SWOT Analysis of GlaxoSmithKline - Case Study Example

SWOT analysis of GlaxoSmithKline (GSK Company Overview GlaxoSmithKline is one of the major pharmaceutical companies worldwide. The company has been established in the 18th century. In accordance with the corporate website ‘Plough Court pharmacy, the forerunner of Allen and Hanburys Ltd, is established in London by Silvanus Bevan’ (corporate website, [1]). It should be noticed that the company focuses on the research in order to improve its products. Because of the quality and the range of its products, the firm has been recognized as one of the most important ones in the pharmaceutical industry within the international market. In accordance with the firm’s mission as included in the corporate statement: ‘to improve the quality of human life by enabling people to do more, feel better and live longer’ (corporate website, [1]). On the other hand, despite the investment made on the research sector, the firm faces the extremely strong competition of other companies that operate in the same industrial area. The analysis of the firm’s external environment through the presentation of its strengths, weaknesses, opportunities and threats can help in order to formulate a valid forecast for the firm’s prospects in the future. 2. SWOT Analysis of GSK 2.1 Strengths In order to understand the position of GlaxoSmithKline within the pharmaceutical industry worldwide, it would be necessary to examine at a first level the performance of the firm in accordance with the data released through the firm’s financial statements. Generally, it has been supported by Holtz (1998, 199) that ‘over the past two decades society has been increasingly exposed to prescription drug advertisements aimed directly at the consumer; the industrys gradual shift in focus from "physician-directed" to "consumer-directed" advertisements poses a threat to the public health because it may have the effect of misleading consumers by understating a drugs adverse reactions and overstating the benefits’. In accordance with the above, pharmaceutical industry is considered to be a powerful one within the international community. The performance of the firms operating within this industry depends on their strategies, the consumer preferences and the financial strength of the market involved. In highly developed countries pharmaceutical companies are considered to be a significant part of the national economy. Within such a context, GlaxoSmithKline has all requirements and chances in order to expand its position worldwide. It should be noticed that already the firm is a major competitor within the pharmaceutical industry with a workforce that is constituted by approximately 100,000 people in about 117 countries around the world while its production rate reaches the four billion packs of medicines on an annual basis. One of the most important sectors of the firm is the research one; the number of staff in the specific department has been estimated to be approximately 15,000. The efforts made by the firm towards the support of people and environment around the world are important. In fact in 2006 the firm donated a significant number of drugs towards the limitation of lymphatic filariasis (elephantiasis) while approximately 206 million tablets were shipped to developing countries for the same period (within 2006). The extended network of branches and staff internationally, the innovation that characterize the research initiatives and the significant support to the community and the environment are the major strengths of GlaxoSmithKline. The performance of the company the last three years can be also viewed in the Figure 1 below. Figure 1 – GlaxoSmithKline, annual turnover, 2004-2006 (source: corporate website) 2.2 Weaknesses Apart from its strengths as presented above, GlaxoSmithKline has also specific weaknesses. As of all firms operating in the particular industrial area, GlaxoSmithKline should try to develop its strategies in order to meet the requirements of the global market. The firm seems to focus on research however it is necessary to spend a significant amount of money to the marketing sector trying to keep the consumers informed on its products. Towards this direction, it is supported by Aitken et al. (2000, 84) that ‘the real news is that most pharmaceutical companies have had trouble executing their direct to consumer (DTC) strategies, and overall industry results have been mixed at best; consumers are frequently confused; and many of the industrys biggest names are struggling as they try to add an entirely new approach by marketing directly to consumers’. GlaxoSmithKline does not seem prepared to face effectively the strong competition of the market especially in a possible case of severe financial turbulence. The extremely high investment in the research sector should be reviewed in terms of its turnover. 2.3 Opportunities As already explained above, the pharmaceutical industry is a highly competitive one. The chances for high profits within this industry are many. Indeed, the study of White (2006, 175) showed that ‘the pharmaceutical sector, by nature knowledge-based, has been very profitable in the last few years; it regularly forms alliances, partnerships, and joint ventures with kindred industries such as biotechnology, diagnostics, health care, and information services--all knowledge-based, rather than materials-intensive, sectors’. In other words, GlaxoSmithKline has all prospects for a significant growth in the future. 2.4 Threats One of the most severe problems in pharmaceutical sector is the high competition. Moreover, the performance of the firms that currently operate in this industry is very likely to be influenced by the possible entrance of new competitors. Another ‘threat’ for all pharmaceutical companies is the fact that the profits from specific commercial activities in this sector have been reduced. More specifically, profits from prescriptions of drugs have been reduced; on the other hand profits from sales of other consumer-related products have been increased. Regarding this issue it is noticed by Holtz (1998, 2004) that ‘a possible explanation for the change in focus from prescribers to consumers may be due to the advent of managed care organizations’. Under these conditions, GlaxoSmithKline has to enforce its strategies regarding the communication with consumers worldwide trying to promote its activities and avoiding extremely high investment in research. 3. Conclusion The issues presented above prove that GlaxoSmithKline is a firm with a strong presence within the pharmaceutical sector worldwide. However, because the number of competitors in the specific industrial area is high the company should try to improve its overall strategies trying to develop its communication with its customers and reduce the costs that are not quite necessary. The expansion of the business activities worldwide – taking into account the current status of global economy – could continue – however appropriate provisions should be made by the firm in order to meet the demands of the international market. References Aitken, M., Holt, F. (2000). A Prescription for Direct Drug Marketing. The McKinsey Quarterly, 82-92 Holtz, W. (1998). Consumer-Directed Prescription Drug Advertising: Effects on Public Health. Journal of Law and Health, 13(2): 199.-221 White, A. (2006) Why We Need Global Standards for Corporate Disclosure. Law and Contemporary Problems, 69(3): 167-194 Website GlaxoSmithKline, available at http://www.gsk.com/about/company.htm Read More