GlaxoSmithKline (GSK) is a prominent pharmaceutical organization that ranks among the top ten globally, but its aging reputation has resulted in a sizable portion of its revenue being allocated towards dividends. This approach has solidified its strategic standing as a company that attracts investors through stock price growth and dividend payouts. Because of its annual revenues of $28 billion, GSK's influence and financial leverage are vast, inspiring a high level of confidence among investors. The pharmaceutical industry entails significant risks and high operating costs, intense competition for intellectual property, and strict government regulations, making it difficult for new firms to enter it. GSK has been able to overcome these obstacles by investing substantial resources in capital, expertise, and know-how. Furthermore, the industry is not typically sensitive to price changes and allows GSK to charge premium prices for its products since most of the company's competitors offer critical drugs that are protected by intellectual property.

2. Stakeholders, Governance, and Ethics

GSK's stakeholders include Emma Walmsley, the CEO, who was appointed to provide expertise to the company's consumer business. She is expected to lead the development and implementation of policies geared towards accomplishing the company's goals. Ms. Walmsley's appointment also seeks to increase the organization's strategic flexibility by altering its payout policy to favor stock price growth over dividends.

Investors constitute the second set of stakeholders. Renowned UK fund manager, Neil Woodford, and many others have invested in the company to help finance its activities. In return, the organization is expected to provide investors with dividends and an increase in their stock's value through comprehensive strategies geared to stakeholders' success.

Patients are also essential stakeholders of GSK as they purchase the company's products and generate significant annual revenues for the organization. As such, the pharmaceutical firm considers the consumer business a core component of its activities.

Finally, the government is a significant stakeholder as it buys most of the products that the pharmaceutical sector produces, making it the most dominant purchasing force in many economies. Governments regulate the industry and enforce rules and regulations that ensure consumer safety, help curb counterfeit products, and monitor pharmaceutical prices.

Ethically, as a generic manufacturer, GSK has lower operating margins than companies that manufacture ethical drugs. Due to this difference, the company relies on efficiency in distribution and manufacturing to remain competitive within the industry. GSK strives to be a critical player in the sector, using similar ethical tactics to those utilized by its rivals. However, the company has suffered financial penalties; for instance, the US government fined it $3 billion for fraud after pleading guilty to promoting two drugs for unapproved use and was fined $500 million in China for ignoring a whistleblower who alleged that bribery was rampant within GSK.

3. History and Culture

The company has traditionally relied on sales and marketing to achieve success. Its global position has become progressively stronger as it invested heavily in sales forces to market and sell its products aggressively, implanting this strategy in its DNA. Like its rivals, GSK focused on aggressive push-marketing techniques in the 1990s, allowing it to enhance its exposure and make itself a recognized name to potential consumers. GSK's culture has evolved into one that is highly efficient and innovative. In 2004, the firm engaged in an exchange of vaccine and oncology portfolios with Novartis to establish deeper expertise in those therapeutic areas.

The organization's current CEO, Walmsley, has reshaped its corporate culture and implemented significant changes to its R&D and executive structure by instituting clear and direct meeting approaches. She also replaced nine of the thirteen managers to support the company's growth and expansion.

4. Business Strategy and Models

Companies in the pharmaceutical industry frequently rely on premium-priced generics while depending on the manufacturer's reputation and reliability. However, this business model may leave the company vulnerable to local generic competitors and may require a rebranding strategy or reference pricing.

GSK has embarked on a pre-competitive approach to address complex medical conditions, allowing for the easier sharing of costs and insights. The company has collaborated with various competitors to increase its knowledge base and establish deeper therapeutic expertise. One example is its exchange of vaccine and oncology portfolios with Novartis.

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SWOT Analysis

Strengths

The organization is widely regarded as one of the world's largest pharmaceutical companies, garnering it substantial annual revenue that enables it to conduct extensive research and development aimed at developing new treatments and collaborating with other large industry competitors. Additionally, it boasts of a loyal customer base, indicative of the diversity in the consumer products it offers.

Weaknesses

Internally, the organization's susceptibility to fraudulent and bribery charges across various countries creates a considerable weakness, which could quickly impact the company's name after a scandal. Such occurrences lead to a reduction in the organization's value and a lack of confidence in its investors, potentially resulting in a loss of business. Moreover, the company is stagnated, focusing mainly on its consumer goods division, raising concerns among investors about its future. Woodford, the most high-profile investor, left the company after the appointment of Walmsley.

Opportunities

The organization has tremendous potential, given its significant resources. The emergence of new diseases underpins the need for continuous innovation in the industry, requiring substantial investment for research and development. This presents an opportunity for the organization to become a global leader through innovation and aggressive marketing.

Threats

In a highly competitive industry, the organization faces a significant challenge, requiring innovation to compete for treatment breakthroughs and to gain intellectual property. Companies fiercely compete for the application's recognition and the years of research invested in it. If a company's application is the first to be recognized, it means other companies' research is less viable, posing a threat to the company.

References

Holland, K.S. (2019). Case Study: The global pharmaceutical industry: harnessing a whirlwind.