Analyzing GSK's Business Environment

This assignment tasks students with analyzing the complex business environment faced by GlaxoSmithKline (GSK), a leading global pharmaceutical company. The focus is on identifying key social and environmental challenges impacting GSK's operations and future strategies. Students are expected to draw upon various theoretical frameworks, such as Porter's Five Forces, PESTLE analysis, and stakeholder theory, to provide a comprehensive understanding of the factors shaping GSK's competitive landscape.

Business and Business Environment
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Table of Contents
Part 1..........................................................................................................................................3
LO 1: Explaining different types and sizes of organisations.....................................................3
P1 Explaining various types and purpose of organisations........................................................3
P2 Understanding size and scope of various organisations and its link with objectives...........4
LO 2: Demonstrating interrelationship of functions of an organisation and its link to
organisational structure..............................................................................................................5
P3 Explaining the relationship between various organisational functions and its link with
objectives and structure..............................................................................................................5
Part 2..........................................................................................................................................6
LO 3: Demonstrate positive and negative impact of macro environment on business
operations...................................................................................................................................6
P4 Identify positive and Negative impact of macro environment on business operations........6
LO 4 Determining the internal strength and weakness of business and its link with external
macro factors..............................................................................................................................7
P5 Conducting internal and external analysis of organisations to understand its strengths and
weakness....................................................................................................................................7
P6 Explaining strength and weakness and its relation with macro factors................................9
Reference List..........................................................................................................................11
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Part 1
LO 1: Explaining different types and sizes of organisations
P1 Explaining various types and purpose of organisations
According to Baron (2012), the sizes and scope of every organisations is drastically different
than one another and their operational activities also differ in size and future scope. The
various types of organisations that are existent all over the globe include public ltd
companies, private ltd companies, companies limited by shares and companies limited by
guarantee. In this study, the assessment of a public and private company can help in
understanding their types, purpose and scope.
As per Child (2014), a public company serves the basic need of the organisation through
dispersing its ownership among the general public. The example of Barclays Plc of a public
sector company can be used to understand the several functions and purposes that the
company undertakes in its operational activities. Being a huge company in the banking
sector, it has huge duties and purposes as a corporate body and the main responsibility is to
have a positive corporate social responsibility (CSR) towards the public. Being centralised in
nature it allows the company to exercise decision making on certain products of their own.
They have a differentiation strategy that is aimed at niche and urban customers. Being present
in the corporate scene for almost 300 years, it has already established a brand identity and
makes it easier for them to conduct business. Since it is a public company, its major sources
of funds arrive from public deposits with customers having high bargaining capability. Their
operational activities are streamlined to give highest customer satisfaction to its customers.
On the other hand, the example of a private ltd company GlaxoSmithKline (GSK) can be
used to compare the operations conducted in a public ltd company. One of the most renowned
pharmaceuticals companies in the world, their functionality is based on serving customers all
around the world. Since it’s a private organisation, their liability is spread vastly, starting
from customers, shareholders and all the major stakeholders. The fact that their business
deals in sensitive products such as medicines and vaccines, they constantly must undertake
research and development procedures to create new and advanced products that have huge
implications in the normal world. Having business in many continents, it has maintained its
corporate responsibility quite well.
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Keeping in mind both the companies and its operations, both companies have a huge scope
since they are already established companies. The purpose they serve has a major distinction
as one company deals in pharmaceuticals while the other in banking services. Both
companies have the common objective of serving customers but the process of raising funds
is different. Public corporations can easily raise money by issuing shares and stock whereas
private companies need to follow several protocols before engaging in raising funds. Their
expansion decision making is based on the volume of profits that they generate.
Another distinction that arises is the fact that issuing shares is easier in public companies and
the owner of the shares becomes a part of the company. It is not the case in a private
company as board of directors of the private company need to follow advice of their
investors. Ultimately it impacts the business decision making process for both companies.
