The Glaxosmithkline Merger: Analysis


Mergers aren't new in pharmaceutical industry in the modern times and the same for both Glaxo Wellcome and SmithKline Beecham throughout each other's background. Considering the political, social and economic resistance, the general driving forces for these mergers in this industry are, more companies showed involvement in using proper partnerships and joint projects to build up and market new products. Though pharmaceutical keeps a global market, the united states market chose the growth of the industry as it supports 45% of the global market. So not surprisingly the US political, social and economic resisted and shipped a strong effect on the expansion of the whole pharmaceutical industry.

However Pfizer's merger pushed Glaxo SmithKline to 2nd rank on the market, they were number one immediately after their merger. Therefore the business changes of the organisation had much impact on the complete pharmaceutical industry. Which means this paper had assessed the reason for the merger and stretch the seeks of the merger is achieved.

Background of SmithKline Beecham:

SmithKline Beecham resulted from the merger of SmithKline Beckman (SKB) and Beecham. Beecham was well known for its traditional research strength whereas SKB was known for its aggressive sales team in US. Although process of merger was prolonged, the change from more laid United kingdom way of Beecham to process focused working was success. The brand new company tried to keep up with critical mass nonetheless they lacked in budgeting R&D, which was the true constrain for company's development.

Background of Glaxo Wellcome:

Glaxo Wellcome's beginning was from Glaxo's takeover of Wellcome in 1995. Glaxo was popular for its strong marketing strategy, commercial success of its R&D efforts and blockbuster product Zantac whereas Wellcome is non-profit medical institution well known because of its academic method of pharmaceuticals. Though there were several clashes between Wellcome's laid back management style and Glaxo's hard-nosed, commercial and control powered culture, with the aid of economic of scale in R&D activities, Glaxo reduced the issues and resistance. Nevertheless the company's growths in producing blockbuster products were missing.

1. Known reasons for the Glaxo SmithKline Merger:

Merger of Glaxo Wellcome and SmithKline Beecham was a global one. The merger was a unique worldwide and various divisions of both companies merged in around 170 countries in 2000, expect Pakistan. The merger emerged through after UK judge order in January 2000; however it took place in Pakistan only on 23rd October 2002. Therefore the merger of Glaxo Wellcome and SmithKline Beecham in Pakistan was the off shoot of the global merger of the firms.

There were six reasons which compelled both legendary companies to go for the merge and also to build a leading company in the whole pharmaceutical industry. The reason why for merging up along were

To reduce the Research & Development pipeline.

To decrease the Research & Development cost.

Drug reimbursement issues.

Political pressures and growing concerns over medicine prices.

Patent expirations / Universal competition.

Recent improvements in biotechnology and the mapping of the human genome.

The right theme and idea backing the merger was, to improve quality of human life for allowing people to do more, feel better, live much longer. As both companies supports the durability in more similar kind of field that is, developing drugs for infectious respiratory neurological gastrointestinal and metabolic disease, they would like to lead just how in providing treatment for the same. Apart from the above field, the be a part of company were the world's leading suppliers of prescription drugs, vaccine and consumer health care products. So they organized for delivering innovative medications and products that help billions of people across the world live much longer, healthier and more comfortable life.

The complete pharmaceutical industry was focusing and investing in R&D as it offers modern ways to handle prolonging problems and helps in the long term development of the industry. The hunger to deliver drugs for new diseases made the join group (GlaxoSmithKline) to pay more attention in R&D and wanted to reduce the range of products in the offing of R&D. Though both companies produced similar kind of drugs and so integrating their products brand was very obvious, the process demanded additional time and efforts. This was mainly because; both got more volume of products in the pipeline and hardly possessed blockbuster products in market. Still the management assumed that enough time for focusing on new diseases will be reduces by working along on lesser products. And generally all research and development evolves a risk of failure. Not that all compounds and everything research towards growing new drugs for a targeted diseases comes out as success but in turn consumes about time, work and money. But the R&D is the only real answer for the long term growth of both the joint company and the industry. So sticking with mission and vision of the new company, GSK has decided to focus of R&D but in a different way of methodology. i. e. cost keeping, economics of range and licensing from other firms.

Apart from these, a PEST evaluation on the pharmaceutical industry will give a specific picture and spotlight the hidden reason behind the recent merger activities in industry and specifically GSK.

PEST Research on Pharmaceutical Industry:


Considering the Medicare in USA and UK's Country wide Health Service, the level of politics interest developed in this industry can be driven. In addition USA and Western market contain the first and second place of industry's global market respectively. So it is very clear that the industry has gained a massive political attention as a result of increasing social and financial burden of medical and protection.

In the increased politics attention on the industry, has stored the industry low to reside in up the expectation and their interference on most moves of the industry was an extremely being concerned the giants of the industry. Also the pressure of civil in fast delivery of products has maintained their quality and the industry confirms hard in providing effective products.


