MGMT90148 - Shared Value in the Pharmaceutical Industry

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Medstar Limited: A Shi0 Towards Shared Value MGMT90148 – Consul1ng Fundamentals AU | CHANDRA | DAHDOULE | KERMECI | RUPAREL

Transcript of MGMT90148 - Shared Value in the Pharmaceutical Industry

Medstar  Limited:  A  Shi0  Towards  Shared  

Value  MGMT90148  –  Consul1ng  Fundamentals  

AU  |  CHANDRA  |  DAHDOULE  |  KERMECI  |  RUPAREL  

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Who  We  Are  

Our  current  strategy,  and  how  it  can  be  improved  

Opportuni/es  What  opportuniAes  do  we  have,  in  order  to  keep  Medstar  compeAAve  

around  the  world?  

Industry:  At  a  Glance  

The  current  state  of  the  industry  in  the  growing  Asian  economies  

Strategy  into  the  Future  

RecommendaAons  for  Medstar  to  maximise  its  opportuniAes  in  Asia  using  shared  value  as  a  key  tool.    

In  the  Spotlight:  GlaxoSmithKline  

Company  analysis  to  demonstrate  GSK’s  methodologies  in  creaAng  shared  value  in  emerging  markets.  

Today’s  Journey  From  Today,  Into  The  Future  

WHO WE ARE

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Current  Standing  Medstar  Ltd:  A  Company  Snapshot  

AUD$18  billion  1H15  

Revenue

Sydney,  Australia  –  with  addiAonal  operaAonal  headquarters  in  the  USA  

Headquarters

Australia,  New  Zealand,  USA,  UK,  France,  

Germany  

Primary Markets

Approximately  90,000  employees  worldwide  

Personnel

Approximately  80  countries  around  the  

globe  

Global Presence

Medstar  Ltd  has  two  business  divisions;  consumer  healthcare  and  pharmaceuAcals.  Previous  aYempts  to  enter  into  emerging  markets  including  Cambodia  and  Vietnam  through  distributors  have  failed.  Recently,  Medstar  has  taken  noAce  of  the  successes  its  compeAtors  are  achieving  in  emerging  markets.  The  possible  entry  of  Medstar,  influenced  by  the  global  acAviAes  of  its  compeAtors  could  allow  opportuniAes  reflecAng  posiAvely  on  not  only  Medstar’s  boYom  line  but  also  on   its  brand   image.  Despite   the  scope  of  opportunity   that   is  present,  penetraAon  of   internaAonal  markets   is   fraught  with   risk  and  complexity  and  a   focused  approach  rather  than  opportunisAc   is  appropriate.  Through  creaAng  economic  efficiencies   in  emerging  markets  whilst   improving  the  health  of  communiAes   in  developing  countries,  a  shared  value  outcome  can  be  achieved.    

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-­‐  VerAcal  business  model  -­‐  Medstar  Ltd  currently  conduct  internal  R&D,  

producAon  and  markeAng  

Opera/ons  

-­‐  Revenue  streams  primarily  originate  from  operaAons  in  established  and  mature  markets  

Markets  

-­‐  Previously  unsuccessful  in  Cambodia  and  Vietnam  

-­‐  Need  for  reassessment  of  strategy  

Globalisa/on  

Currently,  Medstar  Ltd  is  serving  developed  countries  in  which  markets  are  established  and  matured.  It  uAlises  a  fully  integrated,  verAcal  business  model,  undertaking  its  own  R&D,  manufacturing  and  markeAng.    Since  its  disconAnued  operaAons  following  previous  failure  in  Cambodia  and  Vietnam,  Medstar  Ltd  does  not  service  emerging  markets  in  Asia.  If  chooses  to  do  so  it  must  develop  its  business  model  and  accompanying  strategy  whilst  carefully  considering  the  markets  it  wishes  to  enter.    

Current  Strategy  How  can  our  operaAons  be  improved?  

OPPORTUNITIES

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What  Is  Shared  Value?  How  Can  Medstar  Ltd  Prepare  for  the  Future?  

“Shared  value  is  created  when  companies  recognize  that  there  are  tremendous  opportuni7es  for  innova7on  and  growth  in  trea7ng  social  problems  as  business  objec7ves.”  -­‐  FSG      Medstar  has  been  running  on  tradiAonal  strategies,  which  are  built  on  the  basis  of  operaAng  and  profiAng  at  the  expense  of  the  wider  society   and   the   environment   in   which   the   firm   funcAons.   The  powerful   and   revoluAonary   idea   of   social   value   idenAfies   this   is  harmful   to   the   interests   of   stakeholders.   It   proposes   work   to  correct  this  damage  by  emphasising  ‘inclusivity’  by  recognising  that  the   company’s   economic   progress,   and   the   wider   social   progress  are  interrelated  and  interdependent.        

Medstar’s   current   inefficiencies   and   the   scope   for  growth   through   innovaAve   and   trending   business  strategies  in  the  pharmaceuAcal  sector  leads  us  to  pose  the  quesAon:    Should  Medstar   break   into   the   emerging   markets   -­‐  ‘the   next   big   business   opportunity’-­‐   by   adding   a  social  dimension  to  their  business  prac;ce?        

Looking   at   business   through   a  difference  lens:    Being   in   the   pharmaceuAcal   and  medical   industry,   Medstar   faces  tremendous  business  opportuniAes  in  entering   the   realm  of  serving  a   large  underserved   populaAon   that   suffers  the   burden   of   myriad   diseases   and  insufficient  healthcare.  OperaAonally,  Medstar   would   do   this   through  social ly   beneficial   methods   of  producAon,  distribuAon  and  sales.      

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Medstar’s   current   internaAonal   strategy   is   riddled  with   inefficiencies  where  opportunity   could  otherwise  be  apparent.  There  are  a  number  of  problems   that   need   to   be   improved   to   sustain   its   posiAon   as   a   global   leader   in   the   pharmaceuAcal   industry.  Areas   of   parAcular   concern   are  highlighted  below  on  the  company’s  value  chain.    It  is  worth  noAng  that  throughout  this  value  chain,  support  acAviAes  such  as  human  resource  management,  financial  management,  procurement,  IT,  and  the  like,  occur  concurrently  and  simultaneously  to  enhance  value  of  primary  funcAons.    For   the   perspecAve   of   focus   for   Medstar’s   strategy,   primary   acAviAes   that   require   aYenAon   include   research   and   development   (R&D)   and  MarkeAng  &  Sales.      

R&D  focuses  on  idenAfying  disease  target,    drug  research,  discovery,  drug-­‐development,  pre-­‐clinics  

and  clinical  trials.  

