Sie sind auf Seite 1von 15

Industry structure analysis

Introduction

In terms of volume, the Indian pharmaceuticals market is the third largest and thirteenth
largest in terms of value, as per (Reference: a report by Equity Master). Indian generic drugs
accounts for 20 per cent of global exports in terms of volume and is the largest provider of
generic drugs globally. Since market is highly fragmented hence consolidation has become an
important characteristic of the Indian pharmaceutical market.
India enjoys an important position in the global pharmaceuticals sector and has a large pool of
scientists and engineers with great potential to steer the industry ahead to an even higher level.
Presently over 80 per cent of the antiretroviral drugs used globally to combat AIDS are supplied
by Indian pharmaceutical firms.

Important Points about this Industry

The Indian pharmaceuticals market increased at a CAGR of 17.46 per cent during 2005-
16 with the market increasing from US$ 6 billion in 2005 to US$ 36.7 billion in 2016
It is expected to expand at a CAGR of 15.92 per cent to US$ 55 billion by 2020 while
global pharma industry is set to grow at an annual rate of 5 per cent between the same
period
By 2020, India is likely to be among the top three pharmaceutical markets by
incremental growth
India is supposed to be sixth largest market globally in absolute size by 2020
Competitive edge of India is that its cost of production is significantly lower than that of
the US and almost half of that of Europe
Indian pharmaceutical sector accounts for about 2.4 per cent of the global
pharmaceutical industry in value terms and 10 per cent in volume terms
With 71 per cent market share, generic drugs form the largest segment of the Indian
pharmaceutical sector.
India is the worlds leader in Drug Master Files (DMFs) applications with the US.

US is the main market for Indian drugs which are exported to more than 200 countries in the
world. To boost drug discovery and strengthen pharmaceutical infrastructure,the Government
of India plans to set up a US$ 640 million venture capital fund. The Pharma Vision 2020 by the
governments Department of Pharmaceuticals aims to make India a major hub for end-to-end
drug disco.
India also leads over China in pharmaceutical exports with a year-on-year growth of 11.44 per
cent to US$ 12.91 billion in FY 2015-16, (Reference: Ministry of Commerce and Industry).
Imports of pharmaceutical products rose marginally by 0.80 per cent year-on-year to US$
1,641.15 million.

Road Ahead

In the near future better growth in domestic sales would depend on the ability of the
pharmaceutical companies to align their products towards chronic therapies for diseases such
as such as cardiovascular, anti-diabetes, anti-depressants and anti-cancers that are on the rise.
Despite the fact that Indian government has taken many steps to reduce costs and bring down
healthcare expenses, more needs to be done at a fast pace. Speedy introduction of generic
drugs into the market has remained in focus and is expected to benefit the Indian
pharmaceutical companies. The thrust on rural health programmes, lifesaving drugs and
preventive vaccines also bodes well for the pharmaceutical companies.

Key Success Factor

Pharmaceutical company needs to understand its dynamic environment and adapt its
commercial model, plans and behaviours to capitalise on these changes. Unique and optimum
stakeholder approach needs to be developed to meet these changes.
Marketing distribution channel plays an important role in determining the success of a
company in this industry.

Critical Success Factors for GSK


Local strategy within global framework

GSK adopts a country-specific strategy with global support.GSK provides full autonomy to local
management in running the business within the guidelines of ethical business and medical
practices.

In-licensing

GSK adopted the in-licensing approach to launch products for augmenting its portfolio and for
countering the competition from local companies that leverage the process patent regime. This
allows GSK to have a product portfolio to counter local competition, while Intellectual Property
Rights of the innovator company are respected.

Power branding strategy


With the intense competition in the market and increasing pricing pressure, GSK is focusing its
efforts on 30 of its most profitable brands that accounted for about half of its sales and profits.
These brands have higher growth opportunity as compared to the rest of the portfolio. This
move resulted in 42 per cent growth in net profit.

