Strategic Management Essay: Internal, External Environment & GSK

This essay provides a critical examination of the effect of internal and external environments on the strategic process, using GlaxoSmithKline (GSK) as a case study. It begins with a definition of strategic management and a review of different strategic processes, including prescriptive and emergent approaches. The paper analyzes the impact of internal factors like organizational culture, employees, and financial structures, as well as external factors like legal, political, technological, social, and economic environments on GSK's strategic plan. The essay explores GSK's approach to innovation, its use of both prescriptive and emergent strategies, and its position as a major player in the pharmaceutical industry, highlighting how size and resources contribute to its competitive advantage. The analysis covers the company's strategic decisions, its organizational culture, and its response to environmental changes, concluding with a discussion of the interplay between internal and external factors in determining strategic success.

Running head: STRATEGIC MANAGEMENT OF GSK
Strategic Management
Name of the Student:
Name of the University:
Author note:

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Strategic management refers to the analysis of an organisation’s micro (internal) and
macro (external) environment. According to Baumgartner (2014), strategic management
comprises of two key elements- strategy and management. The term strategy can be defined
as the plan, which is designed by the organisational managers for setting general directions
and taking proper actions for achieving the required outcomes in the near future. It entails all
the key aspects of a company for integrating the actions, policies and goals of organisations
into a cohesive whole. On the other hand, management can be defined as the coordination
and organisation of different resources and activities for achieving the organisational
objectives. This combination of strategy and management is directed by the top management
for determining the primary goals of the company and the other strategic directions for
attaining better alignment of all these goals. Parakhina et al. (2017) in this regard have
claimed that “strategic change is the pro-active management of change in an organisation to
achieve clearly identified strategic objectives”. Environment is a dynamic external system,
which comprises of both the internal and external factors, which ensure the overall
functioning and success of a business (Vernal et al. 2014)). This paper shall elaborate on
presenting a critical examination of the effect of internal and external environment on the
strategic process, while reviewing the result of a change in the internal or external
environment that affect a real organisation.
Critical Assessment of the process used by organisations for determining their
strategy
As per David and David (2020), “the formulation of strategy can develop competitive
advantage only to the extent that the process can give meaning to workers in the trenches”. It
is the action that managers take for attaining the organisational goals. On the other hand,
Lynch in this regard has defined strategy as the match among the internal capabilities and the
external capabilities of an organisation. A strategic plan comprises of certain components

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including vision, mission, core competencies, values and the strategic objectives. However, it
is to mention that organisations make use of different processes for determining their
strategy.
According to Lynch (2005), there are mainly two processes that organisations use for
determining their strategy and managing it and they are- 1) prescriptive strategic process
and 2) emergent strategic process. On the other hand, David had formulated a strategy
framework known as “Strategy-Formulation Framework” that helps the strategists in
generating feasible alternatives while evaluating the alternatives and choosing the action
(Ma’ruf 2007).
“Prescriptive strategic process or strategy is the one whose objective is defined in
progress and whose main elements have been developed before the strategy commences”
(Slack and Brandon-Jones 2018). This process gets started with a brief analysis of the
external environment and the company resources. The next step in this process is the
development of objectives followed by the generation of strategic options for attaining the
objectives. From the generated objectives, one or two are chosen and then implemented. This
step by step strategy is known as “prescriptive strategy process” (Timbomei and Bett 2019).
A good example of a company to consider in this case is Motorola. Motorola has met all the
organisational needs of the emerging countries by means of using its key technological
strengths in terms of electronic components for progressing its business from supplying car
radios and televisions to other telecommunications services. However, critics of this strategy
have opined that there are some major difference in between the realized and designed
strategy and that the strategy is excessive prescriptive as business environment in the
contemporary is changing and can be very complex and disordered at times. There are many
theories that would explain about the elements of strategy process within the prescriptive strategy
and they include- the resource based theory, the game theory and the competition based theory.

