Strategic Analysis Of GlaxoSmithKline Plc: Opportunities, Threats, And Business Environment

Political

· The change in the political situation of UK through the application of Brexit might affect the capabilities of GSK. It has been noted that the strong ties with the EU based manufacturers would be affected through the application of Brexit in the organizational processes. The application of different trade tariffs and regulations, post the application of Brexit, might affect the capabilities of GSK in managing the costs of operations (Rogers et al.  2018). Again, the application of Brexit in UK would disrupt the supply chains of the business which would affect the uninterrupted functioning of GSK.

· It has been found that most of the companies in UK are planning to undertake mergers with US pharmaceutical companies. However, the increased governmental involvement over medical prices have restricted the pharmaceutical companies in earning handsome margins while offering huge discounts on the top-selling medicines (Kazzazi et al. 2017). It has again affected the rate of growth and expansion of the pharmaceutical companies in US. The concerned organization, GSK, might develop collaboration with an US pharmaceutical company, like Pfizer but the increased rate of discount offerings on the best- selling medicines might affect the capabilities of the organization in continuing with the efficiency of the operations (Song  2016).

Economic

· UK’s economic growth has been observed as 1.4% in 2019 and 1.3% in 2020 which is lower than the previous trend rate of 2% (Chokkakula, Kolapalli  and Jayanti  2018). In this relation, it is estimated that Brexit has induced significant amount of risk factors in the market. The different changes in the organizational operations are specifically based on the efficiency of the operations as per the needs of the venture.  The GDP of the nation by the second quarter of 2019 was $552,562 million which has contributed to the growth of the different sectors (Fernandez and Chiambaretto 2016). However, the amount of risks that are imposed by Brexit might affect the sustenance of the businesses.  

· The price fluctuation and the economic policies might affect the rate of operations of the venture while operating in the different markets. It has been noted that the GSK’s merger with any US based organization might affect their capabilities of increasing their marginal income due to the increased involvement of the government in the price of the pharmaceutical offerings made by organizations in US (Lioukas, Reuer  and Zollo  2016). Again, the context of Brexit’s imposition might affect the capability of the organization in retaining string ties with the medicine manufacturing industry, dwelling in EU (Gsk.com 2018). The growing price fluctuations might affect the capabilities of the venture in retaining the profit margin in highly volatile market structure (Krishnan, Geyskens and Steenkamp  2016).  

Social

· The growing health related concerns faced by the people in UK and US might create a potential market for the concerned organization. However, through the stats presented in a research, Jeon et al. (2016) stated that there is an increase of health consciousness among the people which might affect the rate of sales of the pharmaceutical industry in US and UK.  The changing lifestyle of the people and the growing health awareness among the same might affect the capabilities of the organization in retaining the huge market share.

· The fear of the changing taxation policies of the nation through possible implementation of Brexit are affecting the buying power of the consumers. However, Gassmann et al. (2018) noted that the pharmaceutical industry’s rate of sale would not be affected by the changing taxation policies as medication is a necessity.  In this relation, the concerned organization is facing threats of losing their customers while operating in the different markets.

Technological

· The R&D operations of the pharmaceutical industry are based on the changing healthcare needs of the customers. In this relation, Mignani et al. (2016) noted that the increased healthcare concerns among the people have brought about significant changes in the industry’s technological developments. Therefore, the concerned organization might encounter a strong competition from the existing market players due to their increased R&D investments.  

· The growing issues related to patents and licensing of the drugs might be an increasing issue on the side of the organization for maintaining the continuity of the operations. Issues in licensing of the drugs might affect the capabilities of the organization in retaining the trust and loyalty of the customers towards their offerings (Gsk.com 2018). The issues in licensing and copyrighting the drugs due to increased governmental intervention in US might restrict the capabilities of the venture in improving their market position. On the other hand, the increased complexities in the political situation of UK has already started affecting the capabilities of the concerned organization in improving the market position of the same.   

