Applied Corporate Strategy Assessment: Strategic Analysis Report

MAIN BODY

1. External analysis

PESTLE analysis-

PESTLE is termed out as framework of the macro environmental components that mainly used in terms to undertake environmental scanning of strategic management. Therefore, these are outlined as-:

Political- From the past few years, the pharmaceutical firms are facing tough political scrutiny at global level. Additionally, there is growing political intervenes that has created pressure on healthcare authorities. There are some of countries that has particular framework on pharmaceutical industry. There are number of laws in regards to safety, standards, certification and drugs utilisation (Derzon, Clarke and Thurer, 2019). Additionally, there are populist demand of cheaper drugs for lower classes of society. Due to this, many pharma enterprises are facing major losses and it results into further fall in price.

Economic- The crisis relates with economical traumas are over but its effects can still be felt. There are some of the countries in which the issues in relation to economic situation has not been recovered yet. Such situation leading towards to loss to pharma industries. Additionally, reduction in disposal income of consumers has wide impact on countries that undertakes the use of different models of health insurance. However, pressure of economic are seeing as increased growth within strategic buying groups that are leading down the price.

Social- The increasing ageing population provides the wide range of opportunities and also contribute as threats to pharmaceutical industry (Liang, Lin and Gao, 2019). In the current era, the people of old generation is continually enhancing and number of sick people is higher than ever. Thus, this factor presents the both opportunities and threats to pharma companies. Additionally, public are more aware than ever before and demands and expectation also have changed simultaneously and this led to put additional pressure on firms. Social media and varied other channels made the public active. This led to pharma sector come under pressure over how they get closer to consumer and maintain profitable growth rates.

Technological- The advancement in techniques aid to creates new business opportunities. This also affects the pharmaceutical company in huge context. This has brought several opportunities. Rise of the social networking has given rise to varied new profitable opportunities to enterprise. In the current era, social media plays the vital role in healthcare sector (Nazri and Sani, 2019 ). This aids to connect with customers. It also provides pharma sector an opportunity to connect with wide range of customers and advertise the commodities direct to customers. Henceforth, the increase of IT brought wide range of opportunities in which cost are also minimum for drug makers.

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Environmental- The environmental risk connected with pharmaceutical firms. Henceforth, some of the Pharma companies that can pollute the environment. Manufacturing of the drugs leaves large carbon footprint. To have long term sustainability of pharma industry, environment laws must have followed. Thus, proper storage and disposal is crucial to prevent negative impact on environment.

Legal- The pressure of legal authorities is one of the major concern for pharmaceutical sector. Therefore, there are different countries that has varied laws and legislation and this puts the negative impact on working of industry (A PESTEL/PESTLE Analysis of Pharmaceutical Industry, 2018). Pharmaceutical Laws are created mainly to undertake creation, sale, distribution, and use of pharmaceutical drugs. These laws inclusive of intellectual property rights to protect drug manufacturers' research, safety standards to protect the public from harmful side effects, restrictions on marketing drugs to the public, and rules regarding how drugs may be prescribed and distributed.

 Poter's five forces analysis- This is defined as strategic management tool that aids to analyse the working of industry. Thus, components of this entities are outlined as below contexted manner as are-

Competitive rivalries- The pharmaceutical sector is one the most competitive industries within the world. In this, profit margins are high and also inclusive of the small large players that has strict government regulation (Robinson, Brown and Bambra, 2019). It leads to make the industry very competitive. Thus, recent trends of the merger and acquisition has observed the smaller players within the industry. In addition to this, technical advancement in biotech and generic have further enhanced the competition and this lead to adopt the new techniques. Due to it, there is constant pressure to undertake the process of innovation. Additionally, some of major rivalries are as sanofi, Merck and AstraZeneca etc. So, it can be stated that competitive rivalries within this industry is quite high.