R&D  

How  Could  We  Improve?  Inefficiencies  in  Medstar  Ltd’s  Current  Strategy  

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Obtaining  Regulatory  Approval  

Supply  Chain  and  Manufacturing  

Seeking  approval  from  the  relevant  bodies  for  the  creaAon  of  types  of  drugs.  Seeking  patents  to  protect  intellectual  property.  

A0er  the  relevant  approvals  are  sought,  the  drugs  will  enter  the  manufacturing  phase.  Medstar  operates  a  number  of  

manufacturing  faciliAes  globally.  

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As  well  as  distribuAon  acAviAes,  the  products  need  to  be  sold  to  front-­‐line  distributors.  Through  negoAaAons  with  buyers  Medstar  seeks  to  create  relaAonships  to  buyers  and  further  channels  of  markeAng  to  on  its  core  strength,  its  brand.  

Marke1ng  &  Sales  

Post-­‐market  surveillance  and  pharmaco-­‐vigilance  Evalua1on  

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Currently,  Medstar   is   focused  on  delivering   results   to  only   its   shareholders   and   its   strategy   is   characterised  by  profit-­‐driven  investments  and  innovaAon  based  on  financial  outcomes.  In  stark  contrast  to  its  direct  compeAtors  who  are  seen  as   highly   innovaAve   and  driven  by   social   outcomes,  Medstar   is   generally   seen   as   a   company  owned  by  profit-­‐hungry  investors.  This  of  course  is  not  the  case  and  the  execuAve  team  should  be  commended  for  the  philanthropic  advances  taken   to   engage   in   corporate   social   responsibility,   for   example   the   recent   strides   to   innovate  upon   criAcal   depression  drugs.  However,   this   percepAon   is   causing   immense   reputaAonal   harm   for   a   pharmaceuAcal   that   needs   to  be   able   to  balance   the   unique   dilemma   of   improving   the   quality   of   life   of   humans   and   at   the   same   Ame  make  money   to   fund  research  and  provide  a  compeAAve  return  for  shareholders  (Goldstein,  2011).      Another  major  problem  is  that  whilst  Medstar  preaches  an  innovaAve  strategy  where  it  claims  to  ‘operate  in  the  future’  there  is  liYle  evidence  of  this  in  pracAce.  Whilst  a  great  deal  of  spending  goes  towards  research  and  development,  there  are  few  results   to  signify   this  and   in  recent  years   it  has   lagged  behind   its  compeAtors.  This  can  be  drawn  down  to   its  current   strategy   for   innovaAon   where   each   of   its   major   research   hubs   focuses   on   each   of   its   separate   research  developments  independent  of  other  countries.  This  means  that  in  each  country  in  which  Medstar  operates  there  may  be  overlapping   development   projects   occurring   at   one   Ame.   This   is   a   major   inefficiency   as   unnecessary   double-­‐ups   are  cosAng  the  company  a  great  deal.  There  is  a  need  for  an  overarching  global  strategy  for  the  research  and  development  team,   this  will  ensure   that   the   response  Ames   to  global  health  needs  can  be   improved.  With   innovaAon  hubs  working  together,  there  can  be  a  harmonisaAon  of  R&D  with  each  locaAon  performing  specialised  tasks  rather  than  overlapping  acAviAes   that   can   result   in   a   waste   of   Ame   and   resources.   An   open   innovaAon   plahorm   is   a   consideraAon   for   the  company  and  will  be  further  outlined,  thereby  ensuring  that  complementary  research  can  be  undertaken  at  any  point.    Whilst  research  and  development  is  highly  decentralized  due  to  the  various  innovaAon  hubs  around  the  world,  sales   is  highly  centralised  with  the  global  sales  team  based  in  the  company’s  Sydney  office.  The  Medstar  sales  strategy  seems  to  be  universally  accepted  but  not  understood.  This  means  that  the  sales  force  has  not  been  able  to  adapt  to  the  needs  of  each  market  and  to  different  cultures  but  rather  passed  down  from  the  global  sales  team.      

How  Could  We  Improve?  Inefficiencies  in  Medstar  Ltd’s  Current  Strategy    

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Primary  Markets  

Medstar  primarily  serves  in  developed  markets    that  is  Australia,  New  Zealand,  USA,  UK,  France,  Germany.  

Headquarters  

Sydney,  Australia  with  addiAonal  operaAonal  headquarters  in  the  USA  

Market  PotenAal  

Moving  into  emerging  markets  will  mean  that  Medstar  can  engage  in  future  potenAal  benefits,  as  well  as  reputaAonal  benefits  

The  geographic  focus  of  Medstar  is  proving  a  major  barrier  to  growth.  Currently,  the  health  needs  of  only  developed  countries  are  being   fulfilled,   with   these   markets   already   being   highly   saturated   there   is   liYle   growth   prospects   in   the   future.   Moving   into  emerging  markets  will  mean  that  Medstar  can  capitalise  on  future  potenAal  benefits,  at  the  Ame  this  can  have  major  reputaAonal  benefits.  There  is  a  great  deal  to  be  acquired  by  reinvigoraAng  the  company  strategy  and  moving  into  new  markets  and  ignoring  this  be  a  will  be  a  lost  opportunity  to  leverage  upon  the  significant  exisAng  competencies  the  company.  

How  Could  We  Improve?  Inefficiencies  in  Medstar  Ltd’s  Current  Strategy  

INDUSTRY ANALYSIS

By   the  end   of   this   year,   40%  of   today’s   pharmaceuAcal  market  will   lose  patent  protecAon,  which  will  also  affect  sales  in  emerging  markets  (PwC,  2015).  Hence,  industry   players   are   required   to   look   out   for   an   alternaAve   and   sustainable  source  of   revenue,   as  well   as  maintain   their   profitability.  Given   the  pessimisAc  outlook   of   the   pharmaceuAcal   industry,   the   Asia-­‐Pacific’s   strong   economic  fundamentals   have   are   an   aYracAve   market   for   the   future   scope   for   players  across  the  globe  (Frost  &  Sullivan,  2014).    By   2016,   the   global   pharmaceuAcal   industry   is   expected   to   generate   an  esAmated  30   percent   of   its   total   sales   in   emerging  markets   (PwC,   2015).   Asia  Pacific   is   the   fastest  growing  pharma  market  and   is  going   through   tremendous  change  due  to  internaAonal  and  local  developments.    As   per   the   data   from  World   Bank   and   Frost   &   Sullivan   analysis   (Appendix   3),  total  Asia  Pacific  healthcare  spending  is  expected  to  grow  from  $1.34  trillion  in  2012  to  $2.20  trillion   in  2018  at  a  CAGR  of  8.6%.  The  healthcare  expenditure  per  capita  is  expected  to  increase  by  4.8%  across  the  region  by  2018.  (Frost  &  Sullivan,  2014).  