Environmental

· The organization, GSK, aimed at developing educational programs for the communities with the objective of supporting a healthy lifestyle for the people. It has been noted that the organization played a massive role for empowering women education for sustainable communities (Fernandez and Chiambaretto 2016). The organization also developed campaigns for educating campaigns in distinct locations for empowering education based on hygiene, sanitation and eradication of malnutrition (Simon 2016). On the other hand, the organization also developed vocational training sessions for the employees in the business with the purpose of increasing their sustenance.

· It has been noted that the organization devised campaigns and strategies for reducing their carbon footprints from their supply chains with the objective of contributing to the growing environmental concerns (Gsk.com 2018). The strategies that are initiated by the organization enabled the same in retaining their position as a performer in the CSR activities that are undertaken in the medicine manufacturing industry. However, the stringent regulations that are imposed by the UK’s environmental protection agencies might affect the current capabilities of the venture in developing uninterrupted process designs (Wang, Plump and Ringel 2015). The concerned organization is planning to develop strategies for reducing their environmental impact which would contribute to the smooth functioning of the venture while operating in the different markets.

Legal

· The application of the Consumer Rights Act by the Federal Trade Commission in UK would restrict the capabilities of the organization in maximizing their margins post Brexit as the operational costs might increase through taxation. However, the Act would prohibit the organization in raising the price of the medicines which might affect the profitability and economic sustenance of the venture. Again, the imposition of the General Data Protection Regulation (GDPR) and the Data Protection Act 2018 poses a serious threat to the good will of the venture in case of any contingency or data being compromised (Chokkakula, Kolapalli and Jayanti 2018). Therefore, the imposition of the legislations might affect the capabilities of the organization while operating in UK in a post- Brexit situation.

Elements

Description

Competitive rivalry

(low)

· Rivalry in the existing market is obvious because the international pharmaceutical industry is highly promising and still in a nutshell. As a result of that the pharmaceutical giants are trying to encapsulate the market in a more extensive manner. It results in high competitiveness or corporate rivalry among the existing companies (Saïd, Sevic and Phillips 2019).

· Some of the leading pharmaceutical companies in the international market are Pfizer Inc, Novartis, Merck & Co Inc, Johnson & Johnson and GlaxoSmithKline Plc. Moreover, it can be stated that the large size of the pharmaceutical industry also enables the companies to set an extensive business approach so that it will generate quicker revenue and supplementing sustainable business advantages to the business organizations. For the joint venture between Pfizer and GSK will expect to get a strategic advantages in the competitive market and low threat.

Power of the supplier

(moderate)

· The suppliers in the international pharmaceutical industry has less power in compare to the customers and other stakeholders. One of the many reasons is huge number of suppliers. As a result of that they do not have enough control over the prices and identified as a weak force in the pharmaceutical industry across the globe. Moreover, the government also initiates a number of regulation and standardize practices for the suppliers so that they face severe challenges while operating their business.

· In fact, it is to note that the suppliers do not contend with other products in the industry. It means there is no threat of substitutes for the products other than ones that are provided by the suppliers (Ismail and Powell 2016). As a result of that it becomes an important aspect for the business organizations operating in international pharmaceutical industry. Moreover, lack of forward integration is also considered is also helped the pharmaceutical companies to create an advantage over the suppliers.

· For GSK it provides great opportunity to put pressure on the suppliers and get the resources in time. Moreover the joint venture with Pfizer will also help the organization to get more suppliers to provide raw materials. Therefore, the bargaining power of the suppliers is moderate.

Power of buyers

(low)

· Bargaining power of the buyers is always referred as a crucial factor for the business organization. In most of the cases it can be seen that the business organizations are busy in dealing with the trend and demand of the customers. However, in case of the international pharmaceutical industry, the customers have limited bargaining power because they are heavily relied on medicine and pharmaceutical products and it is the necessity of customers to have the medicines. As a result of that there are chances for the pharmaceutical companies to exploit the demands of medicines by putting extensive control over the price.