P2 Understanding size and scope of various organisations and its link with objectives
As per Damanpour (2014), structure of an organisation is deeply responsible for the setting
up of objectives that plays a role in operational activities and understanding the scope of the
company’s products and services. If the case of both GSK and Barclays Plc is used, it can be
noted that being large scaled organisations and business spread worldwide, the operational
activities are constantly based on improving services. Drexler (2015) suggested that the range
of products that a company introduces to its public is a culmination of the business objectives
and hard work of its employees to deliver the best quality services possible.
The business objectives and goals of GSK involves in developing a balanced global business,
develop products of value and have a simplified operating model. These objectives can be
inherently linked with the products and service that they provide. They have developed a
widespread business and their products deal in pharmaceuticals, vaccines and healthcare
products. Considering their objectives, the development of these products along with constant
research and development allows them to operate responsibly in the global market.
According to Duncan (2014), no company will ever be able to define its objectives and not
create relevant products and services for the customers since it makes their operations
irrelevant. In the scenario it can be said that Barclays Plc which has been in the business since
many years, considers its operations under ethical and professional terms. Barclays Plc
delivers products and services that range from personal to international banking for
individuals and corporate banking for SMEs and large organisations
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Developing a close working unit allows the company to undertake dealings with employees,
clients and governments in a proper manner that allows personal and business growth. Their
code of conduct for values and behaviour governs every decision making process in the
company. All the actions are covered with full integrity, fairness and cooperation. This allows
them to handle business accounts of every individual tactfully and provide customer
satisfaction. Building this code of conduct specifies their objectives of achieving a unified
workforce. Evan (2014) argued that organisations need to develop objectives as per the
structure of the company so that unethical practices can be avoided and the main goal can be
focused upon. The business types may be different but the organisational goals are definitely
linked directly to the structure and purposes of the company.
LO 2: Demonstrating interrelationship of functions of an organisation and its link to
organisational structure
P3 Explaining the relationship between various organisational functions and its link
with objectives and structure
Frambach and Schillewaert (2012) opined that the direct functions of an organisation shows
the relevance of their application in the achievement of objectives of the company through
their competent structure. Since GSK is dependent on developing products related to
pharmaceuticals and other consumer healthcare, it can be clearly stated that they mainly focus
on developing a work atmosphere that is constantly focused on creating new and advanced
medicines and vaccines for the cure of millions of individuals under their operational
territory. The value that they share about developing products with value coincides with their
work ethics and it is evident from the massive focus they provide on research and
development. Corporate responsibility is also focused upon by them since pharmaceuticals
business can be extremely risky if done the wrong way.
The advantages of having a constant research and development unit is evident from the fact
that it allows massive growth and breakthrough in medicine and brings newer medicines and
vaccines to the roster. Massive investment in the research and development sector helps in
initiating discovery of new vaccines and medicines daily that can cure major diseases.
However, the down side to this function is the fact that it utilises huge investment from the
company and every research and development process does not guarantee success. A massive
failure of the process can lead to big losses to the company financially. Jones et al. (2015)
argued that larger organisations do not get impacted financially as much as the smaller
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organisations when any project fails. This fact suggests to the point that impact of decision
making has different impact on different sized organisations.
Larger organisations get the benefit of financial stability, smaller and medium organisations
cannot readily take the chance of making risk taking ventures. The financial toll can derail the
company’s operational activities and also hamper future decision making process. Thus, it is
evident that operational security is enjoyed mostly by companies that are large scaled
organisations since they have a well-established business and are financially capable of
innovating new things. A medium or small sized organisation will always base its operations
and functions keeping in mind their risk taking capabilities and level of success that they can
achieve in their selected market.
Considering the point about GSK, it is clear that the company has faced vital competition in
the market and it is important that they keep innovating and researching. This allows them to
create new products efficiently and brings their set objectives to fruition. Needle (2010)
argued that it has always been clear that a company’s functions rely on the structure of the
company and the desired objectives that are to be met. Interconnectivity of these factors is
bound to happen in every company, but the level of success can be achieved only by few
organisations. If GSK stops its expenditure of research and development, it will not be able to
achieve its major objectives and clearly it will require a modification of the business structure
to suit the demands of the hour.
