Glaxo Smithkline Is a British Term Paper

Pages: 8 (2407 words)  ·  Bibliography Sources: 3  ·  File: .docx  ·  Level: College Senior  ·  Topic: Business

SAMPLE EXCERPT . . .

The threat posed to the profitability of Glaxo SmithKline is clear because those profits are being explicitly targeted by entities that have the power to reduce those profits.

The second major threat in the external market comes from competitors. Glaxo SmithKline lives by the drugs it develops. The cost of drug development is very high, and like others in the industry, Glaxo relies on a handful of hit products to drive revenues and profits that finance future development. There are often races to develop the leading drug for a condition, especially conditions that are widespread as first-mover advantage can be extremely beneficial for the development of market share over the long run. Glaxo deals with competition by developing a diversified range of drugs, across many different classes and within classes. Glaxo also deals in vaccines and consumer healthcare (2012 Annual Report), both of which provide additional income that is at least somewhat sheltered from the negative effects of competition.

Strengths & Weaknesses, Resources and Capabilities.

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Glaxo has strengths in R&D, where it spent £3.5 billion last year in developing new drugs to keep its pipeline active. The company is well-established around the world, so it has a strong salesforce, great distribution and good connections within all economies. Glaxo also has a measure of political power, due to its established reputation in the business. In short, its resources and capabilities are its main source of strength. The company is also well-funded, and has a reasonably healthy balance sheet, if a little highly leveraged. There are few weaknesses at the company that are readily identifiable. There are individual drugs that are underperforming and perhaps the pipeline could be better, but with a diversified product range Glaxo is well-positioned so that its weaknesses do not undermine profitability.

Strategy

TOPIC: Term Paper on Glaxo Smithkline Is a British Assignment

In general, Glaxo SmithKline is well-positioned to handle its weaknesses. The company has few major ones, and its strengths overpower them. This is evident on the income statement, where Glaxo is a profitable, healthy company that is well-positioned to maintain this health in the long run. This leaves the company with two keys to strategy. The first is to build on the strengths to maintain them. The most important element of this is to maintain the new product pipeline as strong and diversified as possible, to get the most new products to market and increase the likelihood of developing a hit.

The second major strategy is to address the major threats in the external environment. As organized as it is, Glaxo needs to work with firms in the industry to ensure that they retain as much of their bargaining power as possible. To do this will require directing some cash to lobbying efforts and directing the company's considerable intellectual resources to working with governments to bringing down the cost of drugs without compromising the long-term profitability of drug development companies like Glaxo SmithKline.

Value Chain

The Value Chain is comprised of inbound logistics, operations, outbound logistics, marketing & sales, and service. Inbound is not particularly important to Glaxo SmithKline, other than with people, where recruiting is critical to getting the best people and having competitive advantage over the other major firms in the industry, who are also competing for the same people. Operations refers here more to development than production, the latter of which is relatively easy. The company's quality staff again will help here, in finding breakthrough products.

Outbound logistics is a part of the value chain that plays to Glaxo SmithKline's strengths. The company has an excellent distribution network and a strong sales force. This allows it to get its products to market, anywhere in the world, and to take full advantage of its monopoly protections. Glaxo SmithKline should leverage this resource as much as possible in order to strengthen its outbound logistics -- as good as it is, most of its competitors are equally good. Sales & Marketing is linked closely with outbound logistics in this business, and the same thinking applies here as well. Glaxo needs to build the best team and use their skills and customer contacts to maintain its position in the market vs. The competition.

Service is an interest component of the value chain. Governments and insurance companies are among the largest payers (not buyers, but payers) for Glaxo SmithKline's products. Their bargaining power is a major threat to the company. However, this is where having the resource of talented executives with strong political connections comes in. Glaxo SmithKline needs to ensure that its interests are met by government and that is at least something of a service function. Thus, for Glaxo, service with respect to the biggest customers is not about providing great service, but about lobbying them to give Glaxo more. This is a somewhat different approach, but the biter that Glaxo's managers are at doing this, the less threat they will face from governments, insurance companies and regulators.

References

Anderson, A. (2013). Five components of an organization's external environment. Houston Chronicle. Retrieved November 1, 2013 from http://smallbusiness.chron.com/five-components-organizations-external-environment-17634.html

Glaxo SmithKline 2012 Annual Report. Retrieved November 1, 2013 from http://www.gsk.com/content/dam/gsk/globals/documents/pdf/GSK-Annual-Report-2012.pdf

Medicaid.gov. (2013). Federal upper limits. Medicaid.gov. Retrieved November 1, 2013 from http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Benefits/Prescription-Drugs/Federal-Upper-Limits.html

Porter, M. (2008). The five competitive forces that shape strategy. HBR Magazine. Retrieved November 1, 2013 from http://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/ [END OF PREVIEW] . . . READ MORE

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