GSK Economics Essay - 942 Words

EC229 Economics of Strategy Introduction 1. GlaxoSmithKline (GSK) is a global healthcare company specialized in the research, development, manufacturing and marketing of pharmaceutical and consumer health-related products. The company has operations in 120 countries, with products being sold in over 150 countries. (Description) 2. As a dominant player in the pharmaceutical industry, GSK operates in an oligopolistic market. It is highly cash generative, with increased sales growth and shareholder returns. (Oligopoly) 3. Its main competitor is American pharmaceutical giant, Pfizer. Financially, GSK is not the best performer (with $108 bn compared to Pfizer’s $161 bn), but it manages to differentiate itself, which is the key to†¦show more content†¦This is critical to differentiating its products and maintaining growth. a. Its 5-year partnership with McLaren is one of the more notable marketing strategies. 4 b. Divestment has also helped GSK raise profits in 2012, as it refocuses on its core brands. The graph shows the impact of advertising on profits. 3. (Collusion) The ViiV healthcare, a collusion between GSK and Pfizer, helps both companies reduce costs in the race in HIV RD, one of the most expensive public health programmes. In an oligopoly, the explicit collusion of two firms will pay because it enables the players to jointly charges monopolist prices and earn monopolist profits. However, it is for the same reason that there is an incentive to cheat. 5 4. (RD) Ultimately, if oligopolists want to achieve and enhance supernormal profits, they need to erect barriers to entry to protect their competitive advantage. This is why the ultimate strategy lies within RD. It ensures that GSK remains a sustainable business. a. Over the past 4 years, GSK has had 16 new drugs and vaccines approved in the USA, more than any of its competitors. It has also sustained late-stage pipeline of around 30 assets. b. RD is a long run investment that allows GSK to enjoy reduced MC, which further extends its profits. Nonetheless, it is essential that it protects these assets through patents, in order to achieve monopoly powers over these assets. 6 5.Show MoreRelatedFinancial Position Of Hikma Pharmaceutical Plc And Glaxosmithkline Plc3479 Words   |  14 Pagesperformance of both firms. The report will then provide a financial ratio analysis of both firms in order to determine with certainty the best firm for investments The economic pressures including global crisis, price rise and increased rate of inflation and the general instability in the Eurozone affect both firms. The social, political and economic factors have a direct impact on the operating activities of both firms as well as their long-term growth decision plan. 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