Strong doctor franchise

GSK built a strong franchise within the doctor community with its consistent ethical practices
and through commitment in providing world-class medical information. What also benefited
were the significant investments in training and developing its field force.

Efficient supply chain and IT leverage

GSK has been taking several initiatives to enhance efficiency across the supply chain.
Implementation of an e-procurement system was also done. In manufacturing, cost savings
through various initiatives for increasing productivity, reducing inventory, improving the
delivery performance and reducing waste have been carried out. In addition, Lean
Manufacturing and Six Sigma concepts have been imparted in all manufacturing sites. GSK
established a sales and distribution system which has very good width and depth, thus
providing significant reach for its products. GSK has employed IT for its business processes for
improving operational efficiency and decision making. An internet-based Purchase Order
Visibility System, a Sales Force Automation system and a Human Resource Management System
have been implemented recently. In addition GSK has an efficient ERP system as well.

Local management with strong parental support

GSK provides flexibility and freedom within the global ethical and commercial framework to
the local management to adapt to country-specific strategies. This has always provided with a
significant speed in decision-making and responding to the local market dynamics

GSK- Resources & Capabilities


Resource based approach of strategy considers internal resources and capabilities of an
organization as stable basis for strategy formulation rather than industry or market focus
because of high volatility of industry environment. Being a important player in pharmaceutical
industry which is characterized by hyper-competitiveness, GlaxoSmithKline focuses on
resources and capabilities as one of the means to ensure competitive advantage.
Resources

Tangible Resources

These can be classified as financial and physical resources.

PHYSICAL RESOURCES:

The physical resources owned are freehold buildings, leasehold land and buildings, plant &
machinery, equipment & vehicles. A network of 89 manufacturing sites (including 17 vaccines
manufacturing sites), and large R&D centres in the UK,US, Belgium and China. As per GSKs
2015 financial statements it has property, plant and equipment of value 9,668 million.

FINANCIAL RESOURCES:

GSKs financial resources are its cash holdings & cash equivalents, securities and borrowing
capacity. As per GSKs 2015 financial statements it holds total current assets worth 16,587
million. This shows the potential it has to create competitive advantage.

Intangible Resources

The intangible resources which act as a source of competitive advantage include brand of GSK,
goodwill, patents & licences (it includes a large number of acquired licences, patents, know-
how agreements and marketing rights, which are either marketed or in use, or in development
state) and public relations. The brand image that GSK enjoys helps to command premium price
from market.
PARTNERSHIPS:

R&D innovation forms the basis for all the businesses of GSK and for this they have partnered
with more than 1,500 organisations across the globe (academic institutions, pharmaceutical
companies, public-private partnerships and biotechnology companies). In 2015, they have
entered into several agreements Trans-Pacific Trade and Investment Partnership and the EU-
Japan FTA.

ORGANISATION CULTURE: GSKs organisational culture and values are patient focus, integrity,
respect for people and transparency. They encourage employees to work with all integrity and
transparency all the times.

PATENTS & LICENCES:

Patents form the main basis of competitive advantage in a pharmaceutical company. A lot of
investment is required for research and development, to make the return on investment
profitable and recover cost incurred on R&D companies file patents to prevent competitors to
copy the formula developed by them and sell them at cheaper price. In 2015,GSK has profiled
for about 40 new vaccines and potential medicines .Out of which 80% is believed to have
potential of being first-in-class.

BRAND: GSKs Consumer Healthcare business comprises of worlds most well-trusted and loved
brands. Brands are built on the basis of innovation for eg. Panadol, Voltaren, Horlicks and
Sensodyne are some of the well known brands which cater to the worldwide healthcare needs
of the consumers. This is result of successful acquisitions like Sterling
Winthrop, Inc., CNS, Inc., Block Drug Company, Inc. and the Novartis Consumer Healthcare
business in the past. The book values of the major brands under GSK are as shown below-

Total brand equity is of 7.952 billion.

