GlaxoSmithKline (GSK) Corporate Strategy Analysis and Joint Venture

This report provides a comprehensive analysis of GlaxoSmithKline (GSK)'s corporate strategy, particularly focusing on its planned Consumer Healthcare Joint Venture with Pfizer. The report begins with an introduction to corporate strategy and its importance, followed by an external analysis using PESTLE and Porter's Five Forces frameworks to identify opportunities and threats within the pharmaceutical industry, considering political, economic, social, technological, legal, and environmental factors. An internal analysis, including TOWS, Value Chain, and VRIO analyses, evaluates GSK's strengths, weaknesses, opportunities, and threats, as well as its core competencies. The report then assesses the joint venture strategy using SAFe criteria before concluding with a summary of findings and recommendations. The analysis considers the impact of Brexit, technological advancements, and competitive dynamics within the UK pharmaceutical market.

CORPORATE
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
EXTERNAL ANALYSIS................................................................................................................1
PESTLE Analysis...................................................................................................................1
Porter's Five Forces Analysis.................................................................................................3
INTERNAL ANALYSIS.................................................................................................................5
TOWS Analysis......................................................................................................................5
Value Chain Analysis.............................................................................................................6
VRIO Analysis.......................................................................................................................6
EVALUATION................................................................................................................................8
SAFe Criteria..........................................................................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Corporate Strategy means a series of actions or steps which a company undertake in order
to achieve their organisational objectives in a sustainable and competitive manner. It provides
companies, effective and essential direction which helps as well as assists an organisation to gain
the necessary edge within the wider business environment that also helps in ensuring long term
sustainability within the market (Adner, 2017). The assignment below is based upon
GlaxoSmithKline Plc, which is situated in the UK and is one of the biggest pharmaceutical
companies within the nation. Currently, the firm is planning to effectively create a Consumer
Healthcare Joint Venture with Pfizer, which is its US-based rival company, operating under
pharmaceutical industry within the UK. Thus, the report emphasises on a detailed external
analysis to identify opportunities and threats prevailing in the environment for the firm along
with a brief internal analysis to determine the competencies available with the company.
Additionally, the assignment also covers evaluation of this strategy of joint venture using SAF
Criteria.
EXTERNAL ANALYSIS
PESTLE Analysis
For a large organisation like GSK, it becomes necessary to analyse the external
environment of the business which is essential in terms of determining all the opportunities along
with the threats which prevails in the environment and could possibly affect the strategy of the
firm. For this purpose, PESTLE Analysis is being used which is a framework used to analyse
external pointers that are discussed in detail below:
 Political Factors:
These factors are associated with the political functionality of a company and its likely
effects which could be experienced by an industry. In context with the pharmaceutical industry
of the UK, the political scenario is being quite uncertain due to the approaching events of Brexit
and has surely an impact on this sector too. There is an uncertainty in the political front of the
country due to the British exit from the EU. Thus, there are several ineffective regulations that
are likely to be imposed in relation to the free flowing of the goods in EU nations. This could
possibly be a threat for the industry as production and distribution of pharmaceutical products
depend heavily on the regulations imposed by government (The UK Pharmaceutical Industry
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Braces for Brexit, 2019). In order to combat the threat, the industry must encourage effective ties
with the local pharmaceutical companies which safeguards the sector against these negative and
unstable political tensions.
 Economic Factors:
These factors undertake the economic performance of a country which directly impacts
the industries operating in the nation. As far as the pharmaceutical industry is considered, the
sector is responsible for employment of around 140,000 individuals within the UK. Moreover, it
contributes more than £30 Billion to the country' s economy in 2015 (What are Brexit
contingency plans for pharmaceutical industry? 2019). However, more than 2/3rd of the
medicines within the UK are imported from EU and this is likely to be impacted after the
happening of Brexit. Thus, this factor is a threat for the firm in several ways, like lower
profitability due to reduced currency value, enhancement in turnover as most employees in the
sector belong to EU nations as well as heavy import charges due to exit of Britain from European
Union. However, sector must indulge in stockpiling medicines, transferring licenses as well as
formulation of effective supply chain within the country to brace itself from the threats.
 Social Factors:
These factors are inclusive of the social aspects present in the country which could
influence the operations of the overall industry (Zerfass and Viertmann, 2017). In relation to the
pharmaceutical sector, there is a high demand amongst people of the country in regards with
innovative as well as high quality medicinal products from the industry which allows them to
appropriately enhance their healthcare and provide them utmost benefits. This is an opportunity
for businesses within the sector in order to align and integrate their resources with one another in
order to provide the required health facilities and top quality medicinal products to the
customers.
