MGN423 Strategic Case Analysis Report on Pharmaceutical Industry: GlaxoSmithKline Assessment 1 Answer
The strategic case analysis report on the pharmaceutical industry focusing on the company GlaxoSmithKline provides comprehensive details on the macro-environmental factors that impact the operations of the companies in the industry. The competitive advantage of the companies is revealed through the analytical tool of Porter's Five Forces Framework. The current strategic issues faced by the company in the given industry conditions are determined through this report. The case study further helps in obtaining the knowledge on scenario planning techniques that forecasts the plausible uncertainties of the industry and its functioning. The evolvement of the strategic customers is also focused on the recent choices made by the company GlaxoSmithKline in recent years.
The strategic management of a company is essential to determine the valuable and changing strategies adopted in the macro-environment analysis of a company pertaining to the specific industry while resolving its challenges and growth perspectives. The significance of strategic management is highlighted in the case study that serves the purpose of compiling the report based on the pharmaceutical organization GlaxoSmithKline. The strategic management involves in analyzing the current situation of the organization, formulate relevant strategies and deploy them to meet the goals and objectives of the company successfully among its competitive rivals (Klunko et al. 2019). The aim of the report is to focus on the macro-environmental analysis tool of PESTLE and evaluate the competitive forces through Porter’s Five Forces Framework. The alternative approach for developing practical strategies for the company is suggested through recommendation and inference of the mitigation strategies to the problems faced by the company.
Overview of the organization
The pharmaceutical industry in Australia is evolving as the health ministry has reviewed the National's Medicine Policy which provides the scope of timely access to medicines for the patients, the best quality of drugs to be made available, and maintenance is sought to create a feasible and responsible pharmaceutical industry in the nation (McLachlan and Aslani, 2020). GlaxoSmithKline is positioned as the sixth biggest pharmaceutical company which has the competitors as Novartis, Pfizer, Johnson and Johnson, Sanofi, and Bayer. The company originates at Brentford, England while operates at Victoria and New South Wales in Australia. The company has more than 90,000 employees worldwide with the key people managing the company recognized as Emma Walmsley as the CEO of the company and Jonathan Symonds as the Chairperson of the company. The estimated revenue earned by the company is £33.754 billion (Annual Report, 2019). The company is renowned in the healthcare and pharmaceutical sector across the globe for the vaccines, pharmaceutical products, oral healthcare, over-the-counter medicines and nutritional products.
The strategic issues diagnosed in the pharmaceutical industry comprising the company analysis on the challenges faced are recognized as a drop in the patent cliff which was added with more pressure from the groups that regulates the cost of the pharmaceutical patents. The ageing groups present a rare disease which requires individual treatment package and low prescription volume. This reduces the scale of economy for manufacturing generic medicines which also results in low investment from the government agencies (Meyer, 2019).
Discussion on the fundamental environmental forces with PESTLE analysis that impacts the global pharmaceutical industry in recent times
The environmental forces that create an impact on the global pharmaceutical industry in recent times are analyzed through the tool of PESTLE, as mentioned below:
The global business environment is mostly affected by the strict regulatory framework followed by all the developed and developing economies. The stringent laws comprising of the drug manufacturing and selling is encompassed within strict rules for the pharmaceutical industry (Klarin and Ray, 2019). The advertising, sales promotion and maintenance of safety and health standards are crucial to be followed in the complex framework. The rising pressure on pricing strategy is another vital element that is being governed by countries with strict limitations on the price ceiling.
The lifespan of human beings has increased with the boon of medicines and timely advanced treatments. Hence every country is spending more on healthcare where a substantial amount is dedicated to public healthcare (Thakur-Wernz et al. 2019). This has been profitable for the industry as more significant revenue is generated even with cut-throat competition in the healthcare services.
The recent study on public health has revealed that the ageing population and the young generation are suffering from several lifestyle diseases like obesity, diabetes and high blood pressure. This substantially creates a enormous demand for pharmaceutical companies almost in all the developed countries. The recent trend followed by the global citizen is to maintain their health through health supplements which also introduces several pharmaceutical products in the market.
The biotechnology improvement is one of the crucial factors for opting for healthy food supplements, and demand for medicines have witnessed colossal growth in the last ten years. Innovation and drug development process has obtained market approval in recent times which contributed to the growth of the pharmaceutical industry.
The industry has to follow strict rules and regulations to maintain the legal parameter. Almost all the major players in this industry invest in millions to operate inside the standard periphery as maligning a company in the legal front substantially decreases their reputation and revenue.
The pharmaceutical companies are instrumental in addressing the environmental issues in the long run to create sustainable development being conscious of the materials and ingredients used in the manufacturing of the drugs. Toxic elements are disposed of with great care and consciousness in this sector which enables a safe and healthy environment followed in this industry.
Evaluating the scenario planning techniques to recognize the environmental elements that may create an impact on the industry in the future
The scenario planning technique involves the structure of the economies and the elements like political, economic, social, legal, technological and environmental forces.
Analyzing the market and customer behaviour
The marketing process in the pharmaceutical industry depends on the requirements of the buyers. The diverse need of the patients across the globe is of various need where the quantity and quality of the products depend on the prescriptions of the physicians who are the direct point of contact for the producers and sellers (Wong and Tan, 2018). In this industry, therefore, the behaviour of the physicians and the healthcare workers are of primary concern.