GOODWILL: GSK reported an increase in goodwill in year2015 to 5,162 million from 3,724
million in 2014. The increase was accounted due to acquisition of Novartis Vaccines business
and joint venture creation in Consumer Healthcare.
OTHER INTANGIBLE ASSETS: It includes acquisition of intangibles from third parties and
computer software. The net book value reported for this in 2015 was 16,672 million (as
compared to 2014 8,320 million). The increase in due to acquisition of the Vaccines business
(2,680 million), and the Joint Venture creation of the Consumer Healthcare (6,003 million),
capitalised development costs of 217 million, partly offset by the amortisation and impairment
of existing intangibles.

Human Resources

EMPLOYEES:

GSK has highest employee resources when compared to its competitors. GSK uses motivated,
talented and resilient workforce as strategy to deal with global challenges. They have 101,255
employees in more than 150 markets across the globe. Pharmaceutical business has 60,000 and
Vaccines business have 15000 employees. With the latest acquisition of Novartis, 12000
employees have been added to their workforce.

Capabilities

Functional Capability
Area

Mergers & Acquisitions: GSK has successfully acquired and merged with firms in the past.
Recently acquired Novartis and in the past Sterling Winthrop, Inc., CNS, Inc., Block Drug
Company, Inc. They have the capability to associate with firms of same or different industry
for horizontal and vertical integration.
CORPORATE
FUNCTIONS For eg : GSK has worked with rival market holder Pfizer(Pharmaceutical marketing, 2009)
and it has merged with dermatology specialist Steifel.

Vertical Integration: GSK also vertical integrated with PWC to provide them with human
resources service, pension, tax and training.

INFORMATION Integration of IT with decision making: One of the capabilities of GSK is using IT for its
MANAGEMENT competitive advantage through Management Information system management capacity
which was a result of acquisition through vertical integration with software solutions
organisation like ORBIS.

RESEARCH & Research capability : The most essential and impacted capability that act as source of
DEVELOPMENT sustainable competitive advantage is its ability to conduct research of various drugs in
accord to dynamic market demands. The firm invests a lot of resources into R&D and is
quite successful in achieving results. A key milestone in the year 2015 is the approval tha
they received in the US and Europe of Nucala, the first biologic treatment for severe asthma.
They also got approval for malaria vaccine, the first vaccine against a parasite.
GSK also we profiled about 40 new vaccines and potential medicines.

Operational efficiency : GSK is strategically focused on continuously improving its


operational efficiency and same is evident by their performance in 2015 as shown below:

OPERATIONS

Brand management : GSK has a number of well known brands under its umbrella which it
leverages for its profitability. The brands are known for quality and trust.
MARKETING
Building reputation for quality : Being a major player in pharmaceutical company building
quality products is a necessity to gain customer trust. GSK is committed to achieve this
which can be seen by the fact it was ranked no 1. In customer trust for both GSK Respiratory
and Vaccines in the US.
STRATEGIES CHOSEN BY GSK TO GAIN
COMPETITIVE ADVANTAGE
Helping people do more, feel better, live longer is the vision of GSK, it motivates the
corporation to put a high level of effort in developing innovative medicines and products and
make them available to those who require them.

The concern of the business units level of strategy is focused on tactics to beat the
competition. The strategic issues are less about coordinating operating units, but more about
creating and sustaining a competitive advantage for the goods and services. Following are the
few strategies used by the company:

R&D strategy: GSK has always engaged in huge spending on R&D to develop its own
drug and patent it as a member of proprietary and recently has led immediate rival
Pfizer on a hidden R&D partnership journey. Although their partnership was known to
the public for sales of HIV drugs, but there was a secret behind it.

Sales and marketing strategy: With the help of Vodafone, GSK was able to sell its
Flixonase spray to cure hay fever to its customers through text messages and its sales
team, which made its marketing strategy better than its rivals.

