Management Strategy

Critical analysis of GlaxoSmithKline’s Strategy

- Clifford Moon

ContentIntroduction (‘GlaxoSmithKline’)Organisational Goals Planning of the companyCompetitive AdvantageCorporate Social Responsibility of companyPositioning of the companyStrategy ImplementationsRecommendationsReferences

GlaxoSmithKline plc• Our organisation has rich history it starts from early 18th century.• GlaxoSmithKline was formed in 2000 after merging of Glaxo Wellcome plc

and SmithKline Beecham plc.• It is one of the worlds largest pharmaceutical company in terms of revenues.• It has delivered 1.4 billion doses of drugs in 179 countries in 2010.

Mission “To improve the quality of human life by enabling people to do more, feel better and live longer”.

Vision “To become the indisputable leader in the Pharmaceutical industry not only in terms of size but also by to achieve their mission and improve the quality of human life”.

Organisational Goals Every organisations have goals and to achieve this they need strategy. GSK adopted various strategies to achieve growth, reduce risk and improve GSK’s long term financial performance.

Grow a diversified global business:GSK is focusing mainly growth in emerging markets and also on its consumer products operation then developed economies.

Deliver more products of value:To be leader in the market companies need three elements like classic brands, vaccines and innovative products.

Simplify GSK’s operating model:Business continues to change shape, it is essential to transform the operating model to reduce complexities, improve efficiencies and reduce cost.

(GSK, 2011)

Planning (GSK Annual Report 2010)

Grow a diversified global business

Deliver more products of value

Simplify GSK’s operating model

• Drive growth in the pharmaceutical business in our core markets

• Fulfil the potential of Emerging Markets

• Expand our business in Japan

• Build our leadership in dermatology

• Grow the vaccines and Consumer Healthcare businesses

• Focus on the best science

• Diversify through externalisation

• Re-personalise R&D • Focus on return on

investment

• Evolve our commercial model

• Re-shape manufacturing • Streamline our processes • Reduce working capital

GSK’S Business Model

(Annual Report, 2010)

Group Sales (GSK Annual Report 2010)

Competitive advantage

(Chandon, 2003)

1 2 3 47 6

13

4 2

7 8

1

45

2

7

3

3 years Ranking Trend

2008 2009 2010

Top Pharmaceutical Companies

(Roth, 2008, 2009, 2010)

Corporate social responsibility of GSK’s

• Reduce the price of the medicine in the under-developed countries to 25% of developed world prices.

• Flexible pricing structure for middle-income countries.

• Reinvest 20% of its profits from sales of medicines in developing countries to support the strengthening of healthcare infrastructure.

Example

13,500 compound from GSKs library that have shown activity against the malaria parasite have been made freely available online, a first for the pharmaceutical industry.

(Barham, 2010)

Positioning

Strategic positioning is mainly concerned with the impact on strategy of the external environment, internal resources and competences, and the expectations and influence of stakeholders.

(Johnson and Scholes, 2005)

Positioning of GSKTwo and a half years ago, GSK has changed its business

strategy to provide cost effective , new and effective medicines by restructuring and rigorous capital allocation.

Restructuring programme has allowed to diversify its sales base from low growth markets to key growth areas such as emerging economies.

During 2010 it has continued to improve its R&D pipeline, environmental sustainability and commitment towards neglected tropical diseases.

(GSK, 2011)

SWOTAnalysis of key environmental issues and the strategic capability could give theCurrent strategic position of GSK. SWOT involves analysis of company'sinternal environment in terms of its strengths, weaknesses and external environment in terms of opportunities and threats.

Strengths:

Global presence and well diversified.

Industry leader in R&D.Strong sales and marketing.Life cycle management strategies.Strong financial position.

Weakness :

Patent infringement claims. Increasing generic competition. Dependence on low growth

products.

(Alacra.com, 2010)

Opportunities

Growth in emerging markets.

Enhanced product offering.

Movement into oncology and biologics market.

Organic growth.

Threats

Competitive pressures.

Increasing presence of counterfeit Drugs.

Impact of generic products on sales made by franchises.

Further setbacks in R&D pipeline.

(Alacra.com, 2010)

Bowman's strategic clock

(Faulkner & Bowman, 1995)

New Market Entrants :• Recognized Marketing Code

Barriers to Entry :• Government policy• Brand Recognition

Competitive Priority :• Highly Competitive• Low Fixed Costs & High

Working Capital• Differentiation Strategy

Buyers Powers :• Consumers do not have

bargaining power.• Price sensitivity is less.• Brand identity in the hands

of influencer.

Power of Product and Technology Development :• Reforming R & D• Entrants of New Vaccines by 2011 end.• Restructuring for Diversity and

Strengthening.