Industry  Analysis  Outlook:  Pharma  Sector  in  the  EMEs  

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Growing  Middle-­‐Income  Group  The  middle  class  is  esAmated  to  reach  2  billion  by  2016-­‐2017,  giving  a  boost  to  healthcare  spending.  

Rapid  Urban  Growth  UrbanizaAon  is  rising  at  a  higher  pace  in  the  Asia  Pacific  region.  UrbanizaAon  improves  the  quality  of  healthcare,  but  at  the  same  Ame,  brings  several  risks  in  terms  of  increased  polluAon,  high  prevalence  of  smoking,  stress,  etc.  These  factors  have  materially  changed  the  profile  of  disease  in  Asia  Pacific  countries.  

Growing  Healthcare  Coverage  Local  governments  are  making  an  effort  to  increase  the  healthcare  coverage  to  a  larger  populaAon.  Government  iniAaAves  to  increase  access  to  healthcare  and  treatment  advancements  will  drive  the  sector  expansion.  

The  upwards  trend  of  growth   in  emerging  markets   is  not  expected  to  slow  down.  Although  the  Asia  Pacific   is  an  aYracAve  growth  market,   it   is  equally  complicated,   too.  The  market  is  considerably  heterogeneous,  wherein,  countries  differ  from  each  other  poliAcally,  economically,  socially,  technologically  and,  most  importantly,  culturally.  Despite  these  differences,  there  are  common  aYributes  that  are  contribuAng  to  the  rapid  growth  of  the  market.  Some  of  these  important  aYributes  include:    

Industry  Analysis  Outlook:  Trends  

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Industry  Analysis  A  PESTLE  PerspecAve  

-­‐  VolaAle  PoliAcal  Landscapes  -­‐  Need  For  Public  Funding  

-­‐  Local  Government  AuthoriAes  -­‐  Tax  Schemes  

Poli1cal  

-­‐  Need  For  Fair  Pricing  -­‐  OrganisaAonal  ConsolidaAon  

Economical  

-­‐  UrbanizaAon  -­‐  Ageing  PopulaAon  

-­‐  Emerging  Middle  Class  -­‐  Ethics  In  PracAce  

Socio-­‐Economical  

-­‐  Need  For  Product    InnovaAon  -­‐  Green  Technology  

Technological  

-­‐  RegulaAon  In  Pricing  -­‐  Patent  ProtecAon  

Legal  

-­‐  Sustainability  Through  ProducAon    -­‐  Adhering  To  Environmental  PracAces  

Enviromental  

The  pharmaceuAcal  sector   in  emerging  Asian  regions  vary  across  countries,  mostly   in   terms  of  healthcare   infrastructure.  Thus,  a   “one-­‐size-­‐fits-­‐all”  approach  and  analysis  cannot  work  here.  However,  there  are  many  broad  similariAes  in  the  pharmaceuAcal  landscape  across  the  emerging  naAons  of  Asia.  A  PESTLE  framework,  thus,  provides  a  peek  into  some  significant  pharmaceuAcal  industry  highlights  within  Asia’s  emerging  zones:    

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Poli7cal   landscape:   Highly   vola7le,   with   rapid   government   changes  affecAng  economic  prospects.  Corrup7on:   Many   incidents   of   high   profile   corrupAon   crackdowns   and  cases  of  companies  trying  to  achieve  rapid  growth  in  unfamiliar  markets.  For   example:     Firms   try   to   woo   medical   professionals   in   India   for  approvals  through  lavish  gi0s  under  the  pretext  of  medical  conferences,  free  samples,  etc.  In  China,  GSK  was  fined  £300m  by  Chinese  authoriAes  in   September   for   “massive   and   systemic”   bribery   of   doctors   to   boost  sales.  Insufficient   public   funding   and   reimbursement   has   led   to   an   inefficient  healthcare  infrastructure.    Local   government   Ini7a7ves   are   expanding   healthcare   coverage   to   the  larger  populaAon  and  focusing  on  treatment  advancements  Government   focus   is   on   localisa7on   to   encourage   local  manufacturers   to  produce  drugs  of  their  own.  Tax   policy:   Tax   deducAon   for   R&D   and   provision   for   deducAon   for  expenditure   incurred  outside  R&D  (expenses  related  to  overseas  clinical  trials  product  approvals,  patenAng,etc.)  are  low.      

Poli1cal   Economical  

Pricing:   Affordable   products   and   services   work   in   these   naAons.  Governments   are   increasing   their   control   over   prices   and   inching  closer  to  stalling  free  pricing,  to  keep  them  low.  Demand  drivers:  A  Large  middle  class   implies  generally   low  affordability.  At   the  same  Ame,   increasing   incomes   are   leading   to   discreAonary   spending.    Focus  has   surpassed   food,   clothing,   housing   and  energy   costs   and  has  become  health  care,  educaAon  and  financial  services.  Increasing   Urbaniza7on   has   increased   the   risks   of   polluAon,  prevalence  of  smoking,  stress,  etc.  Supply  side  dynamics:  Insufficient   qualified   talent   and   a   highly   fragmented   network   of  logisAcs   and   supply   chain   infrastructure   is   a   challenge   for  companies.   Firms   prefer   local   investment   as   to   cut   costs   and  effecAvely  leverage  commercial  success,    there  is  a  strong  inclinaAon  for   investment   in   local   Research   &   Development   and   local  manufacturing.    Consolida7on  amongst  corporates:  Local  firms  are  increasingly  gaining  market   share,   and   growing     through  M&As   and   partnerships  with  local  and  mulAnaAonal  firms              

Industry  Analysis  A  PESTLE  PerspecAve  

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Distribu7on   of   wealth:   These   lower   &   middle-­‐income   countries   have   a  large   underserved   populaAon,   which   represents   a   huge   new   customer  base.   It   demands   the   applicaAon   of   innovaAve   technology   to  meet   the  needs  of  populaAons  that  suffer  from  insufficient  resources.  Unethical   prac7ces:  Cases  have  been   reported  on   the  use  of   vulnerable  populaAon  groups  in  clinical  trials.    Increase   in   ‘Lifestyle   diseases’:   With   growing   prosperity   and   improved  nutriAon,  disease  paYerns  in  emerging  markets  are  changing  and  shi0ing  toward   ‘lifestyle’   diseases,  which   are  more   common   in  mature  markets.  This   trend   opens   up   new   markets   for   exisAng   products,   for   eg:   the  number  of  cases  of  diabetes  has  gone  up  tremendously.  Growing  trends:  The  growing  senior  popula7on  creates  a  strong  demand  for  innovaAve   cures,   parAcularly   in   therapies   that   avoid   tradiAonal   drugs,  devices  and  surgery.   In  China,   the  age  group  65  and  over,  accounts  for  9.5%   of   its   total   populaAon.   This   trend   is   placing   a   greater   strain   on  healthcare   services   and   increasing   the   demand   for   innovaAve   therapies    for   the   treatment   of   age-­‐related   diseases.   Personalised   and   speciality  treatments  are  also  becoming  a   trend,  where  efforts  are  being   taken   to  move  away  from  the  concept  of  one-­‐drug-­‐fits-­‐all   to  a  more  customised  approach.          