Outsourcing strategy: GSK and Galapagos biotech formed an innovative alliance with
the objective of novel medicine osteoarthritis, which GSK did with the primary purpose
of outsourcing for innovation as the patent ran out.

Expansion strategy: GSK came into partnership with Dr. Reddys, a generic drug maker
in India and also bought 16% of Aspen's stake, a generic drug maker in South Africa. Its
main objective was to have access to emerging market and, sell its drugs at a reduced
rate in Africa, Asia and Latin America.

Currently GSK is aiming at improving its sustainable financial performance, reducing risk and
increasing growth. The strategic priorities include simplifying the operating model, growing the
diversified global business and ensuring the delivery of products of value across the value chain.
GSKs values are embedded with its organizational culture and decision making.

GlaxoSmithKline (GSK) has announced a new restructuring plan to rescale its commercial
operations, global support functions, and important R&D and manufacturing across
pharmaceuticals to deliver marginal cost savings. The plan is in addition to the company's
existing cost-savings initiatives and synergies that will help in deriving from its pending three-
part transaction with Novartis. Under that deal, the companies are combining their consumer
healthcare businesses into a new joint venture company, GSK is divesting its oncology assets to
Novartis, and GSK is acquiring the Novartis' vaccine business (excluding influenza). The
company is also considering an IPO for its stake in the specialist HIV company, Viiv Healthcare.
DCAT Value Chain Insights (VCI) examines GSKs recent performance and focus for the future.

Under the new restructuring program, GSK says it looks to achieve annual cost savings of 1
billion ($1.6 billion) over the succeeding three years, with around 50% delivered in 2016. This
new program is anticipated to result in costs of 1.5 billion ($2.4 billion), predominantly in
cash. Initial savings in 2015 from the program will help set off the earnings impact of declining
sales of its respiratory drug Advair (fluticasone propionate and salmeterol xinafoate).

Possible IPO for Viiv Healthcare

GSK also said it is considering an initial public offering of its minority stake in the specialist HIV
company, ViiV Healthcare. ViiV Healthcare was established in 2009 by GSK and Pfizer with
focus on HIV treatments. Shionogi joined later as a shareholder in October 2012.

In the company's third-quarter release, GSK CEO Andrew Witty said: "We believe now is the
right time to explore the potential for an IPO of a minority shareholding in this business. This
will provide greater visibility of the intrinsic value we see in its currently marketed assets and
future pipeline and also enhance potential future strategic flexibility."

Under the arrangement, the two companies will investigate the potency of combining
dolutegravir and rilpivirine into a single-tablet to expand the treatment options available to
people living with HIV. The Studies included in the new development program are required to
commence by the first quarter of 2015 and will investigate the two-drug combination regimen
as an HIV maintenance therapy for patients already virally suppressed on a three-drug regimen.
The companies will further look into the development of pediatric fixed-dose formulations that
combine dolutegravir and rilpivirine.

Pestle analysis
Political and Legal factors have an immense impact for a pharmaceutical company. It includes
government policies, existing laws and legislations. Public health sector in the UK is highly
affected by political forces. Change of the Government, reform of NHS of government affected
in a huge amount of all the pharmaceutical companies operating in the UK, GSK has no
exclusion. However, the UK government has started supporting UK pharmaceutical industry to
develop. Therefore, UK government support is identified as an opportunity for GSK.

In expanding overseas GSK has followed those countries own medicine and pharmaceutical
related laws. It also watched over other laws like Tax laws, exporting and importing
regulations, employment laws and environmental laws. As GSK is doing business across the
globe in this industry for a long time. Therefore, political and legal elements would not be
threats for GSK. Furthermore the support from UK government will help GSK to expand
worldwide.

Economic factors are always a threat for any global company. For a global company GSK will
face economical threats from all the countries specific economical threats. The economical
factors affecting GSK include the impact of interest rates, the impact of exchange rates and the
impact of the inflation rate. GSK also can be affected by the GDP and purchasing power parity
of that country. GSK will take economical advantage of the emerging and evolving markets. On
the other hand, the strong position of the US dollar against UK pound sterling causes threat for
GSK as because of exchange rate risk in US market including other developed countries like
Canada and Australia.

