Case of GLAXOSMITHKLINE
Since the creation of medicine many years ago, the health sector has known evolutions. First it was something unknown and based on false ideas, with the time, it became a science and today, it is one of the biggest sectors in the world. Pharmaceutical industry is part of it.
Nowadays, the appearance of new virus like theflu H1N1, is the opportunity for Pharmaceuticals companies to develop themselves. In fact, this sector, as all health’s sector, is in constant evolution. Big firms are managing this industry; GlaxoSmithKline is one of them. This very competitive environment, frame by legal restrictions, need to be well plan. Strategy is very important for all competitors.
First we will present the companyGlaxoSmithKline, then we will analyze the sector’s environment and, to finish, we will present the company’s strategy.
PRESENTATION OF THE COMPANY
a) Facts and figures
GlaxoSmithKline is the second largest drug manufacturer in the world and the largest in Europe, in term of revenue. In 2000, its turnover was 18.08 billion GBP; in 2008, it was 24.35 billion GBP with a net profit of 4.7 billionGBP. In 2009, they presented sales revenue of 28.4 billion GBP with a net profit of 5.7 billion GBP. The company employs over 101 000 persons in 117 different countries. Its Headquarter is in England. The following chart shows the repartition of its revenue by region:
b) Company’s activities
GlaxoSmithKline production is divided into five main categories: cosmetics and toiletries, hotdrinks, OTC healthcare, packaged food and soft drinks. This following rating shows, in terms of retail value, which category represents the biggest market share (in the world):
1. OTC healthcare = 3.42%
2. Cosmetics and toiletries = 1.03%
3. Hot drinks = 0.55%
4. Soft drinks = 0.46%
5. Packaged goods = 0.13% (only for Asia Pacific)
GlaxoSmithKline activities can also beendivided in three parts: Pharmaceutical, vaccines and consumer Health care. Pharmaceutical products represent the major part of GSK revenue (83%) and it’s includes all the medical prescription. The two mains ones are:
-Seretide/Advair (5 billion GBP), created to treat, essentially, asthma
-Avandia (771 million GBP), made to treat diabetes
Vaccines represent usually a little part of the revenue, butin 2009, with the H1N1, sales increased.
PRESENTATION OF THE SECTOR
Pharmaceutical industry represents, for the 65 largest companies, nearly 400 billion GBP and it’s increasing every year. This huge amount is due to the fact that it concerns the worldwide population. Those companies have to invest lot of money in order to research, develop, patent and commercialize each innovation. Theaverage cost of developing a new drug is nearly 525 million GBP and it takes 10 to 15 years between the beginning of the research to the commercialize process. After this period, sales can be very lucrative because of the huge number of clients.
The sector of pharmaceutical health care is very competitive. Some big firms share this market and try to dominate it. There are fourmains competitors (expressed with their turnover in 2008):
-Sanofi-Aventis: 23.84 billion GBP
-Novartis: 27.19 billion GBP
-Pfizer: 31.67 billion GBP
-Merck: 15.64 billion GBP
Those companies, as GSK, develop their own patents and produce their own drugs. Competition occurs when they develop treatments against the same disease. That’s why, comparing two companies in the drug sector is not reallyrelevant. In fact, a treatment against asthma will have no impact on a treatment against diabetes.
b) Legal environment
Because of its main goal, prevent population from diseases, the pharmaceutical sector is frame by strict rules. Future new medicines undergo many tests directed by governmental agencies. The average period between the beginning of the research and the commercialization...