Social   Technological  

Focus  of  innova7on:  is  on  product  development  to  deliver  what  the  customers  truly  ‘need’.  This  entails  recognising  the  true  benefits  to   the   customers   and   delivering   through   reengineering   or  reformulaAng   exisAng   products,   improving   funcAonality,  adapAng   innovaAve   packaging   to   reduce   costs   or   improve  safety,  etc.  This   ‘frugal  or   lean’   innova7on  adopted   in  the  EMEs,  challenge   the   “more   is   beYer”   mantra   of   the   western   world.  These   inexpensive   methods   of   producAon,   which   are   ‘need  based’   are   resulAng   in   new   products   and   soluAons   that   are  tailored  for  emerging  markets  Green   technology:   Increased   pressure   on   scarce   resources   is  leading  the  companies  and  local  governments  to  invest  in  green  technology  and  focus  on  environmental  concerns.      

Industry  Analysis  A  PESTLE  PerspecAve  

19  

The  overall  legisla7ve  landscape  of  these  na7ons  is  highly  dynamic.        Pricing  regula7ons:  Regulatory  bodies  like  the  NaAonal  Development  &  Reform  Commission   (NDRC)   in  China   introduced  drug  policies  to  cut  drug  prices  and  to  achieve  “zero-­‐markup”   in  hospitals.  Even  the   Indian  government   is  moving  closer   to   directly   controlling   pricing   of   certain   drugs,   with   the   legislaAon  inching  closer  to  stalling  free  pricing  for  consumer  protecAon.  Patent  protec7on:  Firms,  especially  foreign  players  are  fighAng  over  protecAon  for   their   IP   with   the   governments,   as   regulators   open   up   some   patent  protected  medicines  to  low  cost-­‐generic  producAon  by  local  manufacturers.    Stricter   standards   for   drug   producAon,   quality   control   and   requirements   on  qualificaAon  of  employees.  Regulatory  defini7ons  and  explana7on  to  rules  remain  vague  and  unclear-­‐  Due  to  such  legislaAve  ambiguity,  delays  are  frequent.    Clearance  delays  and  regulatory  uncertainty:  Prevalent  are  delays  in  clinical  trial  approvals  and  compulsory  licensing.  FDI  policies  are  unclear,  especially  in  India  -­‐   the   country   is   aYempAng   to   improve   the   situaAon,   under   the   ambit   of   its  popular   ‘Manufacture  or  Make   in   India’   campaigns.   The   clinical   trial   industry,  however,  remains  a  challenge  to  operate  in.  These  problems  are  also  because  of   mulAple   agencies   and   government   bodies   within   the   pharmaceuAcal  industry.                

Legal   Environmental  

Sustainability   through   redesign:   Companies   are   redeveloping   exisAng  product  lines  to  meet  the  needs  of  these  new  markets,  either  by  lowering  unit  costs  or   improving  funcAonality   in  resource-­‐poor  environments  (and  hence  creaAng  shared  value).  Environmentally   friendly   produc7on   methods:   Companies   are   construcAng  and  maintaining   producAon   faciliAes   that   are   environment   friendly   with  special  air,  water  and  waste  management  procedures  installed.  Stricter   environment   regula7ons:   The   concerned   environment   protecAon  boards   of   these   naAons   have   tougher   laws   to   target   emissions   from  pharma   companies   and   wastewater   treatment,   and   have   rolled   out   a  number  of  iniAaAves  to  promote  energy  efficient  green  technology.        

Industry  Analysis  A  PESTLE  PerspecAve  

GSK: COMPANY ANALYSIS

21  

Thinking  About  Shared  Value  Looking  at  GlaxoSmithKline  

Good  Ideas  

Affordable  

Accessible  

Sustainable  

Vision  

GlaxoSmithKline   (GSK)   recognises   the   importance   of   shared  value   and   its   role   in   addressing   the   unmet   health   challenges  present  in  emerging  markets  (Our  Strategy,  2015).    As   a   for-­‐profit   company,   public-­‐private   partnerships   such   as  those   with   other   companies,   governments,   internaAonal  agencies   and   academic   insAtuAons,   as   well   as   stakeholders,  including   community   groups,   allow   GSK   to   sustainably   meet  strategic   objecAves,   irrespecAve   of   their   customer’s   locaAon  and  ability  to  pay.    Current  partners  include:  AMREF,  CARE  InternaAonal,  Save  the  Children,  Tony  Blair  Faith  FoundaAon,  Vodafone  and  Barclay’s  (Developing   Countries   Unit:   Who   We   Are,   2015).   GSK  endeavours  to  make  their  vaccines  and  medicines  as  affordable,  available  and  accessible  to  as  many  people  who  are  in  need  of  their   products   as   possible   (Developing   Countries   Unit:   Our  Business  Model,  2015).          

22  

Their  current  strategy  is  not  considered  philanthropy,  but  rather  an  innovaAve  way  of  doing  business;  this  long-­‐term  strategy   aims   to   create   healthier   communiAes   over   Ame,  whilst   also   building   the  GSK  business   through   increasing  market  size.  On  four  occasions,  GSK  has  been  chosen  as  number   one   in   the   ‘Access   to   Medicines’   index,   which  measures  and  rates  pharmaceuAcal  companies  operaAons  in   improving   access   to   medicine   in   emerging   markets  (Developing  Countries  Unit:  Our  Business  Model,  2015).      GSK  believes  tradiAonal  business  models  will  not  be  able  to   sustainably   deliver   viable   health   soluAons   to   those   in  need,   therefore   prices   of   patented   medicaAons   are  capped  at  no  more  than  25%  of   the  recommended  retail  price   in   developed   countries.   AddiAonally,   20%   of   the  profit  made   in  developing  markets   is   re-­‐invested   into  the  emerging  markets  healthcare  system.          