Socio-Cultural factors include human behavior, management style, culture,etc. As GSK is a


global company for a long time, including developed and developing country, it has no such
threat of this type. As GSK strategically adopted with these factors long time ago, globally, thus
they are opportunities for GSK.

Technological Factors include research facilities, availability of IT and technology in the market.
GSK always takes advantage from technological factors as it is enriched with technology and
scientific facility.

Environmental Factors such as Disaster, global warming, carbon footprint, react against
production process supply chain by environmentalist can affect GSK any time. Therefore,
environmental factors are identified as a threat .

The Porters Five Forces Analysis


Threat of New Entrants: The pharmaceutical industry has high entry barriers. As new entrant
need to have huge capital to enter, need to gain patent for its products, need to achieve cost
advantage of economies of scale, regulations of government are quite extreme and R&D cost
regarding new drugs and upgrade of old ones are very high. Thus , in case of GSK, the threat of
new entrants would be low.

Threat of Substitutes: The cost of switching to substitute goods is quite low and there is a huge
amount of the substitute from similar firms. Furthermore, the other substitute can be the
generic drugs and interdependent medicine from other rival even small competitors.
Therefore, threat of substitutes is quite eminent.

Bargaining Power of Buyers: The NHS is the extensive buyer of pharmaceuticals in the UK and it
behaves as a very potent buyer in the pricing decision. In a global market place, most of the
developed countries public health services are controlled by big player buyers like the NHS.
Rather than few developing countries, GSK will face higher bargaining power of buyers across
the globe. Therefore, bargaining power of buyer is high.

Bargaining Power of Suppliers: Majority of the pharmaceutical companies makes their product
in their own production plant. This means that suppliers hardly can alter prices. In the case of
GSK, there is no exclusion. As a consequence, low bargaining power of suppliers.

Industry Rivalry: The reasons behind the high competition in the pharmaceutical industry are
the huge sunk cost, magnitude of transparency and altitude of advert expenses. Strategically
antagonistic competition among the major players was identified. GSK has very strong
competitors such as Pfizer, Novartis, Sonafi-Aventis, Johnson and Johnson, Roche, AstraZeneca.
As a result, industry rivalry is very high.

BCG MATRIX

Star Question mark

High growth and high market share Zantac. Low market share, high growth Horlicks,
Sensodyne, Treximet
Cash cow Dog

Low growth, high market share Piriton, Low growth, low market share Migraine table
Horlicks, Imitrex, Ribena, Aquafresh
As can be understood from the BCG matrix, the star for the organization is Zantac which is a
blockbuster drug for stomach ulcers. In the future this can become a cash cow; once it turns a
solid brand that consumers trust and then ask for by name.

Another of its products that could become a cash cow is Piriton. This is a strong branded
product that has been commercialized successfully. While it is popular, seasonally for hay fever
and is primarily known as a remedy for hay fever, it can also be used for other allergies which
occur year round. Questionable products are those with high growth, low market share, as can
be seen with Horlicks, which is a good seller with a small market share, or Sensodyne, which is
widely known and strongly branded but sales are restricted to areas where people have
particularly sensitive teeth. These products have the potential to become big seller or the
company can diversify into other marketplaces.

The weak product, the dog, is Imitrex, a pill for the treatment of migraines. Its patent expired
and, due to low sales, was no longer produced. Yet the company has diversified and has
combined Imitrex with Naproxen, an anti-inflammatory drug, to produce a single pill named
Treximet.

GlaxoSmithKline Ansoff matrix

At present market penetration is high; with new product development needed all the time.
There are markets, such as the US, in which GlaxoSmithKline is strong and there are other
areas, such as smaller countries, in which growth can be realized.