Part 2
LO 3: Demonstrate positive and negative impact of macro environment on business
operations
P4 Identify positive and Negative impact of macro environment on business operations
According to Palmer and hartley (2011), the macro conditions of the market have a huge
impact in any business operations for any company, irrespective of its size and scope. If the
example of the business operations of GSK is undertaken, it can be explained that macro
environment can play a telling role its activities. A PESTLE analysis can highlight its major
impact, both positive and negative. If the political scenario is looked upon, marketing
strategies of the company may get hampered if there are changes in trade regulations
globally. A competitive regulation applied my emerging markets can hurt the business of the
company. If the economic factor is looked upon, the positivity in the economy of emerging
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markets such as China and India allows better business dealings. The uncertain European
market economy makes the emerging markets a better choice financially.
As per Sciulli (2013), social factors in a macro environment makes business dealing very
tricky as it all boils down to the attitudes and preferences of customers. In the case of GSK,
changing trends of buying behaviour and the option of having other substitute companies,
does impact business decision making strategies. Consumer’s buying capabilities and choices
and preferences also play a role in deciding the best business operations for the company. On
the technological front, GSK has been advanced as a major portion of their investment is
made on research and development. This makes the company bring out new products and
makes the operational capability better. On the other side, financial risks also increase by
allocating major funds into just one department.
Being a pharmaceutical company, GSK faces heavy risk if products created by them have
negative impact on people’s health. The CSR responsibility increases and business operations
can suffer. Legal factors can impact their level of research and development and any changes
in laws and regulations can make it difficult for business. According to Shelby (2015), of late
GSK has been pushing towards achieving a carbon free work ethics and it assists in making
the company ecologically competent. The objective of reducing carbon emissions saw a fall
of 21% in last 5 years and operational waste is expected to be lowered by 50% by the year
2020 (Gsk.com, 2017). Being a pharmaceutical company, the risk of polluting environment is
high and can hamper business.
LO 4 Determining the internal strength and weakness of business and its link with
external macro factors
P5 Conducting internal and external analysis of organisations to understand its
strengths and weakness
According to Weatherley and Otter (2014), a thorough internal and external assessment of a
company helps in identifying the key strengths and weakness that can either hurt a company
or make it a successful venture. A SWOT analysis of GSK can elaborate the various strengths
and weakness that the company possesses in the business environment.
Strengths
 The best thing about the company is
its brand identity that is very strong
Weakness
 The number of produced goods from
the research and development
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in all the major markets across the
globe. Being one of the top
pharmaceuticals company in the
world, it caters to millions of people
and has made the brand very
popular.
 Having invested majority of the
investment on research and
development, it is considered one of
the best R&D companies in the
world. This allows development and
discovery of new drugs every day.
 Working alongside the World Health
Organisation (WHO) gives the
company validity and respect for all
the kinds of products and services
that they develop. It makes the
company devoid of any fraudulent
measures.
process leads to creation of bulk
products that expire after a certain
period.
 Massive focus on development of
new drugs often leads to loss in
quality of product.
 Bribery scandal in China has dented
image of the brand in the overseas
market. It could affect sales. Loss of
brand name can affect the image of
the company considerably and cause
failure of new products as consumer
perception is impacted negatively.
Opportunities
 One of the major opportunities for
the company is the growing number
of ageing population in UK. As per
reports, by 2039, more than 1 in
every 12 people is expected to be
aged over 80 years (Telegraph.co.uk,
2017). This makes the need for
medicines even higher.
 Its foray into economically stable
nations such as Brazil, India, China
and Africa is bearing good financial
returns and poses a good opportunity
to expand market base.
Threats
 Massive competition from
companies such as Pfizer, Merck &
Co and Amgen makes it difficult for
sustainable business.
 The research and development
process is a very expensive process
and cannot risk chances of failures.
It can be expensive financially and
medically if a project fails to achieve
desired results.