· Product diversification strategy is a key trend that the international pharmaceutical companies are maintained for procuring benevolent services to the global communities by manufacturing and distributing medicines (Kocakulah et al. 2016). Nevertheless, there are some pressure for the pharmaceutical companies from the customers regarding the price of medicinal products.

· Not all the consumers are rich and wealthy so that it is an ethical consideration in front of the pharmaceutical companies to hike in medicinal products. For GSK the new joint venture practice with Pfizer undoubtedly helps the organization to encapsulate the market in more robust manner by emphasizing on innovation and product diversification. Therefore, the power of the buyers is low.

Threat of substitution

(high)

· There are few products that can be substituted in the pharmaceutical global market because the companies have their patent rights that prevents other manufacturing companies to replicate the product entirely. Moreover, for a new or valuable medicines the Research and Development unit never shares every details of manufacture (Munira 2017). As a result of that reproduction of the same medicine cannot be possible for other companies. Henceforth, it becomes an effective and satisfying fact for GSK in succeeding the copyrights of its products.

· Nonetheless, there are still chances for the rival companies to create challenges for GSK in terms of focusing on unique pricing strategy. The quality and price of the products are the key contributing factors that can help an organization to gain strategic advantage in the competitive market. Therefore, it is always important for GSK to set a business model where the quality and price of the products can be managed effectively. Henceforth, the threat of substitution is very high.

Threat of new entry

(high)

· High product differentiation is considered to be one of the important features that international pharmaceutical industry is follows in course of competing in the international market. Therefore, it becomes a pertinent aspect for the international pharmaceutical companies to put great emphasis on the differentiated products. Moreover, the capital requirements is too high in the market so that small pharmaceutical companies will be failed to survive in the market. The reason behind high capital expenditure was that the manufacturing companies are investing a lot in Research and Development measures (Unuvar, Kaya and Bilge 2017).

· Focusing on the distribution networks is also easily accessible for the business organizations. Henceforth, the business companies are always looked into this matters and trying to cope with the trends in the international market. Threat for new entry has always been a challenge for the pharmaceutical companies in the highly competitive market. Henceforth, it becomes important for GSK to put focus on the threat of new entry while procuring a joint venture with Pfizer.

· Fighting off the new entrants by relying on the economies of scale and product differentiation strategy should be the best practice that GSK should follow. The product development and innovation is also identified as a core concept on which GSK should focus so that a range of medicinal products can be delivered to the patients and customers in a short span of time. Therefore, threat of new entry in the market is high.

Strengths

Opportunities

· Both Pfizer and GSK are leading pharmaceutical companies in the international market.

· Huge resources and funds are the backbone of GSK.

· Vigorous marketing and public relations campaigns.

· Always interested in expanding business in the international market.

· Enough opportunity in the emerging markets can be exploited in due course.

· Market expansion in the developed market is also provided a strong customer base.

· Joint venturing with Pfizer will help GSK to exploit the customer base of Pfizer in the competitive market.

Weaknesses

Threats

· Burden of huge product line is a serious problem for GSK to monitor.

· Increase in the product price costs decrease in customer base.

· Lack of market penetration in the emerging markets.

· Alleged with product quality and safety of drugs.

· Brexit issue posed threat for GSK to continue its manufacturing in European regions.

· Government interference always disrupts the business practice of GSK.

Elements

Valuable

Rare

Inimitable

Organization

Benefit

Brand and market position

Yes

Yes

Yes

Yes

Strong competitive benefit

Financial status

Yes

No

No

Yes

Sustainable edge

Business model

Yes

Yes

No

No

Sustainable edge

Supply chain management

Yes

No

Yes

Yes

Strong Sustainable edge

HRM practices

Yes

Yes

No

Yes

Competitive benefit

Angles of approach

Joint venture

Partnership

Acquisition  

Suitability

4

2

2

Feasibility

3

2

1

Acceptability

4

2

3

Total

11

6

6