Case study completed for the module : Understanding Strategic Management University of Bradford .

1. Presented by:
Aanchal Saxena - 12032303
Blessy Deborah Ann Stephanie – 12032302
Charmi Kiritkumar Dutia - 12032275
Ramona Raduta - 12032305

2. Serial
Number
Topic Slide
Number
1 INTRODUCTION ON GSK 3
2 MISSION OF GSK 4
3 STRATEGIC PRIORITIES OF GSK 5
4 CASE STUDY QUESTION 1 6
5 CASE STUDY QUESTION 2 13
6 CASE STUDY QUESTION 3 27
7 REFERENCES 34

3. GLAXOSMITHKLINE
 GlaxoSmithKline, often abbreviated to GSK, is an English
pharmaceutical, vaccine, biologics, and consumer healthcare
company with its headquarters in Brentford, London.
 The establishment of this company was as a result of the 2000’s
merger between Glaxo Wellcome plc with SmithKline Beecham plc.
 Going by the 2009 prescription drug sales recorded across the
nation, it is the fourth largest pharmaceutical company by ranking
(Robson, 2013, p. 63).
 As of July 2012, it was ranked fifth among the FTSE 100 companies
with a market capitalization of £74.8 billion. The company, also a
constituent of the FTSE 100 Index, is also listed on the New York
Stock Exchange (Anon., 2003, p. 785).
 The company has had to face ardent competition from such rivals as
Pfizer and Sanofi

4.  Their mission is to help people do more, feel better, live longer.
 The business is focused around the delivery of three strategic
priorities which aim to - increase growth, reduce risk and
improve their long-term financial performance.
 These priorities are: grow a diversified global business, deliver
more products of value, and simplify the operating model.
 Operating responsibly and ensuring their values are embedded
in their culture and decision-making helps us better meet the
expectations of society.

5. 1. Grow a diversified business
Highlights
 £26.5bn Group turnover , 39% Group turnover outside USA and Europe
2. Deliver more products of value
Highlights
 6 significant new product approvals in 2013
40 medicines in phase II/III development
3. Simplify the operating model
Highlights
 £400m incremental savings
10 working capital days improvement (adjusted)
 4. Responsible business
Highlights
 60% increase in the volume of medicines supplied to Least Developed Countries since 2010
1st pharmaceutical company to sign AllTrials campaign for research transparency

6.  A) WHAT ARE THE KEY FACTORS FOR SUCCESS IN THIS
MARKET?
 B) WHAT ARE THE IMPLICATIONS OF YOUR ANSWER FOR
LARGE AND GENERIC DRUG MANUFACTURERS?

7.  Key factors for success refers to the combination of specific facts and
resources that are necessary to accomplish certain business goals
(BusinessDictionary.com, 2014).
 Those activities that are associated with the success factors must be
performed at the highest possible levels so that excellence can be achieved.
 An organization must give sufficient importance to the key success factors
as this drives it towards achieving customer satisfaction and loyalty.

8. • Adequate capital, manufacturing and drug development skill can help this
market to bloom.
• The criterion of the industry maybe useful for knowing the probabilities at each
stage of the development of the drug.
• Licensing and procurement abilities of the company must be the best in market.
• The ability to bring in more free cash flow is the main aspect of sustainability.
• Strong manufacturing and R&D capabilities is a must.
• All the patients and physicians require the best treatments and hence there is a
growing competition which enables companies in this industry to perform better.

9. • The company has enough resources in both the pharmaceutical
department as well as the three main product categories, namely:
1. Nutritional Health care
2. Oral health care
3. Over the counter medicines
• GSK focuses mainly on innovation, but still needs to implement this
strategy more effectively.
• The company did not rely on patents which would expire and would
be replaced by cheap generic drugs. Hence it was more concerned
about its customers and their well being. This is very important to
sustain in the market.

10.  GSK’s consumer products division has a very valuable loyal
customer base.
 The company has many smaller divisions which are
responsible for their own R&D , its expenditure etc. these
small units helps to make a decision within six months which
usually takes years .In this manner the company can achieve
cost savings.