 Technological Factors:
It reflects all the technology-related factors within the marketplace that have a wide
impact on the functionality of the sector. Within the pharmaceutical industry, there has been a
constant research to introduce new technologies and advanced equipment which are associated
with providing subtle yet enhanced healthcare to people along with effective production of
medicinal products. This is a major opportunity within the industry and for its players to
combine their R&D divisions and work on technologies like Artificial Intelligence and
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Automation in order to eradicate any scope of ineffectiveness and provide complete guarantee of
the quality of their products. This would also help in the process adopted by the firms to produce
these offerings as it is reliable and fast (Funk and Hirschman, 2017).
 Legal Factors:
Within these factors, all the policies and regulations associated with the industry are
taken into consideration. The trade policies and regulations due to Brexit is becoming highly
uncertain. Moreover, there are greater odds within the market available for enhanced import
duties on medicinal products from the EU countries. Such uncertain and stiff regulations are
likely to possess a threat on the pharmaceutical industry of the UK as a major portion of the
business lies within the EU. In order to combat with the same, businesses under the sector must
formulate monopoly through mergers which strengthen their distribution and supply chain within
EU and could help them survive the uncertain legal scenario of the nation (Hickman and Silva,
2018).
 Environmental Factors:
In this, all the factors associated with the environment are taken into consideration.
Within the UK, the environmental concerns have increased lately and there are several legal acts
like Environmental Act, 1995, which governs the preservation of environment. Thus,
pharmaceutical industry of the country is also under pressure to adopt methods and produce
medicines that are environmental friendly and contribute in preservation of the natural resources.
This is a major opportunity for businesses within the sector to collaborate and adopt high
quality techniques like automatized production that reduces the carbon footprint within the
country and enhance the productivity and effectiveness of the industry.
Porter's Five Forces Analysis
Another effective aspect within the external environment which is important to analyse is
the attractiveness of industry (Lim and Greenwood, 2017). There are several elements within this
analysis that are briefly described below:
Buyers' Bargaining Power:
Buyers / Customers are individuals which buy the offerings of a company and a reason
for its survival. Within the pharmaceutical company, there is a huge number of customers that
buy medicinal offerings from the businesses within the industry. Moreover, the switching cost in
the sector is also low, which enhances their bargaining power against the businesses within the
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industry. Hence, the bargaining power is high within the industry. Thus, in order to reduce the
same, businesses within the sector could combine themselves and could create appropriate
monopoly within the marketplace, where customers are encouraged to buy quality and
innovative medicinal offerings from the combined venture only. Thus, it enhances the
attractiveness of this sector (Wijethilake, 2017).
Suppliers' Bargaining Power:
Suppliers are the individuals or organisations which provide raw materials to the
businesses within the pharmaceutical industry for them to further process the same and convert
into finished goods, i.e., medicines. There are several businesses within the sector that deal with
pharmaceutical products. However, the number of suppliers are limited, which results in their
dominance in terms of setting up the prices within the industry. Therefore, the bargaining power
of the suppliers is high in the sector. However, if businesses indulge into joint ventures, then the
firm could set up its own independent supply chain which might reduce the bargaining power of
suppliers.
Threat of Substitutes:
Substitutes are the commodities which could be used in place of the original products
offered by an organisation. There are different types of medicines available within the market
which could be consumed orally or through injections. Thus, with such diverse portfolio, it is
highly unlikely that much substitutes are available within the market to replace these drugs.
However, there are several organisations that are presenting innovative medicines within the
market. Thus, this threat is moderate within the sector. However, businesses within the industry
that are indulging in joint ventures could produce exclusive and patented drugs within the
market, in order to reduce this threat and provide better medicinal products to the customers.
Threat of New Entrants:
Setting up a business enterprise within the pharmaceutical industry requires heavy
investment to compete with the existing organisations within the sector. Furthermore, it also
requires certain licenses from government to authorise the setting up of business, which is a very
complex activity. Thus, this treat is limited or low within the industry (Banerjee, 2017).
Competitive Rivalry:
Within the pharmaceutical industry of the country, there are several organisations like
GSK, Pfizer, Roche and so forth, that are competing with each other in relation to sell to quality
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products within the country. Moreover, each organisation within the sector continuously works
towards producing more advanced and effective medicinal products that provides more utility
and enhanced health benefits. Thus, this threat is high within the industry. However, to reduce
the same, joint venture could be quite an advantageous method as it would allow the companies
to share their resources, their customers and supply chain, that would provide the firm with
adequate edge within the marketplace (Rasche, Morsing and Moon, 2017).
