Marketing Strategy of GlaxoSmithKline plc
Introduction
An organisation endevours to consolidate all its marketing goals into a single all-inclusive plan. This is an important factor in determining a good marketing strategy. Seeing as marketing strategies enable a company to realise its marketing objectives, it is not surprising that they often entail the four Ps. While there is no consensus among marketers and scholars on the true definition of a marketing strategy, McDonald (2007) states that a marketing strategy "reflects the company's best opinion as to how it can most profitably apply its skills and resources to the marketplace" (p. 298). GlaxoSmithKline plc (GSK) is a multinational pharmaceutical company founded in the UK. To remain competitive in the aggressive global pharmaceutical industry, the company has adopted a market product life cycle that enables it to achieve its set objectives.
Prajapati and Dureja (2012) have defined a product life cycle as "the succession of stages from the product's birth until its final withdrawal from the market" (n.p.). The typical product life cycle of a pharmaceutical company like GSK has five stages:
Product development: During this stage, the company makes no sales and instead, has to invest heavily in order to develop a product that will suit its consumer needs. Profits are hence negative. Introduction: The introductory phase starts when the company has fully developed and tested its new products and it hence seeks to introduce it to the market. It is characterised by low sales, and the company also incurs a high cost to acquire new customers, usually physicians. During this period, competition is limited and profits are negative (Cavusgil et al., 2014). This is the stage at which the company starts to create demand for its product. The marketing strategy adopted is to establish a selective distribution network, in addition to creating product awareness.
Growth phase: This is charactersied by a rapid increase in sales and increased profits. GSK endevours to sustain the growth phase through the adoption of such strategies as continuous innovation and improvement of its product quality. In addition, the company seeks to enter new segments and new markets, offer trade outlets more incentives, and also expand its distribution channels.
Decline phase: This is characterised by declining sales, competition, and profits. to deal with the situation, GSK reacts by withdrawing its products from the markets where profits and sales have declined drastically, alternatively, the company could be forced to phase out its products in specific geographical in an effort to avoid additional losses. Another strategy includes limiting the marketing promotional efforts and channeling such resources to other drug products that are either in the introductory or growth phase.
GSK lives by its mission to "do more, feel better and live longer" (GSK, n.d.). GSK's marketing approach hinges on three key priorities. The first priority involved "growing a diversified global business". In this case, GSK has endevoured to diversify its business with a view to developing a balanced product portfolio, and also in order that the company may stop over-relying on traditional western markets. Moreover, GSK has also heavily invested in such key growth areas as Vaccines, Emerging Markets, as well as Consumer Healthcare business. The second strategy that GSK is committed to achieving is "delivering more products of value". In this case, GSK seeks to sustain its business by investing in R&D in order to come up with innovative products that meet the needs of its consumers. The third strategy that GSK is committed to achieving is "simplifying the operational model". Following the merger between SmithKline Beecham and Glaxo-Wellcome in 2002, the ensuing company, GSK, became a large and complex organisation. The company is thus seeking to transform its operating model by reducing complexities, reducing costs, and increasing efficiency.
Companies in the pharmaceutical industry are faced with increasing competition as rivalry invests in innovative R&D in order to stay ahead of the pack. This, coupled with changing market dynamics will necessitate GSK to adopt strategies that enable the company to not only secure its brand but also expand its market position. One of the strategies that GSK should adopt is market optimisation since it acts as a vital approach for sustaining growth and enabling the company to remain competitive (Thomsonreuters, 2014). GSK can realise its desired growth while still remaining competitive by entering into a strategic alliance with other companies in the emerging market. For example, in 2009, GSK entered into one such strategic alliance with Dr. Reddy's Laboratories. The aim of this partnership was to enable GSK "develop and market select products across emerging markets outside India" (Buckley and Ghauri, 2015, p. 647). Market positioning is also crucial for GSK if at the company is to realise its objectives. Lewis-Cameron and Roberts (2010) have described market positioning as "the interface between brand identity and brand image" (p. 53). Positioning allows a company to benefit in one of two ways. First, positioning enables consumers to differentiate your brand from those of your competition with relative easies. Secondly, positioning gives your brand its own distinctiveness and this could act as a source of competitive advantage. Innovation and R&D are key requirements for companies in the pharmaceutical industry that seek to remain competitive. Towards this end, GSK has altered its focus from making minor adjustments to its products and instead, embraced true innovation. In particular, GSK has invested more in the development of rare diseases and oncology drugs. Such a focus is anticipated to enable the company to improve its pricing power and approval rates (Conover, 2013). Another strategy that GSK has embraced is to strategically branch out from its markets in developed economies into emerging markets (Politis, 2012). These are price-sensitive markets but the company has managed to rely on its vaccine and consumer markets to position its products strategically.
