CASE STUDY 4.

RESOURCE STRATEGY AT GSK: ORGANISING CAPABILITIES FOR INNOVATION

AND NEW BUSINESS

Q1. What are the key factors of success in the market and what are the implications of your
answer for large and generic drug manufactures?

The key factors of success in the pharmaceutical market are:

 Sufficient capital assembling and medication improvement expertise can assist this
with promoting to blossom
 The rule of the business perhaps valuable for knowing the probabilities at each
phase of the improvement of the medication.
 Permitting and obtainment capacities of the organization should be the most
incredible in market.
 The capacity to acquire all the free income is the principal part of manageability.
 Every one of the patients and doctors require the best medicines and thus there is a
developing rivalry which empowers organizations in this industry to perform better.
 Solid assembling and R&D abilities is an absolute necessity.

GSK’s elements of success:

 As the article suggests apart from being dominant in the pharmaceutical market,
20% of their profits are generated from three main products such as:
1. Nutritional Healthcare which comprises of malt drinks such as Horlicks,
Rebana
2. Oral healthcare which comprises of Aquafresh, Sensodyne and Poligrip
denture adhesive.
3. OTC medicines Over the counter medicines with Panadol pain reliver.
 Innovation is key to GSK but this strategy has to brough about constructively.
 More over the company did not rely on patents and was more concerned about the
greater good of the people which has helped the company to sustain itself.
 The customers are loyal to GSK as the products are trustworthy.
  The company had delegated its Research and Development to smaller groups which
took decisions in six months which would otherwise take a few years.

IMPLICATIONS FOR LARGE AND GENERIC DRUG MANUFACTURERS

A few implications are:

 Cost saving should be of primary focus so as to lower cost savings this can by done
by merging sales forces, lowering R&D expenditures by focusing on important
aspects of research only.
 The R&D should be done in a faster manner. The process is time consuming because
everybody doing R&D is focusing on research and development, instead smaller
groups must be formed in order to get prompt results.
 There must be innovation that is faster every decade in order to ensure success of
the industry.
 The company’s competitive advantage must be identified and must be constantly
improved to find success.
 The company must also have strong strategy dealing with sustainability issues.

Q2. What were the competitive advantages of GSK? Were they sustainable?

Competitive advantage is the favorable position an organization seeks in order to be more

profitable than its rivals. For example, if a company advertises a product for a price that's
lower than a similar product from a competitor, that company is likely to have a competitive
advantage.

SUSTAINABLE COMPETITIVE ADVANTAGE (SCA)

A competitive advantage is sustainable only when a firm possesses value-creating processes

and positions that cannot be easily duplicated or imitated by other firms leading to the
production of above normal rents.

SCA is a different competitive advantage (CA), because it provides a long — term advantage
that is not easily replicated. If other companies can easily imitate a firm’s source of
competitive advantage, then any edge the firm gains is short-lived. But if the advantage is
difficult to understand or imitate, the firm can sustain it over time.

COMPETITIVE ADVANTAGE OF GSK

A) RESOURCES

The resources can be classified into tangible, intangible and human resources.

i) Tangible:
 This can be diversified into financial and physical tangible resources.
 The financial resources are cash, securities and borrowing capacity (Hittet al, 2009).
Financial resources and physical assets are identified and valued in the firm's
financial statements. Database (ORBIS, 2009) reports GSK's balance sheet tangible
asset value to be $14,108,592.
 The physical assets include labs owned and leased, land space for offices,
manufacturing plant, medical equipment, non-medical equipment. However, the
primary objective of resource analysis is not to value a company's assets, but to
understand their potential for creating competitive advantage. Hence therefore
GSK's tangible resources are threshold resources.
ii) Intangible:
o Intangible are considered more vulnerable than tangible resources which makes
these kinds of resources equally important.
o This is because the company introduces its premium price with the confidence to the
brand image it has.
o And the people who have no idea about the same product from an unknown
company prefer the branded product at the premium price. The intangible resources
of GSK are generally the brand image, Government support to protect the patent,
good will of the company, public relation.
iii) Human Resources

The human capital of GSK measures to be the highest among all other competitors like
Pfizer, Roche and Johnson and Johnson. There are 101,133 employees working as a part
of GSK worldwide in various departments of research, development, and production.
B) CAPABILITY

According to (Prahalad & Hamel, 1990) Core competences are those that contribute to
customer value, and to enter new market, The key capability factors are:

1. Ability to merge and acquire: GSK has the capability to merge and acquire same or
different industry for lateral and vertical integration. The company has the ability to
work along with rival markets.
2. ‘MIS: managing information system is one of the functional capabilities obtained
through vertical integration with software solutions organization like ORBIS. GSK
chose to use a Lean Sigma approach to analyze the issues and develop a long-term
solution that supports the needs of a global company of their size (Orbis, 2008).
3. Vertical Integration: GSK advisor uses the services of PricewaterhouseCoopers
(Pricewaterhousecoopers, (2009), which provides Human Resource Services to
manage compensation, pensions, share schemes and wider reward, technology,
training and tax.
4. Research and development: as a part of organizational capability GSK possess the
ability to make research various drugs according to changing market demand (Glaxo
SmithKline, 2009). GSK has the ability to integrate the functional capabilities to form
the value chain.

Q3. What lessons, if any, on the development of sustainable competitive advantage can be
drawn from the case for other companies outside pharmaceuticals?

Other companies should have their objectives set on understanding how well they can
create competitive advantage, and should look less on the assets which the company has. It
is very important to have support from the Government so that it would be protected. Every
company should have good public relations and create a high brand image. Companies
should keep their research and development team very active and come up with new and
better ideas all the time, so that their rivals would not take over them.
Without developing new ideas and techniques, company will not have a good competitive
advantage. They should select and use the best strategy that applies to their organization to
boost itself in the market. The company should find out more about the rivals in the market
and be able to work along.

GSK RIVALS AND THEIR STRATEGIES

1. Merck & Co. Inc.

According to Merck & Co. Inc, they believe in operating openly, honestly and with the
highest degree of ethics and integrity. They make sure the company complies with all laws
and regulations, and this is what GSK should do as well.

2. Pfizer Inc.

According to Pfizer Inc, they understand and act on the fundamental principle that good
corporate governance is critical to organizational success and the protection of shareholder
value. GSK could also set principles to govern the operation of its committees.