In   effect,   higher   volumes   of   high   quality,   lower   priced  vaccines   and   medicines   are   distributed,   increasing   the  scale  of  posiAve  health  soluAons  available  to  communiAes  (Developing  Countries  Unit:  Our   Business  Model,   2015).  In   order   to   decrease   the   price   of   medicines,   GSK   is  working   on   repackaging   and/or   reformulaAng   its   exisAng  products,   such   as   its   Ventolin   inhaler,   which   can   sell   in  developing  countries   for  a   few  cents   rather   than   for  five  dollars  in  developed  countries.    Furthermore,   GSK   conAnues   to   adapt   their   value   chain,  offering   incenAves   to   sales   staff   based   on   volume   as  opposed  to  sales  (Peterson  et  al,  2011).  GSK  measures  its  success  on  the  number  of  people   lives   in  which  they  are  able   to  make  a  posiAve  difference   (Developing  Countries  Unit:  Our  Business  Model,  2015).  

Thinking  About  Shared  Value  Looking  at  GlaxoSmithKline  

23  

In  Cambodia,  GSK  has  been  operaAng  through  local  distributors  since  1997  however,  in  2013  through  a  partnership  with  the  Ministry  of  Health  it  established  a  local  legal  enAty  in  Phnom  Penh  (Developing  Countries  Unit:  Cambodia,  2015).  In  March  2015,  a  new  global  headquarters  was  announced  to  be  located  in  Singapore.  The  reason  being  the  PharmaceuAcals  and  Vaccines  markets  in  countries  covered  by  the  new  headquarters,  are  forecasted  to  grow  at  a  significantly  higher  rate  than  that  of  others   around   the  world.  GSK   also   partners  with   the   Singapore  Economic  Development   board   and   its   operaAons   indicate   a   conAnued   commitment   to   servicing   its  markets  in  Asia  (GSK  Announces  Major,  2015).    When  entering  emerging  markets,  partnerships  are  key  to  achieving  operaAonal  efficiency  combined  with  ethical  conduct  in  developing  countries.  In  2004,  former  GSK  CEO  Dr.  Jean-­‐Pierre  Garnier  stated  that  “Improvement  of  health  care  in  the  developing  world  can  only  be  addressed  if  the  significant  barriers  that  stand  in  the  way  of  improved   access   are   tackled   as   a   shared   responsibility   by   all   sectors   of   global   society—governments,   internaAonal   agencies,   chariAes,   academic   insAtuAons,   the  pharmaceuAcal  industry,  and  others—working  in  partnership“  (AMFAR,  2004).      

Thinking  About  Shared  Value  Company  Analysis  GlaxoSmithKline  

At  present,  GSK  operates  a  Developing  Countries  and  Market  Access  Business  Unit  (DCMA),   which   services   over   50   countries   including   the   following   developing  markets:   Angola,   Bangladesh,   Benin,   Botswana,   Burkina,   Burundi,   Cambodia,  Cameroon,  Central  African  Republic,  Chad,  Comoros,  DemocraAc  Republic  of  Congo,  Ethiopia,   Ghana,   Ivory   Coast,   Liberia,   Madagascar,   Malawi,   Mali,   Mauritania,  MauriAus,  Mozambique,  Myanmar,  Namibia,  Niger,  Nigeria,   Sierra   Leone,   Tanzania,  Uganda  and  Zambia   (Developing  Countries  Unit:  Where  We  Work,  2015).   In  2015,  it’s   anAcipated   that   the   DCMA   unit   will   contribute   approximately   $300   million   to  GSK’s  top  line  (Peterson  et  al,  2011).      

RECOMMENDATIONS

25  

1.  Merger  &  Acquire  For  A  Fast-­‐Tracked  Entry    To  enter  new  markets  in  the  EMEs  ,  Medstar  Ltd  should  consider  acquiring  a  local  company  with  an  exisAng  presence   in   the  market.  This  would  enable  Medstar   to  capitalise  on  local  knowledge  and  internalise  the  core  competencies  developed  by  the  local  counterpart  to  succeed  in  that  economy.  This  means  that  Medstar  would  not  have   to  go   into  a  new  market   through  a  greenfield   investment   starAng   from  scratch,  being  exposed  to  the  risks  of  failure  in  the  infancy  of  the  business  life  and  having   to   learn   the   processes   and   culture   of   the   new   market.   Rather,   the  acquisiAon  would  empower  Medstar  to  capitalise  on  the  exisAng  knowledge  in  the  host   country  with   the   embedded   skills   to   assist   in  working   towards   its   strategy.  Moreover,   this   will   allow  Medstar   to   minimise   ‘last   mover   disadvantage’,   as   the  company  can  build  on  the  target’s  relaAonship  with  local  consumers  as  well  as  its  previous  track  record  in  the  economy.      To   kick-­‐start   its   expansion,   Medstar   should   reconceive   their   products   to   make  them  more  appealing  to  its  new  market.  A0er  careful  consideraAon  of  the  product  offerings   of   its   target   company   as   well   as   local   disease   burden,  Medstar   should  create  a  tailored  porholio  of  drugs  to  sell  at  affordable  prices  and    target  diseases  prevalent  locally.  This  strategy  was  used  by  NovarAs  to  target  poor  families  in  rural  India   and   generated   shared   value   by   simultaneously   increasing   revenues   and  decreasing   disease   burden   through   their   easy   to   access,   affordable   medicaAons  (FSG,  2012).  

RecommendaAons:  Engage.  Partner.  Innovate  A  Foot  in  the  Door:  Merger/AcquisiAon  

26  

To   determine   a   suitable   target   to   acquire   in   the   EMEs,   Medstar  should  consider  pharmaceuAcal  companies  in  both  India  and  China.  Both  the  countries  are  expected  to  be  strong  growth  areas  for  the  global  pharmaceuAcal  industry.  As  Appendix  1  indicates,  the  growth  in   GDP   of   both   these   countries   is   expected   to   significantly  outperform   that   of   other   countries   throughout   the   world.  Furthermore,  given  the  rising  wealth  of  the  middle  class  in  both  the  countries,  healthcare  expenditure  is  expected  to  increase  by  2.45x  and   2.34x   in   China   and   India   respecAvely,   as   highlighted   by  Appendix   3.   Lastly,   both   these   countries   have   a     burgeoning  manufacturing  sector  and  provide  easy  access  to  skilled  workforce.  Hence  a  company  in  either  country  should  be  targeted  by  Medstar  to  begin  their  expansion  into  the  emerging  economies  of  Asia.    Whilst  the  acquisiAon  of  a  company  would  allow  Medstar  to  enter  into   a   new  market,   due   diligence   should   be   performed   to   ensure  that   the   target   is   a   cultural   match   for   Medstar.   AddiAonally,   the  presence  of  an  internal  champion  can  ensure  that  the  realigning  of  processes   and   frameworks   within   the   target   company   occurs  smoothly  and   the  acquirer  can  execute   the   long-­‐term  strategy   for  the  company  in  a  hassle  free  manner.  

