ANALYSIS ON A FTSE 100 COMPANY

Table of Contents
I. Executive Summary 3
II. Introduction 3
III. SWOT Analysis 3
IV. Porter Analysis 3
V. References 4

Student’s Last Name

3
I. Abstract

Strategic management, an analysis of internal and external factors hat that affect a
company is essential because it improves the position of a c o many in the market. Besides,
strategic management helps companies to determine strategies and regions will best work for
them and those that will not work so that they can make wise decision for the success of the the
company. For this case, Porter’s five forces and SWOT analysis will be used to analyze the
market position of position GlaxoSmithKline (GSK), a company that conducts its business
globally and currently position at number four in FTSE 100 companies. SWOT analysis has been
done to determine in the first part of this report to understand the internal situation of GSK. Also,
Porters five forces have been used in the second part of the report to understand the nature of
competition GSK faces in pharmaceutical industry.

II. Introduction

GlaxoSmithKline (GSK) is ranked fourth in FTSE 100 companies and is one of the top
companies in the pharmaceutical industry worldwide. GSK produces and markets consumer
healthcare and pharmaceutical products in at least 120 countries globally. As an international
company, it is essential to understand the internal and external factors that have kept the image
of the company high. Besides, these factors are essential for the company because it help it
know how efficient its business strategies need to be. Moreover, for the company to make proper
business strategies, it is needed that their stakeholders have a better understanding of internal and
external forces that surrounds the company. As a consequence, the proper understanding of the
strategic management will support the management of the company in proper decision making
(Wetherington 2010).

Student’s Last Name

4
III. SWOT Analysis

SWOT analysis is a frame work that is used to evaluate the position of companies based
on the four factors: strengths, weaknesses, opportunities, and threats.
Strengths
GSK is among the 5 best pharmaceutical companies in the world and is the largest
inventor in research and development in the world. Also, in the united kingdom, it is the funder
of research and development in private sector. In appreciation of its efforts, GSK won the
chemical industry manufacturing and resource efficiency award. Besides, GSK has its focus
centered in exploring new markets and the fact that it is present in more than 120 countries
around the world makes it strong. Finally, it has a large workforce of over 10,000 workers
(Martinez 2008).
Weaknesses
The weaknesses of the company are controversies surrounding issue of drug safety
tarnishes the image of the company and the high rates of expiry of bulk-buster products affect it
(Nadi & Tolba 2015).
Opportunities
The opportunities that are presented to GSK include:

1. The increasing awareness of the needs of healthcare.
2. The surge in demand for high quality healthcare services
3. Mergers and acquisitions enhance its global penetration, and
4. The strategic agreements that it has get into with other pharmaceutical companies
   boost its research (Wetherington 2010).

Threats

Student’s Last Name

5

The threats that GSK if facing are:

1. Slowdown in economic growth in Europe
2. Regulatory environment is becoming more and stringent
3. Risks of new products being unsuccessful (Wetherington 2010).

IV. Porter Analysis

Basing consideration on the pharmaceutical industry, the Porter’s five forces analysis for GSK
company include:
Threat of New Entrants

there is high entry barrier in the pharmaceutical industry because new entrants should
have huge capital, acquire patents for its products, attain cost advantage from the economies of
scale, overcome high cost of new drugs and upgrading of existing drugs, and face strict
government regulations. As a result, the threat for new entrants is low.

Threat of Substitutes

According to Kasapi and Mihiotis (2011), There exists huge amounts of substitutes from
other firms in the industry and low cost of switching to substitute goods. Besides the generic
drugs are among the substitutes, thus the threat of substitutes is high.

Bargaining Power of Buyers

In the united kingdom, NHS is main buyer of pharmaceutical products hence controls the pricing
decision for buyers (Kasapi and Mihiotis 2011). This makes the bargaining power to be high

Student’s Last Name

6

Bargaining Power of Suppliers

Kasapi and Mihiotis (2011) argue that Most of pharmaceutical companies, including
GSK, manufacture their products in their own plants making it hard for suppliers to modify the
prices of raw materials. As a result, the bargaining power for suppliers is low.

Industry Rivalry

High sunk cost, high advert expenses, and the level of transparency are the reasons
behind fierce competition in the industry. The main rivals that GSK has are, Roche, Johnson and
Johnson, Novartis, Sonafi-Aventis, and AstraZeneca (Kasapi and Mihiotis 2011). Therefore, the
rivalry in the industry is very high.

