Glaxo Smithkline Assignment

Glaxo Smithkline Assignment Words: 1396

Table of Contents 1. 0 Introduction2 1. 1 Objectives2 1. 2 Overview of the Organization2 2. 0 Market Share and Competition in the industry3 2. 1 Market Share3 2. 2 Portfolio4 2. 3 Competition5 3. 0 Industry Market Structure7 4. 0 Conclusion8 5. 0 References9 1. 0 Introduction 1. 1 Objectives This assignment was prepared to understand and present an overview of GlaxoSmithKline (GSK), in the pharmaceutical industry and its competition against its distributors in Sri Lanka and also its market structure in view of its market structure at present in the industry. 1. 2 Overview of the Organization

GlaxoSmithKline, with operations worldwide is an acclaimed universal healthcare group engaged in the creation, discovery, development, manufacture and marketing of pharmaceutical and consumer health-related products. With an estimated world market share of 8. 15% GSK is ranked as one of the top five pharmaceutical companies in the global marketplace. Glaxo Laboratories (Ceylon) Limited founded in 1956, achieved number 01 market position by 1986 among private pharmaceutical companies, currently operates as two separate SBU’s Glaxo Welcome and SmithKline Beecham since the merger of the two companies in 2001.

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Employing around 500 staff GSK is one of the most admired companies in Sri Lanka committed to major scale research and development working towards the betterment of the society. GSK has a challenging and inspiring mission “To be the most admired company in Sri Lanka making available innovative, valuable / accessible solutions in preventing & treating diseases and thereby to make people feel better and live longer” 2. 0 Market Share and Competition in the industry 2. 1 Market Share GSK is the indisputable market leader in the private sector of the pharmaceutical industry with a market share of 7. 3% as per the latest IMS survey in the local market. The following diagram shows the market share available in each sector. Total Pharmaceutical Market Dispensing (1%) State (30%) Private Sector (70%) Retail Chemists (85%) Private Hospitals (15%) Source: IMS Q1 2009 Being ranked world’s 4th largest pharmaceutical company according to global sales of prescription drugs, GSK have set out three new strategic priorities that aim to increase growth, reduce risk and improve long-term financial performance. Sri Lanka’s pharmaceutical sector has shown a 17. % growth in recent years with a market worth over US$ 254 Million with the private sector controlling over 70% of the market share at a value of US $ 177 Million, State Sector and dispensing controlling the remaining 30% valued at an approximate of US$ 76 Million. Private sector is controlled by Private Hospitals valued at US $ 26. 5M (15%) and Retail Chemist US$ 150. 4 M (85%). GSK is currently at the second position with a Market Share of 8. 15 % at a growth rate of 10. 9% in the local market. Competitive Context Cipla 8. 5% Market Share(MAT) Growth 37% No. 1 Position GlaxoSmithKline 8. 15. % Market Share (MAT) Growth 10. 9% No. 2 Position Zydus 5% Market Share (MAT) Growth 13% No. 3 Position Sun Pharma 3. 14% Market Share (MAT) Growth 20. 14% No. 4 Position Ranbaxy 3% Market Share Growth 20. 9% No. 5 Position Figure 1. 1 Source – GSK SL Sales Report 2. 2 Portfolio GSK produces medication to treat a realm of illnesses and is also known to be the pioneers in major medical breakthroughs which are one of the many strengths that the company possesses.

The company’s B2C based product portfolio consists of the following categories; Anti-Infectives – Consists of products such as Augmentin, Zinnat, Zinacef, Timentin, Ceporex, Fortum and Zobactin and is the current market leader in the anti infective portfolio. Dermatology – Consists of products such as Stiefel, Cutivate, Bactroban, Betnovate, Oilatum, and Candid and is the current market leader in its portfolio.

Enterprise – Consisting of products such as Piriton syrup / DM, Becadex, Amoxil Vaccines – Consisting of products such as Infanrix Hexa, Rotarix & Varilrix and are the pioneers in introducing a wide range of the newest available drugs in the local market. Respiratory –consists of products such as Seratide, Ventolin, Flixonase and is ranked 3rd among the competitors on overall sales performance. Overall sales contribution of the portfolio’s are depicted in the chart below; Figure 1. 2 Source – GSK SL Sales Report 2. 3 Competition

GSK is one of the few pharmaceutical companies researching both medicines and vaccines for the World Health Organization’s three priority diseases, with a turnover of US$ 1,789 million and a 92% of sales achievement in 2009. Low cost generic brands give GSK high competition despite the fact that GSK being one of the market leaders. The main competitor for GSK is Cipla with a market share of 8. 85% and they are growing at a rate of 10. 9%. Cipla is the main supplier of pharmaceutical products to the entire public sector and they import at cheaper prices mainly from Pakistan, Bangladesh, and India.