 Economic slowdown in European
markets has crippled major business
opportunities in various nations. Tis
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 The constant research and
development procedures along with
spending on getting better
researchers allows inventing of new
and capable drugs since the cases of
new diseases are on the rise.
has lowered the financial returns
considerably along with competition
for a shared market
Table 1: SWOT analysis of GSK
P6 Explaining strength and weakness and its relation with macro factors
According to Williams and Anderson (2014), macro factors play a major role in the either
hampering or boosting the decision making process of any company. Keeping in mind the
various strengths and weaknesses of the company GSK, it can be stated that it was due to the
various macro factors which play a critical role in deciding what is good for the business.
Brand identity of the company can be attributed to the widespread business of the company
and the social factor that allowed the customers to regularly purchase its product and help in
developing brand name. Even the political factors play a role in helping the brand achieve its
marketability and penetrate profitable markets. The business expansion in emerging markets
like India and China is proof of the political effects that allows the business to conduct its
business functionalities smoothly than other parts of the globe.
Worthington and Britton (2014) argued that technological factors such as advanced
machinery allows the company to indulge in making use of the technology to develop
advanced and relevant products. GSK uses the latest technology for its research and
development process and it helps them create new drugs every day. It has helped them to
become one of the best research and development companies in the world. Coming to the
drawbacks that macro environments bring to the company, it can be said that investing a
major chunk of finances in the technology department, risks of project failure can cause
massive losses to the company. Drexler (2015) argued that proper planning for investment is
absolutely necessary to negate situations where decision making can have an opposite result
as compared to the desired goals. The business can also lose ground in the market due to the
failure and will help the rivals to move ahead in the business field.
Another issue that a macro environment can have on the business decision making is the legal
issues that can plague company operations. The example of GSK’s debacle in China where
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the company was accused of bribery had an extremely negative impact on the business
proposition in the country. Being an emerging market for GSK, the chances of consolidating
market share took a hit due to these charges. Legal complications due to this fact made
business operations problematic. Duncan (2014) opined that legal complexities is never a
good sign for established or emerging businesses. The legal hassles faced by the company
make it very difficult to actually conduct profitable business dealings and it impacts the
overall decision making process for the company. It can create a situation where the business
needs to completely shut down operations and shift to a different market.
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Reference List
Baron, P. (2012) Business and its Environment. 7th Ed. London: Prentice Hall.
Child, J., (2014). Organizational structure, environment and performance: The role of
strategic choice. sociology, 6(1), pp.1-22.
Damanpour, F., (2014). Organizational innovation: A meta-analysis of effects of
determinants and moderators. Academy of management journal, 34(3), pp.555-590.
Drexler, J.A., (2015). Organizational climate: Its homogeneity within organizations. Journal
of Applied Psychology, 62(1), pp.38-42.
Duncan, R.B., (2014). Characteristics of organizational environments and perceived
environmental uncertainty. Administrative science quarterly, 12(1), pp.313-327.
Evan, W.M., (2014). Toward a theory of inter-organizational relations. Management
Science, 11(10), pp.217-220.
Frambach, R.T. and Schillewaert, N., (2012). Organizational innovation adoption: A multi-
level framework of determinants and opportunities for future research. Journal of business
research, 55(2), pp.163-176.
Gsk.com. (2017). Progress on our commitments | GSK. [online] Available at:
http://www.gsk.com/en-gb/responsibility/our-planet/progress-on-our-commitments/.
Jones, R.A., Jimmieson, N.L. and Griffiths, A., (2015). The impact of organizational culture
and reshaping capabilities on change implementation success: The mediating role of
readiness for change. Journal of Management Studies, 42(2), pp.361-386.
Needle, D., (2010). Business in context: An introduction to business and its environment.
Cengage Learning EMEA.
Palmer, A. and hartley, B. (2011) The Business Environment. 7th Ed. Maidenhead: McGraw-
Hill.
Sciulli, L.M., (2013). How organizational structure influences success in various types of
innovation. Journal of Retail Banking Services, 20(1), pp.13-19.
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