INTERNAL ANALYSIS
TOWS Analysis
GSK's
INTERNAL
ANALYSIS
STRENGTHS (S) WEAKNESSES (W)
 Adaptable Corporate culture
 Optimum R&D
 Effective Distribution Channels
 Usage of technology to combat
environmental challenges
 Huge reliance upon
UK market
OPPORTUNI
TIES (O)
 High demand for innovative medicinal
products
 Rise in trends such as Automation and
Artificial Intelligence
 Changes in
demographical needs
of population of UK
THREATS
(T)
 Deflated currency value  Enhanced import duty
 Political Uncertainty
 Strengths/Opportunities (SO): There are some opportunities for the entity such as rise in
trends such as Artificial Intelligence (AI) and rising demand for innovative medicinal
products. These can be effectively used by entity by making use of its strengths. The
organisational culture of GSK is adaptive which will inflate the scope of implementing
AI and automation. Through the use of technology, environmental challenges can be
combated and thus corporation can gain competitive edge.
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 Strengths/Threats (ST): A significant threat for GSK is the deflated value of currency
which will lead to inflation. This implies rise in prices of products sold by rivals. In such
case, GSK will make use of technological advancements to come up with ways to
decrease the overall cost. Weaknesses/Opportunities (WO): The demographic wants of people pertaining to UK
market constantly keep on changing. Company can explore automation and AI to
effectively cater to the evolving needs and demands of people belonging to United
Kingdom (Tran, 2019).
 Weaknesses/Threats (WT): GSK is highly dependent on UK market for its sales and
profitability while the political state of UK is highly uncertain. This tends to worsen the
situation for GSK.
Value Chain Analysis
PRIMARY
ACTIVITIES
DISTINCTIVE
COMPETENCES
SUPPORTING
ACTIVITIES
MEASURE OF
COMPETITIVE
ADVANTAGE
Inbound Logistics Optimal Retrieval of Raw
Materials (Warehousing)
Infrastructural
facilities
Extremely High
Operations Production and Packaging of
Vaccines and Medicines
Technological
Advancements
High
Outbound
Logistics
Suitable Distribution Channel
for timely delivery
Infrastructural
Facilities
Extremely High
Marketing & Sales Advertisement by way of
Digital Operations and Social
Networking
Procurement High
Services Effective Post-Sale Service HRM Medium
VRIO Analysis
This is a strategic and analytical framework that is taken into use by companies in order
to gain knowledge of the resources as well as capabilities of entity (Tran, 2019). With the help of
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this, an organisation can effectively attain a competitive edge in market place. This model
constitutes 4 elements, namely, Valuable, Rare, Inimitable and Organised. The resources and
capabilities which cater to all the before mentioned aspects tend to provide competitive
advantage to the company.
For the value chain analysis of GSK, the resources and capabilities that have been taken
into consideration are Warehousing, Production and Packaging, Distribution Channels,
Advertisement and the Post-Sale Services.
COMPETENCIES VALUE
(V)
RARE
(R)
INIMITABLE
(I)
ORGANISED
(O)
Inbound Logistics- Optimal
Retrieval of Raw Materials
(Warehousing)
Inbound
Logistics - - Inbound
Logistics
Operations- Production and
Packaging of Vaccines and
Medicines
Operations Operations Operations Operations
Outbound Logistics- Suitable
Distribution Channel for timely
delivery
Outbound
Logistics
Outbound
Logistics - Outbound
Logistics
Marketing & Sales-
Advertisement by way of Digital
Operations and Social Networking
Marketing
& Sales - Marketing &
Sales
Marketing &
Sales
Services- Effective Post-Sale
Service Services - Services Services
As per the above stipulated table, it can be identified that out of the preceding resources
and capabilities, operations of the respective company are the most effective resources that
renders competitive advantage to GSK. A discussion over this aspect is done as follows:
Valuable: This is ascertained to be valuable for the respective organisation as the
business model of GSK is formed in accordance with the acquisition of raw materials from
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vendors and then these are finally sent for processing into finished goods. Post this, the goods are
packed well so that there is no leakage or spoilage (Rugman and Verbeke, 2017). This is then
finally consumed by the ultimate user. So, it can be said that operations related to production and
packaging have become an internal part of corporation and thus are of primary value to entity.
This is so because if any problem occurs within this phase, then it may also hamper the other
business operations such as supply, distribution etc.
Rare: It has been acknowledged that the business operations of GSK are rare as the
production as well as packaging process and ingredients are adequately and relevantly patented
by the corporation in order to avoid getting indulged in legal adversities (Helfaya and Moussa,
2017). This deflates the probability of similarities between the operational structure of this
company and other rival pharmaceutical firms. This justifies the rareness of this competitive
resource of GSK.
Inimitable: GSK is renowned to have a long past for maintaining uniqueness and
creativity within the organisational premises at all times. The business operations such as
production and packaging of medicines as well as vaccines is done in a unique manner and is
appropriately patented to avoid imitation by rival firms.