RecommendaAon:  Engage.  Partner.  Innovate  A  Foot  in  the  Door:  Merger/AcquisiAon  

27  

Pfizer   and   GSK   have   created   shared   value   through   this   method   by   merging   their   HIV   related   drug  porholios  to  create  a  new  jointly  owned  company  called  ViiV  Healthcare.  This  presents  the  new  company  with  a  comprehensive  R&D  pipeline  of  numerous  compounds  and  provides  it  with  the  opAon  to  selecAvely  progress  only  most  the  most  promising  leads  through  the  drug  development  and  approval  process.  Hence  the   alliance   saves   money   for   the   parent   companies   but   also   quickens   the   drug   development   process,  thereby  benefixng  the  community.  

 

Nonetheless,   forming   strategic   alliances   presents   risks   for   Medstar.   Different   moAves   of   partner  organisaAons  may   render   the   process   full   of   inefficiencies   which   drive   up   cost   and   benefits   not   being  realised.  Moreover,  in  case  of  the  an  alliance  involving  a  for  profit  firm  and  a  public  organisaAon,  there  is  a  possibility  of  public  backlash.  The  community  and  government  may  view  the  alliance  as  a  means  for  the  commercial   organisaAon   to   extract   value   from   public   bodies   by   exploiAng   their   research   and   experAse  without  fair  compensaAon  in  return.    

RecommendaAon:  Engage.  Partner.  Innovate  Building  Value  Through  Partnership  

A0er  Medstar   gains   a   foothold   in   the  market,   the  company   should   seek   to   form   alliances   with   local  hospitals,   research   insAtutes   and   universiAes.   This  would  enhance  its  R&D  porholio  and  build  a  strong  pipeline   of   new   products   with   minimal   iniAal  investment   costs.   As   a   result,   the   company   could  engage  with  local  stakeholders  (for  e.g.  government  departments)   and   create   shared   value   by  commercialising   government   funded   research,  thereby   increasing   the   rate   of   rate   on   taxpayer  dollars   and   reducing   the   burden   on   government  and   NGOs   to   fund   medical   research.   AddiAonally,  publically   owned   research   organisaAons   and  universiAes   may   gain   access   to   the   company  extensive   intellectual   property,   technical   knowhow  and   financial   resources   which   may   further   drive  their  independent  work  and  aid  the  society  at  large.  Therefore,   shared   value   is   created   by   redefining  producAvity  in  the  value  chain.  

2.  Medstar  Limited’s  New  Partners  -­‐  Form  Strategic  Alliances  

28  

3.  Open  Innova1on  PlaYorm  A0er  alliances  are  formed  and  Medstar  has  built  an  ongoing  relaAonship  with  each  partner,   the   company   should   focus   on   creaAng   a   common   plahorm   where   its  partners   collaborate   amongst   themselves   and   with   the   company.   An   emerging  trend  in  the  high  technology  industries  has  been  for  companies  such  as  Boeing  and  Apple   to   create   an  open   innovaAon  plahorm  and  bring   together   the  experAse  of  their   partner   organisaAons   to   create   the   end   product.   Similarly,   Medstar   should  create  such  a  plahorm  to  uAlise  specialist  knowledge  in  different  fields  of  medical  research,   currently   located   in   different   organisaAons   to   create   a   comprehensive  product   offering.   The   benefit   of   this   approach   is   that   Medstar   gains   access   to  experAse   of   other   organisaAons  without   the   high   cost   associated  with   recruiAng  the   pioneers   of   parAcular   fields.   The   benefit   for   the   community   is   that   a   profit  driven  company   like  Medstar  would  drive  up  efficiencies  and   reduce  bureaucracy  that  is  normally  prevalent  in  public  sector  organisaAons.  AddiAonally,  the  company  could   also  direct   the   research  undertaken  at   such  organisaAons   to  fields   that   are  relevant   to   the  society  at   large  and  prevent   individual  scienAsts   from  undertaking  pet  projects  which  provide  no  large  scale  benefit  to  the  community.    In   spite   of   the   numerous   shared   benefits   to   the   firm   and   the   public,   there   exist  potenAal  risks  that  need  to  be  considered.  Managing  numerous  stakeholders,  each  with   a  different   corporate   culture   and  different  moAvaAons   for  being  part  of   the  open   innovaAon   plahorm   may   be   a   Ame   consuming   process.   Apart   from   losing  Ame,   the   company  could   also   lose  valuable  proprietary   informaAon  as   a   result  of  sharing  extensively  to  promote  working  cohesively.        

 

 

   

 

 

 

   

 

 

RecommendaAon:  Engage.  Partner.  Innovate  InnovaAon  Is  EssenAal  

29  

Rethinking  Innova1on  Within  Medstar    A  related  suggesAon   that   the  Board  should  also  consider   is   for  Medstar   to  have  local  R&D  offices  in  which  they  can  collaborate  with  their  counterparts  in   other   countries.   As   previously   outlined,   a   recent   problem   that  Medstar  had   been   faced  with,   is   the   decentralised   research   department;   with   each  country’s  R&D  department  seemingly  operaAng  as  a  separate  enAty.  This  is  both  costly  and   inefficient  and   limits  the  uAlisaAon  of   in-­‐house  experAse   in  developing   innovaAve  soluAons.  Nowadays,   innovaAon   is  more  crucial   than  ever  before;   lagging  behind  on   innovaAon  is  one  of  the  greatest  challenges  for   technology   based   companies   going   into   the   future   (Industrial   Research  InsAtute,   2002)   and   will   separate   market   players   from   market   leaders.  Therefore,   an   open   innovaAon   plahorm   that   fosters   the   transfer   of  knowledge  is  criAcal  to  Medstar’s  expansion  in  the  future.        There  is  immense  benefit  for  the  board  of  Medstar  to  consider  a  strategy  to  beYer   coordinate   these   spaAally  dispersed   research  hubs,   integraAng   them  under   a   single   overarching   strategy   for   innovaAon.   CommunicaAon   is   key  here,  with   the  global   team   in  Sydney  needing   to  build  plahorms   for  strong  internaAonal   interacAon   between   the   naAonal   teams.   This  will   ensure   that  research  teams  work  in  synergy  wherever  they  are  around  the  world,  but  sAll  be   equip   to   meet   local   requirements   for   innovaAon.   Furthermore,   there  would   be   great   value   from   forming   a   Global   R&D   Ambassador   tem,   this  internaAonal   team   will   convene   every   year   in   Sydney   and   will   head   the  naAonal  research  agenda  for  their  respecAve  country.    