11.  Focus on cost saving as much as possible by adopting ways such as
combining sales force, lowering R&D expenditures by focusing on important
aspects of the research only.
 Create smaller units in the firm to make things easier and faster. For
example, if a very large company has only one department dealing with
research then it might take years to find a solution which will hinder
decision making. Therefore it is wise to have smaller teams working on
different aspects like the GSK.
 Having a strong strategy dealing with sustainability issues. The business
must not only be value based but also responsible.

12.  Find out what is the company’s competitive advantage and focus on the
continuous improvement of it.
 Innovation must be faster than the previous decade. There is a necessity
for a differential drug for sustained success in the industry.
 Once the patent expires the company relying only on one drug can go
into deep losses. This is due to the patent cliff on important drugs in the
industry. Therefore this will create the need for more drugs that are
differentiable for patenting purposes for a company.
 The company must have strong strategies like the GSK. These strategies
consist of resources and capabilities which will help to survive in the
market. There are resources and capabilities which are unique and helps
the company to differentiate itself from other competitors. This also
helps to identify the competitive advantage of the company

13.  WHAT WERE THE COMPETITIVE ADVANTAGES OF
GSK? WERE THEY SUSTAINABLE ?

14.  “Competitive advantage means superior performance relative
to other competitors in the same industry or superior
performance relative to the industry average.”
 Every company must have at least one advantage to
successfully compete in the market. If a company can’t identify
one or just doesn’t possess it, competitors soon outperform it
and force the business to leave the market.

15. • "Sustainable competitive advantage is the unique position that an
organization develops in relation to competitors that allows it to
outperform them consistently” (Hofer and Schendel,1978).
• A competitive advantage is sustainable only when a firm possesses
value-creating processes and positions that cannot be easily
duplicated or imitated by other firms leading to the production of
above normal rents.
• SCA is a different competitive advantage (CA), because it provides a
long – term advantage that is not easily replicated. If other
companies can easily imitate a firm’s source of competitive
advantage, then any edge the firm gains is short-lived. But if the
advantage is difficult to understand or imitate, the firm can sustain it
over time.

17. The resources can be classified into tangible, intangible and human
resources
a) Tangible:
 This can be diversified into financial 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 firm's financial statements. Database (ORBIS, 2009) reports
GSK's 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
company's assets, but to understand their potential for creating
competitive advantage. Hence therefore GSK's tangible resources are
threshold resources.

18. b) 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.

19. c) Human Resources:
 Human 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).

20.  Prahalad and Hamel state that the term organizational capability can be
coined as 'firm's 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:
1. 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.

21. 2. MIS: managing information system is one of the functional capabilities
obtained through vertical integration with software solutions
organization like ORBIS. GSK chose 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).
3. Vertical Integration: GSK advisor uses the services of
PricewaterhouseCoopers (Pricewaterhousecoopers, (2009), which
provides Human Resource Services to manage compensation, pensions,
share schemes and wider reward, technology, training and tax.
4. Research and development: as a part of organizational capability GSK
possess the ability to make research various drugs according to changing
market demand (Glaxo SmithKline, 2009). GSK has the ability to integrate
the functional capabilities to form the value chain.

22.  Non- stop R&D strategy- GSK has always engaged in huge spending on R&D
as to develop its own drug and patent it as a member of proprietary and
recently has led immediate rival Pfizer on a hidden R&D partnership journey
(Invivo 2009). Although their partnership was known to the public for sales
of HIV drugs but here lies the secrete behind it.
 Sales & marketing strategy- with the help of Vodaphone , GSK was able to
market its Flixonase spray to cure hay fever to its customers through mobile
text messages and its sales team (mobile marketing 2006) which makes it
marketing standout from others.
 Outsourcing strategy- GSK and Galapagos Biotech formed an innovation
alliance for the purpose of novel medicine osteoarthritis (A. Hoekema 2007)
which GSK did with main intent of outsourcing for innovation because of
expiry of patent