Market Development: looking at entering a new market, that of growing countries with
cheaper drugs that can save lives.

New Product Development: looking at buying into the biotech business, in order to augment its
product development

Product/Market diversification: diversify in the market of consumer products and medicines;


could look at working with others to create biologic.

According to the Ansoff matrix, GSK considers competitor levels when entering a new market
and new drugs as well as the status of the marketplace. GlaxoSmithKline already has many
branded products across the globe. This has allowed to open doors for the company and within
many countries it has strong brands. As well as this, its medicines are selling really well in the
USA and in the rest of the world, consumer goods are strongly branded.
Because GlaxoSmithKline has recently been criticized for its ethics, it is significant that when the
company enters markets, it ensures that all legalities are adhered to, as further on down the
line it could be required to pay very heavy penalties. More importantly, it could develop a bad
reputation within the marketplace. As reported by Lachapelle (2012), GlaxoSmithKline has
already tried to work together with the company that creates Biotechs, an area that is evolving
rapidly and where there seems to be a great deal of money to be made. Working with this
company would certainly grow GlaxoSmithKline. It would mean diversifying into a raw field that
is slightly outside pharmaceuticals, and requires using new expertise. It is also an area which
cannot be replicated.

Another new market, which GlaxoSmithKline could enter is that of developing countries. The
company has stated on its website that intends producing cheaper life-saving drugs in order to
help people in these nations. This venture would not experience a high growth as it would not
be for profit; however, despite the small growth, this market would enhance the companys
reputation.

Advantage each firm enjoys in the


industry

Merck and Co Inc

Merck has maintained ample amount of cash flows and thus they are able to spend
more on research and development while enhancement of product line takes place
simultaneously.
Merck has the competitive advantage in its employees by providing them complete
autonomy and thus they are willing to innovate, work hard, and enjoy the work.
Merck and Co. believes in operating honestly and with highest degree of ethics and
integrity that most of its competitors lack.
They ensure company complies with all laws and regulations, and these are the steps
that GSK could also employ.
Novartis AG

Novartis focuses its mission on care and cure. They aim to discover, develop and market
innovative products for prevention and curing diseases to ease suffering and enhance
quality of life.
They reward their shareholders for the investment of money and time in their company
They provide cost efficient and qualitative high generics.
They offer innovative prescription medicines and leading over the counter drugs.

Pfizer Inc

They understand and act on the principle that good corporate governance is critical for
organisational success and protection of shareholder value.
It is always the first company to invest more and more in ongoing researches.
It targets market dominance by utilising skimming strategy.
The company believes in diversification of both products and regions.
Acquisitions of other pharmaceutical companies has always been their leading strategy.
Decentralisation and debureaucratization by splitting its drug research benefitted the
firm in focussing at different levels.
GSK could also set principles to govern the operation of its committees.
Sustainablity of the advantage

1. Technological headways in cutting edge respiratory medications will guarantee that GSK
maintains its fortification in asthma and ceaseless pneumonic malady part.

2. Research has been a vital component for GSK's feasible development. GSK need to proceed
with its R&D to build up its own particular medication and patent much of the time to support
in worldwide commercial center. It could incorporate covered up and mystery R&D action, for
example, GSK has a concealed R&D organization with its opponent Pfizer.

3. Focus on advancement has been an incredible move in GSK's approach which has helped it in
solid improvement in field of oncology and move from created markets to developing markets
has demonstrated fundamental in the treatment of uncommon sicknesses.

4. Sustainability regarding different topographical development is guaranteed considering


developing markets and money streams.

5. Cost advantage guarantees maintainable development as GSK has proceeded with its cost
sparing activities

a) Since 2012, organization has distinguished more than 3 billion in potential yearly cost
investment funds.

b) A solid hang on licenses, dissemination arrange, economies of scale and different


operations.

6. It supports its present position in the pharmaceutical business since there are high passage
boundaries for new players considering economies of scale, controls of governments and R&D
costs.