RecommendaAon:  Engage.  Partner.  Innovate  Facing  Issues  Before  Moving  Into  EME’s  

30  

Whilst  the  acquisiAon  of  a  company  would  allow  Medstar  to  enter  into  a  new  market,  due  diligence  should  be  performed  to  ensure  that  the  target  is  a  cultural  match  for  Medstar.  AddiAonally,  the  presence  of  an  internal  champion  can  ensure  that  the  realigning  of  processes  and  frameworks  within  the  target  company  occurs  smoothly  and  the  acquirer  can  execute  the  long-­‐term  strategy  for  the  company  in  a  hassle  free  manner.          

RecommendaAon:  Engage.  Partner.  Innovate  How  Medstar  Ltd  Can  Prepare  for  the  Future  

31  

In   order   to   scope   out   the   potenAal   merger   or  acquisiAon  of  an  exisAng  pharmaceuAcal  company.    RaAonale:   this   company   will   have   on   the   ground  operaAons   and   a   branded   reputaAon   in   developing  countries,   rather   than  Medstar   needing   to   undertake  greenfield   investment.   Reduce   the   cost   of   not   being  an   early   mover   into   EME’s   and   minimising   the   last  mover  disadvantage.      Risk:   need   to   ensure   a   clear   strategic   and   cultural  alignment,   and   that   the   core   acAviAes   will   not   be  disrupted  by  the  M&A.        

Undertake  Due  Diligence  

Preferable   markets   to   move   into   would   be  markets   that   are   yet   to   be   saturated,   provide   a  compeAAve  plahorm,  soon-­‐to-­‐be  robust  emerging  middle  class  and  low  poliAcal  risk.  

Execute  M&A  

1  

2  

32  

With   universiAes,   hospitals,   and   similar  partners;  the  value  is  in  the  ability  to  leverage  on   core   local   knowledge   and   fostering  engagement   with   the   community   at   large.    Public-­‐private  partnerships  will   allow  Medstar  to  further  focus  on  conAnuously  innovaAon.  

Build  Strategic  Alliances  

Backward   verAcal   integraAon   with  research  insAtuAons.  This  will  assist   in  building  a  strong  research  component.  

Ver1cal  Integra1on  

3  

4  

33  

A  hub  near  a  cluster  of  synergisAc  ameniAes-­‐  so,  close  to  universiAes  and  hospitals.  This  will  be  a  research   hub   that  will   specialise   in   finding   new  medicines   and   enhancing   and   reissuing   drugs  that  are  close  to  the  expiraAon  of  patent  date.  

Open  Innova1on  Hub  5  

34  

Through   our   analysis   of  Medstar   Limited,   the   industry  and   the   wider   environment,   we   have   been   able   to  outline  recommenda1ons  moving  forward.  These  recommenda1ons  will   tap   into  new  markets  and  capitalise  on  the  opportuni1es  that  are  present.  Implemen1ng  this  new  strategy,  Medstar  will  be  able  to  sustain   its   market   leading   posi1on   through   realising  Shared  Value.  

In  Summary  

35  

THANK  YOU  

THANK  YOU  Designed  by:  Robert  Au  

For:  AusAn  Chia  

MGMT90148  

Melbourne  Business  School,  2015  

37  

All  stock  images  provided  by:  www.geYyimages.com.au      AMFAR,  (2004).  CreaAng  New  Partnerships  and  Rules  of  Engagement,  TREAT  Asia  Report,  Retrieved  from  <hYp://www.amfar.org/arAcles/around-­‐the-­‐world/treatasia/older/an-­‐interview-­‐with-­‐glaxosmithkline-­‐ceo-­‐jean-­‐pierre-­‐garnier%E2%80%94creaAng-­‐new-­‐partnerships-­‐and-­‐rules-­‐of-­‐engagement/Developing>    Bhidé,  A.  (2009).  Where  innovaAon  creates  value.  The  McKinsey  Quarterly,  2,  119-­‐125.      Booz  &  Company,.  (2013).  How  emerging  markets  are  driving  the  transforma7on  of  the  pharmaceu7cal  industry.  Retrieved  from  <hYp://www.strategyand.pwc.com/global/home/what-­‐we-­‐think/reports-­‐white-­‐papers/arAcle-­‐display/pharma-­‐emerging-­‐markets>  Clarke,  M.  (2011)  Emerging  market  growth  pushes  GSK  to  profit,  Fresh  Business  Thinking,  Reviewed  at  <hYp://www.freshbusinessthinking.com/news.php?NID=9471&Title=Emerging+market+growth+pushes+GSK+to+profit#.VV8eQBf9pek>      Countries  Unit:  Cambodia,  (2015).  Retrieved  from  <hYp://www.developingcountriesunit.gsk.com/FileViewer.ashx?f=AssetsLibrary\43\cambodia.pdf>      Crawford,  R.  K.  (2002).  Industrial  Research  InsAtute's  R&D  Trends  Forecast  for  2002:  As  They  Tightly  Target  R&D  Spending  for  Tangible  Business  Results,  IRI  Members  ConAnue  to  Emphasize  Growth  through  New  Businesses  and  Partnerships.  Research-­‐Technology  Management,  45(1),  16.    Developing  Countries  Unit:  Our  Business  Model,  (2015).  Retrieved  from  <hYp://www.developingcountriesunit.gsk.com/Our-­‐innovaAve-­‐business-­‐model>      Developing  Countries  Unit:  Where  We  Work,  (2015).  Retrieved  from:  <hYp://www.developingcountriesunit.gsk.com/Where-­‐we-­‐work>      Developing  Countries  Unit:  Who  We  Are,  (2015).  Retrieved  from  <hYp://www.developingcountriesunit.gsk.com/Who-­‐we-­‐are>      Ernst  &  Young.  (2014).  Rapid-­‐growth  markets.  Retrieved  from  <hYp://www.ey.com/PublicaAon/vwLUAssets/EY-­‐rapid-­‐growth-­‐markets-­‐february-­‐2014/$FILE/EY-­‐rapid-­‐growth-­‐markets-­‐february-­‐2014.pdf>    