Following the Porter’s five forces analysis, it is evident that GSK operates in an
oligopolistic with stiff competition and controlled by top firms in the industry. Also, GSK faces
high buyers bargaining power and low suppliers’ bargaining power and high threat in substitute
goods.

V. Recommendations

Following the SWOT and Porter’s analysis, for GSK to attain a sustainable competitive
advantage then it should boost its strengths, utilize and exploit its opportunities effectively, and
properly mitigate its weaknesses and threats. As a consequence, these are the recommendations
that GSK needs to put into consideration to increase its market share and remain competitive in
the pharmaceutical industry (Johnson et al. 2014).

Student’s Last Name

7

First, GSK needs to adopt a diversified product strategy as evident in there website
(GlaxoSmithKline n.d). Therefore, for it to remain diversified in its product portfolio and remain
sustainable in this industry with stiff competition, it needs to diversify its products (Department
for Business, Innovation & Skills 2012). Also, GSK should consider expanding over the counter
product portfolio because it is the segment that presents the opportunity to reach its consumers
via marketing and advertising. Besides, GSK should consider extending its growth towards the
generic drug market through partnership with developing markets like South Africa, India, and
Bangladesh (Johnson et al. 2014). Moreover, GSK should keep up with its exceptional marketing
operations as it used it in marketing of Flixonase spray, a cure for fever, via Vodafone.
Furthermore, to gain competitive advantage in the industry, GSK should expand to the
developing and emerging markets by meeting their needs and increasing the supply and
awareness of its services. Finally, GSK should consider ethics in all its operations. This is
because the 300 million pound fine for China’s bribery scandal and paying for three million
dollars fraud settlement in united states in 201 tarnished its image. Therefore, GS should embed
ethical values in its business strategies (Department for Business, Innovation & Skills 2012).

VI. Conclusion

After the analysis and recommendations, GSK should ensure that it puts all the
recommendations into consideration so that it can gain a competitive advantage in highly
competitive pharmaceutical industry. Moreover, for GSK to regain its lost market share and to
adapt to the dynamic market of pharmaceuticals, it should reformulate its strategies and
implement them immediately.

Student’s Last Name

8
VII. References

Department for Business, Innovation & Skills (2012) Strategy for UK Life Sciences One Year
On. [pdf] London: Department for Business, Innovation and Skills. Available at
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/36684/12-
1346-strategy-for-uk-life-sciences-one-year-on.pdf [Accessed 15 May 2015].

GlaxoSmithKline (2014) Annual Report 2014 [Online] Available at
https://www.gsk.com/media/603031/annual-report-2014.pdf [Accessed 15 May 2015].

GlaxoSmithKline (2015) Regulatory Update on Three-Part Transaction with Novartis. [press
release] 28 January 2015. Available at http://www.gsk.com/en-gb/media/press-
releases/2015/regulatory-update-on-three-part-transaction-with-novartis/ [Accessed 15
May 2015].

GlaxoSmithKline (n.d) About Us. Online at http://www.gsk.com/en-gb/about-us/ [Accessed 3
May 2015]

Johnson, G., Whittington, R., Scholes, K., Angwin, D and Regner, P (2014) Exploring Strategy.
Harlow: Pearson Education Limited.

Kasapi Z. and Mihiotis A (2011) Management as applied to New Products Penetration in the
Competitive Environment of Pharmaceutical Industry. Interdisciplinary Journal of
Research in Business, 1(10):73- 85. Online at
http://www.idjrb.com/articlepdf/idjrb10n1p9.pdf [Accessed 5 May 2015].

Student’s Last Name

9

MARTINEZ, A. (2008). Preclinical efficacy on GSK-3 inhibitors: Towards a future generation
of powerful drugs. Medicinal Research Reviews. 28, 773-796.

NADI, R., & TOLBA, A. (2015). Managing Brand Portfolio in a Crisis.

WETHERINGTON, J. D., PFISTER, M., BANFIELD, C., STONE, J. A., KRISHNA, R.,
ALLERHEILIGEN, S., & GRASELA, D. M. (2010). Model-Based Drug Development:
Strengths, Weaknesses, Opportunities, and Threats for Broad Application of
Pharmacometrics in Drug Development. The Journal of Clinical Pharmacology. 50, 31S-
46S.