Analyzing technology and innovation
The significant technology and innovation in this industry are marked with the introduction of artificial intelligence and machine learning which contribute in storing silos of data of the health of the patients while observing the effect of tested drugs in the body of the patients which is impeccable progress in the diagnosis of the patients (Yang et al. 2020). GSK used AR tool to observe the migraine experiences of the patients, which is essential to decipher in recent times.
Analyzing the core competency of the organizations
The capacity of the industry lies in the research and development of life-saving drugs. Innovation in the biotherapeutics is beneficial for patients suffering from cancer and arthritis (Schoner et al. 2017). Blockbuster drugs are one of the vital innovation which helps in determining the strength of the companies.
Identifying the uncertainties
The scenarios of plausible uncertainties in the pharmaceutical industry can be developed in the matrix, which may have two challenging scenarios like compliance risk and regulatory challenges which are most common for testing the new drugs. The companies operating in the industry identify these uncertainties while observing their strength and weaknesses to comply with the trend and traits of the market.
Discussing the implications
The industry needs to be instrumental to set standard policies and strategies to be followed by all the operating companies so that the problems faced by the companies can be mitigated.
Analysis of the Five Forces Framework affecting the pharmaceutical industry and evaluation of different sectors in the industry life cycle
The different sectors operating in the pharmaceutical industry is considered to be the drug manufacturing companies, drug marketing companies, and companies involved in Biotechnology and Research and Development. Porter’s Five Forces Framework that impacts the industry in its operations can be mentioned in the following points:
Bargaining power of the suppliers
The bargaining power of the companies as suppliers are medium as there is stiff competition in the market (Yousefi et al. 2017). GSK is one of the prominent manufacturer and distributor of the pharmaceutical products which maintains equilibrium in the market as a producer.
Bargaining power of the customers
The bargaining power of the customers is perceived low as they have limited knowledge on the pricing strategy based on what ingredients used, use of advanced technology and presence of similar products at the same pricing in the market (Tukdeo et al. 2016). Moreover, companies like GSK directly offer their products to the physicians who act as intermediaries of sales point to the customers.
Competition with the rivals in the industry
GSK has a colossal base across the globe which has the possibilities of catering massive demand. The competitors like Sanofi, API, Novartis and others pose medium competition to the company.
Threat from new entrants
The entry barriers in the industry due to compliance of stricter rules, regulations and healthcare policies limit the entrance of the new companies in the market (McCarthy, 2019). Moreover, the pharmaceutical companies demand huge investment, R&D and advanced technology to cater to the global market. Hence, the threat from the new entrants is low in this industry.
The threat of substitute products
The threat from substitute products available in the market is high as there is cut-throat competition from renowned brands already existing in the market.
Evaluation of the evolving of the “strategic customer” in the industry and the impact on critical success factors of the industry
The strategic customers from the viewpoint of the pharmaceutical industry comprise of the physicians, patients, healthcare service providers, insurers and payers for the products. The emerging business model suggests that the customers have become more aware of the healthcare products, which make them thirsty for the information pertaining to the development of new drugs (Fernando et al. 2020). The emerging customers are more careful about the lifestyle diseases and engage directly with the companies to gain information for the drugs available in the market. The pharmaceutical companies engaged with the customers directly tend to provide transparent information and expand the channel of communication to interact with the customers efficiently.
The critical success factors achieved by the industry in the recent years involve explicit research on the patients' experience of the drugs and its side-effects, the interactive commercial model employed by the pharmaceutical companies; the engagement of the payers and informed relationship on the medical grounds contributes to the success factors of the industry. It is often argued that the physicians and healthcare providers were the main points of access to the customers which is now changing to directly access the opinions of the customers in the industry (Awino, 2016). The factors involved in the success of the industry that has changed over the years since 2010 has been the engaging customers directly which reduced the long waiting channel to access the information, increased regulation on the personal promotion of the companies and availability of experts to answer the queries of the customers directly.
Identifying the strategic groups within the industry along with a description of the choices made by the company since 2019
The strategic groups operating within the industry is recognized as the suppliers, government agencies, creditors, stakeholders and customers. The CEO of the company GSK has iterated on the improvement that has strengthened the strategic choice of innovation made by the company. The company has now made 17 vaccines and 41 fresh stocks of medicines available to the consumers (Patrick, 2019). The company has engaged in a merger with Pfizer while introducing artificial intelligence and machine learning in the technological development for the company. The company has invested in an asset swap deal with Novartis with the agreement of selling oncology products for $15billion.
Recommendations on the company’s financial and managerial competencies
The recommendations suggested on managerial and financial competencies of the company highlights or restructuring the company by achieving the annual cost savings of $2billion in 2019. The preliminary savings of the company will be utilized to mitigate the impact of declining sales of the drug Advair used for respiratory functions. The alternative strategies for diversification of the complex production techniques are recommended for the company. Sustainable healthcare products must be in the pipeline at cost-effective rates offered by the company (Wentworth, 2019). The managerial competencies must be diversified among the top management, R&D and supply chain management of the company for better execution of the strategies undertaken for the improvement of sales in 2020.
In conclusion, it can be summarized that the company has immense potential to emerge as a profitable company in the long run where the focus of the company must be on improvement of the healthcare products. The top management of the company must implement both short and long term plans to achieve the mechanism of control on the qualitative production and distribution of the life-saving drugs while implementing strategies that can help achieve the competitive advantage in the industry.