Referencess  

38  

FSG  (2012).  Compe7ng  by  Saving  Lives:  How  Pharmaceu7cal  and  Medical  Device  Companies  Create  Shared  Value  in  Global  Health.  Retreived  from  <hYp://www.fsg.org/publicaAons/compeAng-­‐saving-­‐lives-­‐0>        Goldstein,  K.  (2010).  Corporate  ReputaAon  Management  in  the  PharmaceuAcal  Industry.  Ins7tute  for  Public  Rela7ons.      GSK  Announces  Major  New  Commitment  to  Asia,  (2015).  Retrieved  from  <hYps://www.gsk.com/en-­‐gb/media/press-­‐releases/2015/gsk-­‐announces-­‐major-­‐new-­‐commitment-­‐to-­‐asia/>      Kim,  S.,  Peterson,  K.,  Rehrig,  M.  &  Stamp,  M.  (2011).  CompeAng  by  Saving  Lives:  How  PharmaceuAcal  and  Medical  Device  Companies  Create  Shared  Value  in  Global  Health,  FoundaAon  Strategy  Group  (FCG),  pp.  35      Persaud,  A.,  Kumar,  V.,  &  Kumar,  U.  (2002).  Managing  synergis7c  innova7ons  through  corporate  global  R&D.  Greenwood  Publishing  Group.      PricewaterhouseCoopers  LLP.  (2012).  10  Minutes  on  Medical  Innova7on.  PricewaterhouseCoopers  LLP.  Retrieved  from  <hYp://www.pwc.com/us/en/10minutes/assets/medical-­‐innovaAon.pdf>      PwC  Analysis.  (2015).  Retrieved  from  <hYp://www.pwc.com/gx/en/issues/the-­‐economy/assets/world-­‐in-­‐2050-­‐february-­‐2015.pdf>      Our  Strategy,  (2015).  Retrieved  from  <hYp://www.gsk.com/en-­‐gb/investors/invesAng-­‐in-­‐gsk/our-­‐strategy/>    Ward,  A.  (2014).  Pharma  giants  face  developing  market  ambiAons.  Financial  Times.  Retrieved  from  <hYp://www.0.com/intl/cms/s/0/e1b39b2c-­‐2f97-­‐11e4-­‐83e4-­‐00144feabdc0.html#axzz3aljZ3uV4>  

Referencess  

39  

Projected  Growth  Profiles  for  Major  Economies:    Projected  average  annual   real  GDP  growth  rates   for   the  BRICs,  the  US,  the  UK,  the  EU  and  the  world  over  the  period  to  2020  and   in   the   following   three   decades.   Our   model   suggests   that  growth   in  emerging  economies,  par7cularly  China  but  also   to  a  lesser  degree  India,  could  moderate  ader  2020  as  they  mature.  Brazil   and   Russia   show   a   slightly   different   paeern   since   short-­‐term   problems   give   them   scope   to   improve   in   the   2020s,   but  they   too   see   their   growth   rates   revert   back   towards   the  advanced  economy  norm  of  around  2%  in  the  longer  run.  

Appendix  1  (Source:  PwC)  

40  

A  quick  look  on  the  growth  paths  (US$  Billion)    Emerging  7  (E7)  -­‐    the  seven  largest  emerging  market  economies  -­‐  China,  India,  Brazil,  Russia,  Indonesia,  Mexico  and  Turkey,    Versus,  the  mature  economies  (G7)  -­‐  US,  Japan,  Germany,  the  UK,  France,  Italy  and  Canada.    It   is   expected   that   the   E7   economies   will   con7nue   to   be   the  driving  force  of  the  world  economy  in  2014  –  2050.  

Appendix  2  (Source:  PwC)  

41  

Emerging   Market   Economies:   Inflows   from   Foreign   Direct  Investment,  2000-­‐2012      As  published   in   the   report  by   the   Interna7onal  Monetary  Fund,  Regional  Economic  Outlook:  Asia  and  Pacific:  the  past  few  years  in  Emerging  Asia  have  seen  an  upward  trend  in   Foreign   Direct   Investments.   In   2012,   it   aeracted   about   a  quarter  of  the  world’s  FDI  flows.  This  has  risen  sharply  ader  the  global  financial  crisis,  making  these  Asian  countries  an  aerac7ve  FDI  des7na7on.  

Appendix  3  (Source:  IMF)  

42  

0  

1000  

2000  

3000  

4000  

5000  

6000  

7000  

8000  

Australia   Japan   Singapore   China   Malaysia   Indonesia   India  

Healthcare Expenditure per Capita, Asia-Pacific (Source: Frost & Sullivan)

Where  developed  markets  are   struggling  with  a   single-­‐digit,  year-­‐over-­‐year   growth   of   1-­‐4%,   the   Asia   Pacific   market   is  witnessing  strong  double-­‐digit  growth  of  12-­‐18%.  

Appendix  4  (Source:  Frost  &  Sullivan)  

43  

Strengths  •  One  of  the  top  5  largest  pharmaceuAcal  

companies  in  the  world  •  Strong  R&D  focus  and  is  one  of  the  

worlds  largest  investors  in  R&D  •  Vast  resources  and  funds  •  Strong  exploraAon  of  new  markets  •  Global  presence  in  over  100  countries  •  Over  97,000  employees  worldwide  •  Winner  of  awards  regarding  chemical  

industry  manufacturing  and  resource  efficiency.  

•  Strong  sales  and  markeAng  team    

Weaknesses  •  Patent  expiry  dates  •  Controversy  regarding  safety  of  products  

affecAng  GSK  image    •  Controversy  regarding  ethical  pracAce  

affecAng  GSK  image  •  Product  recalls  

   

Opportuni1es  •  Strategic  alliances  with  public  and  private  

organisaAons  such  as  government,  chariAes,  academic  insAtuAons  and  other  pharmaceuAcal  companies  

•  Global  penetraAon  •  Specialised  markets  and  segments  •  Mergers  and  acquisiAons  •  Increasing  awareness  of  healthcare  •  Increase  in  demand  for  health  soluAons  

exp:  HIV/Aids  medicaAons  

Threats  •  Risk  of  product  failure  in  new  markets  •  Increasingly  stringent  regulaAons  and  

legal  requirements  •  Slowdown  in  exisAng  markets  (Europe)  •  CompeAtors  •  AlternaAve  medicines  •  Complacency  as  shown  in  operaAons  

(USA)  

S   WT  O  

In   order   to   conAnue   entering   emerging   markets   with  success,   GSK   must   draw   on   its   strengths,   and   seize  opportuniAes   whilst   minimising   or   managing   its  weaknesses  and  threats.    

Appendix  5  SWOT  Analysis