medicines (Juliano, 2013). 5.1. Proposed StrategyIn their future strategy, GSK could employ Bowman’s strategy to leverage its competitiveness.
Ideally, this approach helps companies to be able to identify its competitive edge by meeting their customer’s needs. In this case, the strategy allows a company to be competitive against other companies in the same market. For instance, GSK should consider that many pharmaceutical companies sell medicines and vaccines with negligible differences from their pharmaceuticals. Therefore, GSK should focus on the prices and degree of success in their products so that they may become more competitive than the other companies may (Arnold & Oakley, 2013). GSK should rely on generic strategies, which are, cost leadership, product differentiation and market segmentation. The strategies will help GSK to ensure that their pharmaceuticals are low-priced, useful and provided with the customers’ specifications. Whenever their vaccines and medicines will sell lower than the other companies will, GSK will become more competitive Price and value of pharmaceuticals is a major concern when it comes to competitiveness in the pharmaceutical industry. GSK should ensure that their products meet the recommended value specifications demanded by the customers (Morrow Jr. Sirmon, Hitt & Holcomb, 2007).
Using the Bowman’s strategy, one can adjust the three porter’s positions to eight while explaining the benefits of value and cost of the products. Therefore, GSK should embrace Bowman’s strategy in improving their competitiveness in the pharmaceutical industry (Koo, Koh& Nam, 2004). 6. ConclusionGlaxoSmithKline remains the leading pharmaceutical and healthcare company in the sector of Vaccines and Medicines in United Kingdom. This company enjoys a robust growth despite the dynamism in the pharmaceutical markets. Despite its successful performance in production of vaccines and medicines, GSK has also faced several challenges such as competitive pharmaceutical companies, stringent political issues and economic downturns. GlaxoSmithKline is a renowned pharmaceutical company whose products are common in the pharmaceutical industry. The primary goal of GSK is to achieve a competitive nature.
However, this will require improvement of the quality and value of the products as it eliminates the weaknesses and threats. GSK must utilize its opportunities with the aim of delivering first-class safe and quality drugs and vaccines. On the other hand, GSK has a task of pioneering safety of medicine and vaccine use through the media. This company should focus on production of quantities that can feed the markets without unnecessary surpluses that affect the returns to the company. Growth of market all over the world is also a good idea that should be embraced by the company. Idyllically, GSK remains one of the largest pharmaceutical companies whose products are distributed throughout the world. Noteworthy, GSK has a strong position in the pharmaceutical industry.
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