The economic development of the industry was swift lately and next to IT industry with nine geographic market segments take into account over 80% of global pharmaceutical sales they are US, Japan, France, Germany, UK, Italy, Canada, Brazil and Spain. Of this above listed marketplaces, US market keeps a significant one and quickest too however there may be down fall in 2009 2009.

"THE UNITED STATES Pharmaceutical Industry is one of the mainstays of the Market of America. It has been observed that the US Pharmaceutical Industry is growing at an instant pace and is showing no indications of slowing. THE UNITED STATES Pharmaceutical Industry Growth is also considered as an extremely significant part on earth pharmaceutical industry as well".

Source: http://www. economywatch. com/world-industries/pharmaceutical/us. html

"Matching to analysis, in '09 2009, global pharmaceutical sales increased by only 2. 5% ~ 3. 5%, achieving a total of about 750 billion-760 billion U. S. dollars, which is leaner than in October this past year the development rate of 4. 5% to 5. 5%, a total of 8200 the forecast 100 million U. S. us dollars. This development rate is the cheapest in the past 25 years. "


http://www. sourcejuice. com/1169843/2009/05/08/Growth-rate-global-pharmaceutical-industry-lower/


Every industry will try to truly have a good social relation. But this industry is many steps forward than the other sectors because; a healthy body can be an important personal and public requirement. All of the companies of this industry maintain and play a vital and unique role gratifying society's need for well being. And risk of some killing diseases like, AIDS, SWINE FLU, SARS etc. had not only attracted the attention of general public and multimedia but developed a more depending and demanding situation on the industry.

This immense situation has made the industry to keep up direct relationship with the society (consumers) with the aid of media and federal government care.


The advance medical technology have increased the need for high spending in research and development when it comes to encourage the innovation. The expansion of technology drives the industry to responds faster to the expectation of the surroundings. This technology progress evolves both hazards and rewards.

Legal Environment:

However in current situation, federal government consists of the industry in the proposal for regulatory outflows to encourage the development, these legal and regulatory affairs folks in special was a speed beaker for the introduction of the industry. Western pharmaceutical giants really battled in this example.

"Sykes's affirmation summarized how Europe's pharmaceutical companies have been locked in a higher stakes multibillion dollar struggle with their US rivals in which to stay business in the 21st century. This struggle is associated with increased takeover activity and pharmaceutical companies seeking economies of level to finance escalating research and development finances. "

Source: Research study - "GSK - a merger too far?" Exploring Corporate Strategy by Johnson, Scholes & Whittington.

2. From what extent hold the aims of Glaxo SmithKline merger been achieved?

Some of the seeks of the recently formed Glaxo SmithKline were,

Not to safeguard future earnings growth but actually to increase critical mass to essentially outperform the industry.

To become the indisputable leader on the market in conditions of conquering the problems that the industry faces.

To deliver progressive products that helps large numbers of people on the globe to live longer, healthier and happier.

To achieve the aims, the management formed a new framework for R&D, highlighting the cost reductions and breaking of pipeline. However, the lack of focus on general organisational composition and internal management structure led to low returns set alongside the estimate one. To take care of the situation, the all the long terms aims has left unfocused and the management attempted to recover the business from the 'sudden-death symptoms'.

This clearly gives an data for Glaxo SmithKline's downfall form the anticipated growth. The shortcoming of GSK in producing blockbuster products, joint palm with the above mentioned detailed situation made things worse.

Focusing on employees and other internal management issues in the later part helped the business to handle the global resisting issues and concentrate on their long term goals.

Analysing GSK's currency markets performance (1998 - 2003), instructs that GSK failed to touch the anticipated levels and were only in a position to sail combined with the industry growth. Predicated on the Lewin's make field model, the driving a car forces of GSK were not too enough to overcome the level of resistance for change and so didn't achieve the resolved target.

Evidence for GSK loses record:

In the first time of post-merger, GSK said 12% increase in pharama industry, by making use of cost benefits and disposal of assets. The firm anticipated double the amount of saving in the next year. Medical care and attention grew only 3%.

They neglect to record returns in R&D in spite of blended R&D budget and investment. It also didn't deliver blockbuster product to enhance the earnings. Instead to keep up the tempo, the management placed buying 40 licenses from other companies.

GSK has shed more than 15, 000 jobs; Managers were unable to wthhold the talent that resides on the companies. Instead of creating a "powerhouse", research was put into smaller, autonomous systems. (Abrahams, 1992 p. 22)

GSK's new radical composition was a response to a series of failures in research at the two merger companions. (Dyer, G. , 2002 p. 3). The new radical framework resulted Wayne Palmer (Brain - Development) resignation in Oct 2002.