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On the other hand, the emergent strategic process is quite experimental in nature and
it has many possible outcomes that are basically based on how the matters extend. According
to Agburu, Anza and Lyortsuun (2017), this strategy is the strategy “whose final objective is
undecided and whose elements are developed during the course of its life, as the strategy
proceeds”. It is to mention that the initial stages of emergent strategic process are similar to the
prescriptive strategy process, i.e. the environmental analysis and then resources. Later, they are
followed by purpose and finally, strategy development and implementation. The process is more
round and experimental in nature (Kleibrink, Gianelle and Doussineau 2015). There are many
theories that explain about the elements of strategy process within the emergent strategy and they
include- survival based theory, the innovation and learning based theory etc. However, the critics
of this process have claimed that there is a risk of “strategic drift” in the process as the objectives
are not clear. Also, the control of management is not clear because the actions that are to be taken
are not planned in advance. Kopmann et al. (2017) too in this context have claimed that using this
process makes it more tough to analyse the performance as the targets are less well-defined.
Through the strategy formulation framework, David has identified that the process
comprises of three stages- 1) the input stage, 2) the matching stage and 3) the decision stage
(Arlym and Hermon 2019). The input stage summarises the key input information that is
required for formulating the strategies and that include the Internal Factor Evaluation (IFE)
matrix, the External Factor Evaluation (EFE) matrix and the Competitive Profile Matrix
(CPM). The second stage is focused on the generation of feasible strategies by means of
aligning the important internal and external factors (Arlym and Hermon 2019). It comprises
of techniques like SWOT matrix, BCG Matrix, SPACE Matrix, Grand Strategy Matrix, and
Internal-External (IE Matrix). The last stage is the decision stage that comprises of a single
technique only- the QSPM (Quantitative strategic Planning Matrix) that uses the input details
from the first stage for objectively evaluating the feasible alternatives that are identified in the

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second stage. However, Manera et al. (2019) have opined that there are four common phases
of strategic planning process and they are- 1) initial assessment, 2) situation analysis, 3)
strategy formulation and 4) strategy implementation.
Critical evaluation of the impact of internal and external environmental
variation on the organisational strategy
In order to operate successfully in the business market, organisations need to be well
aware of the internal and external factors that affect the smooth flow of their business
processes. Examining the internal and external factors is required to be ensured before
launching any strategic plan.
The variables of internal environment include the ones that are in the control of
organisations and have both direct and indirect impact on the overall activities and operations
of the companies. These variables include organisational leadership style, employees,
organisational and administrative processes, strategic risks, employee risks, innovation,
financial structure etc. Khan et al. (2019) have opined that employees are the key part of a
firm’s internal environment as they need to be good at their respective jobs, be it coding or
selling or marketing products to customers. However, even if each employee is competent
enough and talented, the internal conflicts and politics can ruin a good and flourishing
company. Again, even in a great economic condition, lack of money could determine whether
or not the company can suffice. When the resources are limited, it can greatly affect the
number of employees a company is planning to hire and the quality of employment that it can
give to its employees. Hence, resources too can influence the strategy planning of
organisations. Furthermore, Kampf et al. (2017) have highlighted the role of organisational
culture, which consists of the priorities, values and attitudes of the company in which its
employees work and the culture can influence the creation of business strategy of an

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organisation. According to Laforet (2015), organisational culture is a driving force behind the
business operation of a firm and therefore, has a direct impact on the development of business
strategy. It dictates the level of risk that a company can take during its R&D, investment in
equipment and client interaction. It can also influence the incentive pay and employee
retention strategy of the company.
The variables of external environment includes the ones that are out of the
organisations’ control but have direct impact on the overall activities and operations of the
company. These variables include the legal, political technological, social and economic
factors and environments. According to Aldmour et al. (2017), the social factors like the
changing customer buying patterns and lifestyles, the population etc. affects the business
strategy as businesses are required to frame their strategy as per their customers’ preferences
in order to ensure long term success. Gender, age etc. determines the customer buying
patterns and therefore, it is also important to understand these changes for developing
strategies that are in lined with the situations of business market (Hacklin, Bjorkdahl and
Wallin 2018). Again, legal factors are the ones like the governmental laws and regulations.
As opined by Campbell and Park (2017), for a success business strategy that impacts
positively on the overall business operation, it is very important that organisations take into
consideration the legal issues that are involved in a specific situation and that they must have
the capacity of anticipating the ways in which the alterations in the governmental laws and
regulations would influence the way in which they should behave. It is to mention that
governmental laws and regulations keep on changing with the passage of time, if not
considered the changed and new law on time, business strategy could end in developing
opposite result. Businesses should therefore be aware of all the legal changes in terms of
environmental legislation, employment law, health and safety, protection legislation etc.