23.  Expansion strategy- GSK formed a partnership with Dr. Reddy’s a generic
drug maker in India and also bought 16% of Aspen’s stake, a generic drug
maker in South Africa Its main objective was to have access to emerging
market and generic drugs, sell many of it drugs (reduced rate) in Africa, Asia
and Latin America. (firstwordpharma.com , 2014)

24.  The complexity in approving a generic version of an inhaled drug like
Advair will likely hold off significant generic competition well past the
drug's 2010 patent expiration, especially in the U.S., where approvals
for generic inhaled drugs are particularly difficult.
 Furthermore, the company's advancement of its next generation
respiratory drugs should help the company maintain its stronghold in
both asthma and chronic obstructive pulmonary disease sectors.
 Glaxo has shifted its focus from making slight product enhancements
toward true innovation. The benefits of this change is evident in
Glaxo's strong development of oncology and rare disease drugs. We
expect this focus will improve both approval rates and pricing power.
 From a geographic standpoint, Glaxo is strategically branching
out from the developed markets into emerging markets.
Glaxo's consumer and vaccine segments well positions the firm
in these price sensitive markets.

25.  While this strategy will likely create some challenges like the potential legal
violations that arose earlier in the year in China, we believe the fast-growing
emerging markets will help support long-term growth and diversify cash
flows beyond developed markets
 Turning to the bottom line, Glaxo continues to implement cost savings
initiatives.
 Since 2012, the company has identified more than £3 billion in potential
annual cost savings, which should be achieved by 2014-16. The improved
productivity should help mitigate pricing pressure in Europe.
 Glaxo holds a wide economic moat on the basis of patents, a powerful
distribution network, economies of scale, and diverse operations.
 Similar to its peer group, Glaxo's branded drugs hold patent protection that
keeps competitors at bay for several years, while the company can charge
prices that enable returns on invested capital above its cost.

26.  The delay in competition also enables the company to develop the
next generation of patent-protected drugs to evergreen its pricing
strategy.
 Not only does Glaxo's powerful distribution network attract small
biotech companies that need help marketing drugs, but also very
large firms such as Amgen AMGN and Roche RHHBY have partnered
with Glaxo for its marketing power.
 Glaxo's strong cash flows enable the firm to support the $800 million
on average needed to bring a drug to the market. Finally, Glaxo's
operations in vaccines and consumer health care products augment
its efforts in branded drugs, with only minor pressure on operating
margins.

27.  What lessons, if any, on the development of
sustainable competitive advantage can be drawn from
the case for other companies outside
pharmaceuticals?

28.  Other companies should have their objectives set on understanding
how well they can create competitive advantage, and should look
less on the assets which the company has.
 It is very important to have support from the Government so that it
would be protected.
 Every company should have good public relations and create a high
brand image.
 Companies should keep their research and development team very
active and come up with new and better ideas all the time, so that
their rivals would not take over them

29.  Without developing new ideas and techniques, company will
not have a good competitive advantage.
 They should select and use the best strategy that applies to
their organization to boost itself in the market.
 The company should find out more about the rivals in the
market and be able to work along.

30. 1. Merck & Co. Inc.
 According to Merck & Co. Inc, they believe in operating
openly, honestly and with the highest degree of ethics and
integrity. They make sure the company complies with all
laws and regulations, and this is what GSK should do as
well.

31. 2. Novartis AG
 According to Novartis, their mission is to care and
cure. They want to discover, develop and market
innovative products to prevent cure diseases, to ease
suffering and to enhance the quality of life. For their
shareholders, they want to reward them for investing
their money, time and ideas in the company. These
could also help GSK competitive advantage if it is
being used too.

32. 3. Pfizer Inc.
 According to Pfizer Inc, they understand and act on the
fundamental principle that good corporate governance is
critical to organizational success and the protection of
shareholder value. GSK could also set principles to
govern the operation of its committees.

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