As shown below, some of the other main competitors are as follows, Rank| Company| Market Share| 1| Cipla| 8. 85%| 2| Glaxo SmithKline| 8. 15%| 3| Zydus Cadilla| 5. 00%| 4| Torrent Pharma| 3. 36%| 5| Sun Pharma| 3. 14%| 6| Ranbaxy| 3. 00%| 7| Astron| 2. 57%| 8| Micro Labs| 1. 97%| 9| Astra Zeneca| 1. 87%| 10| Kalbe Group| 1. 79%| 11| Janssen-Cilag| 1. 61%| 12| Pharmachemie| 1. 59%| 13| Sanofi Aventis| 1. 57%| 14| USV| 1. 50%| 15| Cadilla Pharma| 1. 44%| Source: IMS Q1 2009 One of the salient reasons for the strong competition in the industry is due to the price differences.

The prices which GSK charges is relatively high compared to the other generic drugs brought down by other competitors. GSK provides high quality drugs to their patients and most of the products are imported from its sister companies located in United Kingdom, Australia, and Germany etc. The other main competitors bring down low cost generic products mainly from the Asian region. Therefore there is a tendency that even in the private sector; doctors tend to prescribe these products to the patient as the middle class will not be able to pay high prices. . 0 Industry Market Structure As shown above the top fifteen of the companies in the pharmaceutical industry control around 50% of the market share. This salient feature is found in both Monopolistic and Oligopoly markets, where in an Oligopoly there are about 2-10 large firms and in a Monopoly there are many firms, but not as many as Perfect markets. However scientists have stated that (Lipsey & Chrystal: 2005), in an Oligopoly market if a firm reduce the price, others will follow and firm slowly increase its sales.

This feature is not seen in pharmaceutical industry because this industry is relatively price inelastic and hence, an increase in price will lead to an increase in the total revenue and a reduction in price will lead to a decrease in total sales. Therefore it can be argued that this industry can be tagged as a monopolistic market. According to Lipsey & Chrystal (2005), a salient feature of a monopolistic model is if price is increased, firm will not lose all of its customers.

For example if GSK increase the price of Augmentin, still there are customers who are loyal to this brand as it’s the number one antibiotic in Sri Lanka, so they will perceive the existing products as the best. Therefore firm will not lose all of its customers due to this brand loyalty and high degree of trust placed by doctors and patients on products of GSK. As explained earlier, products of GSK are branded thus they charge higher premiums from the patients. This feature is found only in this market structure.

Also in this industry any firm can enter the market as there are no strong barriers. Even though there’s a regulatory barrier, still firms can enter the market due to lapses in the regulatory system, hence it can be noted that freedom of entry exists in this industry. Also in this industry firms use special promotions and advertising to gain market share. For example, they use product specific promotions such as note pads, pouches to promote the product to the doctors. Also there’s a strong corporate brand advertising campaign conducted by GSK in media these days, purely to gain market share.

Therefore it can be noted that the industry consists of salient features of a monopolistic market structure. Below given is a graph of a monopolistic competition. 4. 0 Conclusion According to the main characteristics of a monopolistic competition which is, large number of small firms, similar but not identical products sold by the firms, relative freedom of entry into and exit out of the industry, and extensive knowledge of prices and technology. We conclude that that Glaxo SmithKline Pharmaceuticals is based on a monopolistic market structure. . 0 References * GSK Sri Lanka Sales Report,(2009) * IMS,Quarter 01,(2009) * Lipsey, G. , Chrystal, K. Alex, (2005), Economics. 10th ed. Oxford University Press, New Delhi, India. * Monopolistic Competition,Characteristics;http://www. amosweb. com/cgi-bin/awb_nav. pl? s=wpd;c=dsp;k=monopolistic+competition,+characteristics [retrieved on 19th May 2011] * Monopolistic Competition;http://cyro. csterritories. com/asa2_economics/unit4/monopolisticcompetition. html [retrieved on 17th May 2011]

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