At the AGM on 19 May 2003, GSK shareholders turned down a action regarding a 22 million pay and benefits offer for CEO, JP Garnier. This is the first time such a rebellion by shareholders against a significant British company has happened, but was seen as a possible turning point against other so-called "fat cat" deals within executive pay structure.

Source: http://en. wikipedia. org/wiki/GlaxoSmithKline

In November 2005, AIDS Healthcare Foundation accused the business of enhancing its short-term monopoly profit by not increasing production of the anti-AIDS medicine AZT despite a surge popular, hence developing a shortage that influenced many Helps patients in Africa. GSK announced that it experienced halted clinical tests of the CCR5 entry inhibitor, aplaviroc (GW873140), in HIV-infected, treatment-naive patients because of concerns about severe hepatotoxicity. [27] In June 2006 GSK said it was further clipping, by about 30%, the not-for-profit prices it charges for many of these medications in the world's poorest countries.

Source: http://en. wikipedia. org/wiki/GlaxoSmithKline

To analyse, stretch the aims of the merger have been achieved; SWOT research is done on the joint company, Glaxo SmithKline. Remuneration lenient explicitly

SWOT Research - Glaxo SmithKline:


High potential staffs and experienced professionals.

Wide-ranging set of documents in health sector.

Strong program in healthcare division.

Strong market position

Focus to concentrate and develop authority in Public relationships i. e. to strengthen the social context of the surroundings.

Modern hospital system, Clear general public health and healthcare service purchasing

Balanced funding in medical sector

Strong IT development

Product development background.


Lack of clear and wide perspective. goals to achieve the aims

Weak connection among healthcare, public health and social care and attention.

Inability to handle the cost rises.

Low brand value because of its products.

Inefficiency in motivating the experienced head and thus failing woefully to make maximum use of the actual staffs.

Lack of practical training and management skills.

Not a competent HR strategy in retaining key pros.

Lack of right proposition of varied competences.

Co-marketing agreements can limit GSK's global existence.

With mass R&D, lack of ability to produce blockbuster products.


Technological development

Social changes and difficulties.

Economic development of the industry (immediately next to IT industry).

Free motion of goods, services, labour.

Developing vaccines for prolonged diseases chance to acquire craic.

Empowerment of citizens and their better engagement


Patent expiry on drugs that generate strong income

Ageing and demographic change.

Safety issues surrounding the products.

Ecological and open public health hazards.

Expectations of the bringing up population

As the R&D of global competitors focus on similar products in the majority of the cases, your competition is high and much demanding.

Emerging of potential local market like China and India.

Political pressure in correcting the purchase price for new drugs, which does not fulfil even the study cost.

Ever increasing cost of drug trials and ever higher standards enforced by national medication approvals physiques (Aspirin wouldn't normally get approval if invented today!)


Thought there are several giants in the industry, similar to the current situation, there was an uncertain situation during the period of early 90s. Also to get over that uncertain situation, almost all of the firms on the market move themselves for the strategy "Mergers and acquisition". But, as there's always a expressing that not absolutely all mergers works, almost all of the mergers on the market neglect to achieve the expected growth and Personally i think Glaxo SmithKline is the right example for the situation. GSK presumed that bigger the size, bigger the expansion and bigger earning. Nonetheless it failed to appreciate bigger the size, bigger the expectation, bigger pressure and failing woefully to cope with the pressure and keep carefully the expectation will reflect badly.

Various merger analyse debated, though GSK declare some success through cost cutting down and pipeline synergies, the targeted and announced progress was not received in terms of market.

So I conclude that, the merger offered the company only in short term success and failed to achieve the seeks of the merger.

Reference and Source:

http://www. ucc. ie/quality/INTERNET/PESTAnalysis. pdf

www. gsk. com

Johnson G, Scholes K and Whittington R (2008) Discovering Commercial Strategy, (Prentice Hall)

http://en. wikipedia. org/wiki/GlaxoSmithKline#cite_take note-43

http://www. wikiswot. com/SWOT/4_User_Generated/GlaxoSmithKline. html

http://www. allfreeessays. com/essays/Gsk-Swot-Analysis/114901. html

Mullins L. J. (2007), Management and Organisational Behavior, Eighth Edition, Great Britain, Pearson education limited.

http://www. pwc. com/us/en/issues/business-combinations/publications/snapshot-mergers-acquisitions-business-combinations. jhtml

http://www. startupbizhub. com/company-mergers-and-acquisitions. htm

Also We Can Offer!

Other services that we offer

If you don’t see the necessary subject, paper type, or topic in our list of available services and examples, don’t worry! We have a number of other academic disciplines to suit the needs of anyone who visits this website looking for help.

How to ...

We made your life easier with putting together a big number of articles and guidelines on how to plan and write different types of assignments (Essay, Research Paper, Dissertation etc)