As explained above, expansion into the emerging market remains the most viable expansion strategy. However, such a strategy could be faced with various barriers. One such barrier is the issue of infrastructure development. Certain countries in the emerging market lack well-developed healthcare infrastructures since their main priority is on ensuring increased access to healthcare. For this reason, the company may face challenges in its expansion approach. Another barrier that GSK could be faced is the issue of cost containers. Various countries have implemented containment measures with a view to enabling the government to manage the costs incurred in evolving healthcare systems. For example, some governments depend on tendering for their hospitals. This compels governments to introduce price caps on medicines as they seek to ensure that drugs become increasingly affordable to patients. This could limit GSK's quest to increase profit margins in such markets owing to price restrictions (Pwc., 2013). Other emerging markets such as China and Brazil are also embracing value-driven drug pricing and evaluation, as is the case in mature markets. This could limit GSK's access to such markets. However, the rapid growth in the emerging market will enable the company to realizes increased sales volumes and market share more than the developed markets.
As a key player in the global pharmaceutical industry, GSK is likely to be faced with increased commercial pressures in the next five to 10 years. For example, the "blockbuster model" which enabled pharmaceuticals to recoup their investment from R&D through extended patents on drugs is coming under increased pressure because the profits made by pharmaceutical companies are no longer sufficient to sustain their R&D activities during their patent life (Taylor, 2015). The number of new pharmaceuticals approved relative to investments made in R&D will also be expected to reduce considerably. We can therefore expect an increase in mergers and acquisitions within the global pharmaceutical industry, as firms endevour to capitalise on the synergy brought by such partnerships such as market research intelligence, R&D, and reduced cost and staff reductions. pharmaceuticals will also come under increased pressure from governments and environmental lobby groups to go "green" in an effort to drastically reduce environmental pollution. Consequently, GSK will be forced to observe various environmental laws in different jurisdictions, and this could increase their operational costs in such markets. Increased regulations will also result in increased drug development times and extra operational costs, with a resultant decrease in patent expiry time. SK is also likely to face stiff competition from generics as they enjoy increased market penetration. This is because governments and manufacturers are on the lookout for affordable, yet effective drugs.
Conclusion
GSK is a leading player in the global pharmaceutical industry. This is a highly competitive industry and to retain its market share and brand loyalty, GSK has relied on various strategies, including heavy investment in R&D and innovations in product manufacture. Additionally, GSK capitalises on product awareness and selective distribution during the introductory phase of its product life cycle, entering new segments and expanding its distribution channels to enhance its growth phase, as well as withdrawal of products from markets with declining sales during the decline phase. In terms of market approach, GSK relies on brand diversification, such as entering the emerging market and the vaccine markets, and innovations to add value to its products. To secure its brand and expand its market position, GSK relies on market optimisation techniques, such as forming strategic allegiances with other companies. True innovation also enables GSK to increase its pricing power and product approval rates, in addition to expanding into the emerging market. However, this presents such challenges as a lack of infrastructural developments in emerging markets and the issue of cost containment. Over the next five to 10 years, GSK is likely to come under increased pressure to enter into mergers and acquisitions owing to lost profitability, not to mention the need for increased environmental legislation by various governments, as well as competition from generics.
References
Buckley, P.J., and Ghauri, P.N., 2015. International Business Strategy: Theory and Practice. London: Routledge.
Buente, M., Danner, S., Weissbäcker, S., and Rammé, C., 2013. Pharma emerging markets 2.0. How emerging markets are driving the transformation of the pharmaceutical industry.
[Online].
Cavusgil, S.T., Knight, G., Riesenberger, J.R., Rammal, H.G., and Rose, E.L., 2014. International Business. Melbourne: Pearson Australia.
Conover, D., 2013. GlaxoSmithKline Retains its Competitive Advantage. [Online]. GlaxoSmithKline., n.d.. About Us. [Online].
Lewis-Cameron, A., and Roberts, S., 2010. Marketing Island Destinations: Concepts and Cases. London: Routledge.
McDonald, M., 2007. Marketing Plans: How to Prepare Them, how to Use Them. Oxford, UK: Butterworth-Heinemann.
Politis, J., 2012. ECMLG2012-Proceedings of the 8th European Conference on Management, Leadership and Governance: ECMLG. Reading, UK: Academic Conferences Limited.
Prajapati, V., and Dureja, H., 2012. Product lifecycle management in pharmaceuticals. Journal of Medical Marketing, 12(3).
Taylor, D., 2015. The Pharmaceutical Industry and the Future of Drug Development, Pharmaceuticals in the Environment, 1-33.
Thomsonreuters., 2014. Ways to prosper in the increasingly competitive global pharmaceutical market. Which direction should you take your company. [Online].