Porters Five Forces Model for Developing Countries :

(Porter, 2008)

Implementation

• Strategy can be weighed not only based on the positioning and planning phases, but carry great weight when it is actually being carried out “Implementation”.

• Implementation should consider the time scale of the operation, resources and available funds.

• It also must monitor and control the operations.

Measures (GSK Annual Report 2010)

Grow a diversified global business

Deliver more products of value

Simplifying the operating model

• Performance of core pharmaceuticals and vaccines businesses

• Diversification of sales• Contribution of

Emerging Markets to our overall sales and growth

• Growth of Consumer Healthcare business

• Expansion of Japanese business

• Build biopharmaceutical portfolio

• Contribution to sales of new products

• Number of reimbursable product approvals and filings

• Sustaining late-stage pipeline

• Enhanced R&D productivity and increased externalisation for Drug Discovery

• Delivery of major restructuring programme

• Reduce working capital

Implementation of Strategy in GSK

As there are different aspects to be considered in order to evaluate the GSK strategy implementation, based on the time constraint I would like to discuss 4 of the aspects:

• Marketing : Grow a diversified global business and deliver more products of value.

• Operations : Simplify GSK’s operating model

• Sustainability: Increase growth, reduce risk and improve long-term financial performance

• Technology : Research and Development “R&D”

Marketing Operations

Marketing strategy changes according to the region where the group is providing its products. Pharmaceutical products are subjected to price controls by the government institution or private

GSK’s marketing strategy is different they always innovate new medicines as well as they enhance its old products with mild alterations and deliver it to the consumer accordingly

Operations strategy deals with the design and management of products, processes, services and supply chains.

GSK is removing avoidable processes and structures. The new simplified operating will release more resources for investment and higher returns for share holders.

Simplifying organisation to speedup decision making and improve alignment to business priorities

Striving to ensure simpler and efficient cross business process and structures.(Weyzig, 2004)

Sustainability Technology

As part of environment, health, safety and sustainability policy (EHSS) and to achieve global leadership and excellence it works with various stake holders to reduce its carbon foot print.

GSK has revised its sustainability strategy in 2010 to reduce its annual costs by £100 million by 2020.

It acts beyond the operations to reduce carbon emissions resulting from supply chain and sales to customers.

Its vision is to reduce co2 emissions by 25% in coming ten years and make its products carbon neutral by 2050.

Technology depends on a vibrant and productive R&D function that encourages creativity and facilitates the accelerated discovery and development of new medicines and vaccines.

A refocus on the best science led us to create an entrepreneurial environment in discovery and medicine development.

GSK have strongest development pipelines of potential new medicines and vaccines in the industry.

GSK build collaborations and links with other research groups

(GSK, 2011)

Recommendations

In emerging markets it should adapt a strategy to protect itself from counterfeiting of its drugs.

Create new modelling tools to update data and influence strategic decision making.

References

Alacra.com (2010) GlaxoSmithKline plc (GSK) - Financial and Strategic Analysis Review [Online] http://www.alacra.com/acm/2087_sample.pdf [Accessed 17th November 2011]

Barham, L. (2010) GSK's approach to corporate social responsibility [Online] http://social.eyeforpharma.com/marketing/gsks-approach-corporate-social-responsibility [Accessed 15th November 2011]

Chandon, P. (2003) ‘Innovative marketing strategies after patent expiry: The case of GSK’s antibiotic Clamoxyl in France’,. International Journal of Medical Marketing, Vol. 4 No. 1, pp. 65-73

Faulkner, D. & Bowman, C. (1995) The Essence of Competitive Strategy, 1st edition, Prentice Hall PTR GlaxoSmithKline plc. (2011) Our Strategy [Online] http://www.gsk.com/about/our-strategy.htm

[Accessed 10th November 2011] GlaxoSmithKline plc. (2010) GlaxoSmithKline Annual Report 2010 [Online]

http://www.gsk.com/investors/reps10/GSK-Annual-Report-2010.pdf [Accessed 11th November 2011] Johnson, G. and Scholes, K. (2005) Exploring corporate strategy: text and cases, 7th edition, Harlow:

Financial Times Prentice Hall Porter, M.E. (2008) On Competition, Upd Exp edition, Harvard Business School Press Roth, G.Y. (2008)(2009)(2010) Top 20 Pharmaceutical Companies Report [Online]

http://www.contractpharma.com/issues/2009-07/view_features/2009-top-20-pharmaceutical-companies-report/ [Accessed 17th November 2011]

Weyzig, F. (2004) GlaxoSmithKline company profile [Online] http://www.docstoc.com/docs/15102099/GlaxoSmithKline-company-profile [Accessed 19th November, 2011]