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Furthermore, economic factors are the ones that comprise of the changes in the global
economy. Rise in the standards of living is likely to increase the customer demands for
products and goods, thereby, giving greater opportunities for the businesses in making
profits. For this reason, businesses must consider this factor too while developing their
strategy to help them cope up with the growing demands of the customers in the long-run,
while making profits. With the same, Stroebel and Vavra (2019) have also pointed in his
study that with the rise of economic activity and the rise in demands, the product price will
increase and in case, the demands go down, the product price shall decrease. For this purpose,
business strategies are to be developed while keeping such fluctuations in mind. Similarly,
the technological factors are considered to be great influencers of business strategies. As per
Krotov (2017), these factors provide businesses the opportunity for adopting new inventions
and innovations. Along with the advent of the modern days’ communication technologies, the
technological factors have achieved much impetus in the business domain. High range of
information could be securely shared through databases and in this way, it enables in huge
cost reductions and service improvements. Businesses are therefore, required to take into
consideration the latest technological advancements for their business in order to stay
competitive in the market.
GSK’s strategic plan
Perspective Adopted by GSK
GSK (GlaxoSmithKine) is one of the largest drug firms in the world. It is one among
the top twenty FT Global 500 companies. It develops markets and manufactures vaccines,
pharmaceuticals products and the other health related products and medicines. From the case
study, it is clear that innovation is at the heart of this company and it promotes innovation
through its unique organisational culture. It is to mention that it is a merge of two major

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companies, the Smith Kline and Glax, which took place in the year 2000. Both the
prescriptive and emergent approaches to strategy development were used by the company. As
mentioned earlier, the prescriptive process takes the view that it is important for companies to
make use of their resources effectively and building on their resources’ strengths (Dhir 2019).
GSK’s strategy moulds its resources for providing a more efficient organisation. Its strategy
of getting merged benefitted the company as it resulted in a range of job cuts that ultimately
resulted in an annual savings of more than 750 million dollars (Morrison et al. 2017).
However, it is also to mention that there is not complete agreement among the emergent
strategy adopted and strategists on this matter. They opined that there is no certainty on the
prescriptive view of the capabilities and resources. For instance, the job cuts at the company
resulted in significant amount of worry and uncertainty which ultimately affected the
potential of it carrying out changes within the organisation.
Tools ideas
The 2000 merger had made use of the “sigmond curve”. During the change
management of getting merged, the company focused on innovation and creativity. The
company realised the without these two, it was at high risk from the highly competitive
pharmaceutical industry with a rise in the generic manufacturers (Mak et al. 2015). The
company analysed the external environment in which it was operating during the merger by
means of PESTLE analysis and concluded that the stringent laws, increasing costs and
generic competition along with deceasing innovation are the key reasons for its integration of
change in the research and development process after the merger. It made use of Excellence
Model for measuring its performance and for gauging their performance in the diverse
aspects of its change management. It provided a benchmark for the company against the best
practice within the industry as well as across different industries. It ensured that R&D
department and its people understood the pressure of change why it was necessary. It also

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developed and shared a clear vision behind the change to its employees and put in place
organisational, departmental and individual capabilities for change.
Implications of Change
The change process of the company has a direct impact on its people, leadership,
processes and resources that would also impact on the overall results of the customers. For
this reason, are the key performance indicators (KPI). With the same, the leadership style that
is used in every CEDD as well as the overall leadership style at the time of change has been
under high pressure in order to ensure that it is well-aligned with improving the creativity of
the organisation. The styles of leadership that is required to be change that that of a change
from the task oriented and autocratic style towards the customer oriented and democratic one.
The employee motivation within the company was also very low because of several
changes that took place in a very short period of time. The employees first saw the merger of
Wellcome and Galxo in the year 1995 and then again, in the year 2000, they saw the merger
of Glaxo and Smith Kline. According to Srivastava (2018), there mergers were the
constraining forces in their process of work as they had some budget issues before the
merger, due post-merger and diligence. Also, this motivation level became lower after it was
announced that the system would change to CEDDs.

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