Threat of new entrants- There are number of new entrants and they come up in market with undertaking innovation and new ways of doing things. Due to this, firm adopts the lower pricing strategy, reducing the cost and also offers new value proposition to the customers. Additionally, existing players under this industry led to developed economies of scale and also enhance the profits. Thus, customer only prefers those brand they have already tried. In this, new entrant will have tough time to grabbing market share. If an entity wants to launch the business activities in pharma line they needs to undergo lengthy process of approval from regulatory authorities. So, it can be stated that threat of new entrant in pharma sector is low.

Bargaining power of supplier- There are most of the firms in the Drug manufactures who buy their raw material from the varied number of suppliers in market. This sector only needs raw materials and these are produced in the house. Another need is technical advancement for undertaking process of manufacturing and production plants. Also, the their components the supplier needs is packaging materials. So, there are number of provider who can supply these commodities, so, there is no need to negotiate in terms to influence the price of market price. Hence, some of the supplier under this sector as are Wako chemicals, Nexeo solutions and BASF corporation etc. So, this can be stated that suppliers in the pharma sector has very low bargaining power.

Bargaining power of buyers- The consumers within this industry are demanding a lot. They needs to buy the commodities that are avail at the best offering by paying the minimum price as possible. Additionally, the consumers as hospitals, clinics have some bargaining power but individual buyer has no bargaining. Thus, internet aids to buyer to do more research on drugs in addition to prescription recommended by doctor. This gives them more bargaining power. So, this can be stated that bargaining power of the consumers is moderate.

Threat of substitute- At the time when new product and services meet with the similar requirements of customers in varied ways then profitability of the industry suffers. If one particular drug is in the period of patent then there is no patent for that specific drug. At the time when patent period expires then its generic production starts to begin. This leads to develop the number of substitute in the market (Zheng and Peng, 2019). Additionally, homeopathic and herbal treatments are substitute for drugs made by pharma sector. Thus, undertaking the promotion of balanced diet, exercise and other physical activities are substitute to many drugs. So, it can be stated that threat of substitute within this sector is low to medium.

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2. Internal analysis

Internal analyses is used to determine the internal position of company, it helps in taking right action for the welfare of organization. GSK is the leading firm that is planning to make joint venture with Pfizer.

Resources

Company will have several resources and each resource will have its own strength and limitations. Description of these resources are explained as below:

• Human resource: this would be strength of GSK, as employees are both companies will work together that would help in generating more sales. New ideas will be promoted that would bring innovation in organization. Employees are shareholder of company and by making joint venture GSK will earn more profit and it will be beneficial for human resource as they will get dividend from the firm. Company has loyal employees those who like to retain in firm after this venture as well (Nandonde 2019). As they find it better firm from the career perspective hence they put best efforts to satisfy consumers so that organization grow well and they get more opportunity to develop in business unit.
• Financial resource: This is another resource of firm that plays significant role in success of business unit, GSK is the leading firm and it has adequate funds to make joint venture with Pfizer. As company is expecting to generate cost saving of 0.5 till the end of 2022 after this venture. By implementing this strategy entity will raise its profit by 20% around. As Pfizer has strong position in market and its share position is very high in some of the geographical locations. As per the records of 2017 GSK total profit before tax was 884 million and its operating profit was 7110 million. Hence it has adequate amount of funds availability that make it its unique point.
• Physical resource: It has limited physical resources as, machines and other equipment of business are limited hence it is weakness of company. It has limited land area and IT equipment’s are also limited.
• Intangible resource: Brand image of GSK and Pfizer are good which create positive image of firm in the mind of consumers. Patent of firm is its unique point and it has strong good will in market This is strength of organization.
• Tangible resource: GSK has good investments in market that gives strong return over it, it has adequate cash availability that help organization in managing operations well.

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Competences

VRIO analyses is the tool that is used by companies to analyses its internal position, by using this model firm can get to know it capabilities that may help in taking right action to gain success with this joint venture.

