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Glaxosmithkline is a global leader in the market of pharmaceutical goods and services, currently holding 7% of market share in this field. Formerly Glaxo Wellcome plc, the firm merged in December 2000 with Smithkline Beecham, a leading manufacturer of medical and consumer healthcare goods. , however there is much dispute over the motives behind the merger and what Glaxo Wellcome sought to gain through the collaboration. This is of particular concern as following the merger, many shareholders and city analysts have criticised the firm for not yielding the predicted benefits from the merger, particularly with regard to an innovative product pipeline. It has been argued that the purpose of the merger was to serve as a method of consolidating Glaxo Wellcome 's position in the pharmaceutical market, following competitive threats from generic products and reports of stifled profits. However, others have argued that the reason behind the merger was to facilitate the production of innovative pharmaceutical products; through strengthening the firm 's core competences, given the lack of new products in the product pipeline. The aim of this report is to ascertain which strategy Glaxo Wellcome sought to pursue through merging with Smithkline Beecham.
Part1- The merger with Smithkline Beecham
When one considers the current and then state of the pharmaceutical industry it becomes apparent that there was in fact the need for a merger or other form of change in order to remain competitive. Following the 1997 expiry on the patent of blockbuster drug Zantac, the company merged with Wellcome and reaped rewards through marketing existing products. However, due to a shortage of new products in the pipeline, the firm began to experience dangerously low profit margins. Thus it can be argued that Glaxo Wellcome sought a cost cutting and rationalisation strategy in order to increase efficiency and to focus on those activities which add value.
Although the bargaining power of
Part1- The merger with Smithkline Beecham
When one considers the current and then state of the pharmaceutical industry it becomes apparent that there was in fact the need for a merger or other form of change in order to remain competitive. Following the 1997 expiry on the patent of blockbuster drug Zantac, the company merged with Wellcome and reaped rewards through marketing existing products. However, due to a shortage of new products in the pipeline, the firm began to experience dangerously low profit margins. Thus it can be argued that Glaxo Wellcome sought a cost cutting and rationalisation strategy in order to increase efficiency and to focus on those activities which add value.
Although the bargaining power of
References: http://news.bbc.co.uk/1/hi/business/606830.stm The New York Times, May 4, 2003 pBU4 col 01 (29 col in) `For Glaxo, the Answers Are in the Pipeline The Sunday Times - Business0x01 graphic July 21, 2002