Glaxo Smith Kline's Business Strategy Case Study

Glaxo Smith Kline's Business Strategy - Case Study Example 2004, p. 10). Two of the four elements of a strategy, internal competencies and shortcomings are within the organization and can be controlled by it, if properly appraised. The other two, changes in the environment and intelligent moves by competitors are external forces, and require adoption or modification of action sequences and determined policies to achieve organisational goals and fulfilling stakeholder expectations. Glaxo Smith Kline (GSK), one of the largest companies operating in the "technically innovative" and highly competitive "global market" pharmaceutical industry. (Lynch 2006, p. 191). In the pharmaceutical industry, obsolescence is a constant challenge and companies are required to constantly replenish old drugs, which means that the research and development 'pipeline' should be kept flowing. The development of a single new drug is estimated to cost up to $ 500 million and takes several years. However once developed a new drug has patent protection which means the company that developed the drug can have exclusive marketing rights for a period of (generally) ten years from the time the patent is registered. The drugs are marketed to customers - as doctors, hospitals and government health agencies through large sales forces. Companies employ several thousand specialist sales personnel in North America alone. All these operations require large financial outlays. Therefore organisational size does matter as revenue generation normally corresponds to size. According to Michael Porter, five external forces impact businesses. They are industry competitors, potential new entrants, substitutes, suppliers and buyers. (Porter 2004, p. 4) He offers three generic strategies to meet the challenges of these forces: cost leadership, differentiation and focus (Porter 2004, p. 35). While questioning some of the premises on which Porter based his theory, in a provocatively titled box, "Bye, Mr. Porter", (Whittington 2001, p. 67), Whittington proposes three strategies for companies to achieve growth: they are innovation, diversification and internationalisation. (Whittington 2001, p. 73). As we have seen innovation is an intrinsic factor that is necessary for survival in the pharmaceutical industry, diversification implies diversification, integration and takeovers. During the nineties many pharmaceutical companies have taken the 'mergers and acquisitions' route to augment their c ompetitiveness and enhance financial outcomes such as revenue generation and profitability by: Increasing and consolidating organizational size for Achieving economies of scale and reducing costs Complementing/extending ranges of products and services Replenishing