One capability of GSK is high rating of customers. As consumers are very satisfied with the products and services of GSK, they want to experience its services in near future also. This capability of firm help it in gaining competitive advantage in market. On the other hand, the another capability of GSK is Better healthcare commodities as the customer prefer this brand as this provide high quality attributes to customers. Also, this offers at the lower price rates this enhance the profitability of the industry in huge context. Thus, GSK has high brand awareness and this has high competency rate as per the organisation. Therefore, organisational workers undertake the effective research and development process to carter need of public and to provide that healthcare commodities that do not have huge amount of drug substances that can affects the health of an individuals. In addition to this, this entity has undertaken various steps that aids to enhance market reputation. This allows the to resulting firms to be established with appropriate capital structure in terms to undertake better future investment needs and capital allocation prioritise. With help of providing better product to the customer with high quality services aids to enhance and develop market reputation of GSK. However, leader working has moderate competency rate. The leaders of the enterprise are not taking better steps to maintain the effective supplier range and this highly impacts the operational working of enterprise.

TWOS MATRIX

This is defined as analysis that aids to undertake the internal and external analysis of the working industry. Therefore, this is outlined as below contexted manner as-:

3. Strategy evaluation

Strategic evaluation termed out as process that aids to determine the effectiveness of plan of action in order to accomplish the organisational objectives and also allows to take the corrective actions when its required (Erbas, 2019). In order to have joint venture of GSK with Pfizer the entity is undertaking the marketing expansion to enhance the market share of the enterprise. Therefore, it is very crucial to evaluate and control the business strategy that is needed to be developed and this also assist to accomplish the goals and objectives within specific time period. However, startegy can be evaluated with help of using the particular method that defined in below contexted manner as-:

STRIP7

Suitability- This is defined as plan of action that needs to be suitable enough to assist GSK to attain its goals and to have successful merger with Pfizer. To have the suitability, the threat and opportunities must be considered. Therefore, one of the major threat to the this enterprise is firm is under the pressure to reduce the price as they have few machineries and equipments. However, threat has been found out that Bio-Tech expansion will remove pharmaceutical firm process in the future and opportunities is as to increase market share with bringing product development. GSK is already has strong brand image and this will be easy for them to execute the plan of action to undertake the market development. This can assist the firm to increase their presence at the global level.

Adaptability- This is defined as plan of action that must be accepted by each person in the enterprise. Thus, quoted firm must take the initiatives that can aids to convince the stakeholder that formulation of strategy is accepted. Without the acceptance of stakeholder strategies the things cannot be implemented successfully (Kontu, Kantola and Kontu, 2019). In addition to this, stakeholder can gives suggestion that how the things are needed to be accomplished. They can execute the plan of action with help of communicating with suppliers, consumers etc. However, expansion of the market is the best strategy that can be developed to have the successful implementation. This is also a less risk tool. Thus, the one of the strength of GSK is that this entity has effective brand awareness and great market reputation. It is factor that can aids to attract the individuals from the different market. In addition to this, the acceptance from the stakeholders can be gained with help of showing varied benefits to the plan of action. This can help in expanding the profitability of the enterprise. With this kind of the strategy the market value of the GSK can be enhanced.

Feasibility- This is the stage that allows to implement the plan of action with use of adequate resources available. In order to implement the plan of action successfully, the firm need to hire the skilled labour workforce who can able to undertake the better use of raw materials to produce drugs and medicine with help of better technological equipment. Henceforth, the resources are inclusive as financial, human, machineries, capital etc. GSK must have skilled labour workforce and huge fund to undertake the better investment. In addition to this, it can be stated that this plan of action will enable the organisation to enhance their customer base. Thus, enhancement in sales will give rise in high amount of profitability and market share.

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CONCLUSION

Hereby, this can be summarized that strategy analysis is crucial to undertake changes within the enterprise. Formulation of better plan of action derives the large amount of profitability. Thus, report has based on the working of GSK, it is pharmaceutical firm that is looking forward to have joint venture with Pfizer.

Furthermore, external analysis has been conducted with application of PESTLE and Porter's five force to evaluate the opportunities and threats. Also, external analysis has been collected with use of VRIO to analyse the resources and competences of the enterprise to have successful merger. Lastly, strategy evaluation has been conducted with use of SAFe to implement the plan of action successfully.

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