Organised: The respective corporation focuses upon technological advancements in
order to enhance its offerings and render better services to people. Furthermore, the entity also
makes use of these advancements to effectively produce and pack the medicines and vaccines.
This indicates the effective organisation of operations of GSK so as to facilitate the entity to
attain massive success in market place.
EVALUATION
SAFe Criteria
This is a framework which is taken into use by corporations in order to examine and
analyse the strategy undertaken by the firm. The strategy undertaken by GSK is to enter into a
joint venture with Pfizer whereby the former organisation would be holding more than 68% of
the overall stake. The major rationale behind the adoption of this strategy is to gain access to a
whole new healthcare customer segment (Hardy, 2018). This will aid in provision of medicines
and associated services to people at an affordable pricing.
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In this regard, to optimally carry out the analysis of the adopted business strategy, the
respective business firm is making use of SAFe criteria. This is discussed as follows:
Suitability:
To relevantly and appropriately examine the suitability of a business strategy, it is
generally regarded as effective to evaluate it against TOWS matrix. There are various types of
opportunities as well as threats that are acknowledged within the before mentioned model. In this
regard, the opportunities identified are rise in Artificial Intelligence and Automation. For GSK,
the strengths include ability to adapt to changes, utilisation of latest technologies for the
attainment of objectives. Together, they will aid the corporation to acquire high digital
capabilities. Further, it is ascertained that R&D of Pfizer is very strong and thus renowned across
the globe for providing an edge to the firm in marketplace. Through the execution of joint
venture, GSK would be able to gain growth thus inflating customer healthcare segment through
automation and AI (Grayson and Hodges, 2017).
Acceptability:
The next stage within SAFe analysis is acceptability which is yet another crucial aspect to
be taken into account by the firm in order to gain approval or acceptance from the various
stakeholders of corporation. This can be referred to as the examination of various types of risks
that are linked to the adopted business strategy of GSK and are most likely to be experienced
post the execution of Joint Venture with Pfizer. There are numerous stakeholders of this entity
that are listed along with their interest and power with respect to the enterprise.
INTEREST LEVEL
POWER LEVEL
High Low
High Investors, Staff Government
Low Clients Vendors
Out of the stakeholders of the respective corporation, there are three stakeholders which
are acknowledged to be the most influenced by the undertaken business strategy. Such
stakeholder groups along with the impact are mentioned below:
Investors: These are the individual who invest their sum within the organisation and thus
against it, expect a significant return from the respective company. This stakeholder group is
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essential to be taken into consideration by GSK while adopting the joint venture strategy as they
are the ones who hold high power and interest in the operations of entity (Brewster, 2017). The
investors would facilitate this strategy as both the companies are leading the Pharmaceutical
sector and the JV would further give a push to the corporations to inflate their stake in global
market place. This will result in high profitability along with accelerated revenues, thus,
implying more returns for investors.
Customers: These are the individuals who are the ultimate users of the products and
services offered by entity in market place. When they get satisfied with the offerings of the
corporation, it aids the entity to attain high stake in market place. Post the joint venture, GSK
will be able to make use of more technological, physical, human and financial resources. This
will facilitate the entity to effectively cater to the medicinal needs and requirements of people.
Thus, they will also support the JV strategy of company with Pfizer as through this, they will be
able to effectively satisfy their demands.
Suppliers: They are impacted with this new strategy of the company as both the firm
shave effective supply chain and with their merger, there might be several changes in the
structure introduced by the company which might affect their inbound activities. However, the
firms might be able to decrease their procurement cost which would attain more profit to the
company.
Feasibility:
To carry out evaluation of feasibility of undertaken strategy, several skills are needed to
accomplish joint venture like negotiation and analytical skills. Further to make it more
successful, financial resources are needed by GSK to negotiate effectual purchase consideration
with Pfizer. Once this is done, the business entity must align the resources with equity and debt
requirements to execute the joint venture (Balmer, 2017). This strategy is feasible for GSK as
this will provide benefit to all its stakeholders and is even effective for both the corporations.
CONCLUSION
Thus, it is concluded that corporate strategy allows an organisation to effectively gain a
competitive edge within the market Moreover, external analysis allows to gain access to several
opportunities and threats which prevails within the wider business environment, along with
assessment of industrial attractiveness. In addition to this, internal analysis allows a company to
assess their strengths and weaknesses against the identified opportunities and threats.
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Furthermore, such analysis also helps them in determining their core competencies. Lastly,
techniques like SAF Criteria makes an organisation capable to evaluate its set strategy in terms
of suitability, accessibilities as well as feasibility.
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