GSK PESTEL Analysis | Business Teacher
- British-based GSK is drawing up contingency plans to secure its supply chains after the UK leaves the EU. Currently strong ties with EU manufacturers will mean increased costs once Brexit occurs. To avoid this, GSK is negotiating politically to ensure that the UK government will guarantee minimal disruption will occur (Vina, 2016).
- In China, GSK are currently suffering from further accusations by the head of the Communist Party of China’s (CPC) anti-corruption watchdog into whether GSK executives ordered subordinates to commit bribery to boost sales (Zhang, 2017). This comes from a previous case where GSK agreed to pay $20 million to settle allegations of bribery to Chinese officials (Robinson, 2016).
- In the United States, increased governmental involvement over medical prices have forced pharmaceutical companies to offer big discounts on their top-selling medicines. Under Trump’s administration, further cuts are expected to the Medicare service which will force GSK to be even more competitive with drug pricing (Hirschler, 2016)
- Whilst uncertainties surrounding Brexit are causing political issues for GSK. In the UK market, the weakened pound has led to group sales surging 23% in 2017. As a result, GSK have reinvested the profits into eleven new products that are estimated to bring sales of £6bn a year by 2018 (Vina, 2017).
- However, while overall profits are up. The Brexit decision has led an increase in exchange rates. To meet these new factors, GSK are changing how they operate within the UK. Original expansion plans for a £350m factory in Cumbria have now been cancelled, with a loss of a potential 320 jobs. Furthermore, to save costs GSK are selling their ‘Horlicks’ brand and shutting the Slough manufacturing plant (Fletcher, 2017).
- While many Western markets are economically unstable, profits in the Indian market continue to grow and account for 30% of GSK’s profits. The low exchange rate between India and the UK has led to GSK looking to move investments into India with a planned factory for 2018 (The Economic Times, 2017).
- From 2016 GSK have announced that the company will no longer file drug patents in the lowest-income regions of the world. What this means is that affordable healthcare will be more easily accessible to all. Furthermore, GSK also invests 20% of any profits its makes in the least-developed countries into training health workers and building medical infrastructure (Mukherjee, 2016).
- With an aging global population, GSK have announced in 2017 the move towards a new form of HIV treatment. Traditional pill treatment can prove problematic as people become older. GSK understand the social need for new forms of treatment and invested heavily to meet a new market demand (Crow, 2017).
- Since 2015, GSK have worked to help combat the global epidemic of the Ebola Virus. Working in partnership with the World Health Organisation, GSK are funding projects to improve existing Ebola vaccines. The positive publicity has resulted in GSK maintaining a positive image of social responsibility by consumers (Cookson, 2017).
- Traditionally GSK were ranked one of the lowest in terms of investment into R&D against their competitors in 2016. To meet investors demands, GSK have invested to restructure their R&D sector in 2017. In July, GSK have unveiled their latest investment in the field of artificial intelligence. As part of a $43m deal, GSK are using AI to predict how drugs will behave to save time and money on unnecessary traditional tests (Hirschler, 2017).
- From 2016 GSK have heavily invested in automation solutions to increase production levels. Through software investments, GSK have now cut manufacturing request times from three weeks to four days. This has allowed GSK to resupply companies faster and provide financial saving in production times and minimise costly downtime (Neville, 2017).
- GSK are also partnering with data handling companies to invest in supercomputers which, GSK hope will reduce the time it takes to identify a disease. The advantage of this would allow for faster development on medical treatments and the competitive advantage on being first to market with treatments (Hirschler, 2017).
- From 2015 GSK have switched production to ‘continuous manufacturing’ which allows for medicines to be made cheaper, faster and with a smaller impact on the environment (GSK, 2017).
- GSK work within a highly regulated and enforced industry. Within the countries GSK operate, they must follow a wide range of law, regulations and compliances before selling their products. To meet these standards, GSK spend upwards of £100m in legal charges to ensure the company operates within guideline perimeters (Irvine, 2017)
- After the Chinese corruption scandal, GSK have reinvested their interests into the $10bn market. However, to meet new Chinese laws, GSK have had to invest heavily in new ‘anti-bribe’ training for their drug reps. The hiring of new in-house compliance officers, the investment of training and the removal of incentives all have tried to demonstrate GSK’s commitment to repairing their reputation within China (Ward & Waldmeir, 2015).
- Cookson, S. (2017) Demands of disease drive vaccine science. Financial Times. [Online] Available at: https://www.ft.com/content/ca911ce2-155b-11e7-b0c1-37e417ee6c76 [Accessed 25/07/17]
- Crow, D. (2017) GSK claims new HIV combination therapy will be ‘less harmful’. Financial Times. [Online] Available at: https://www.ft.com/content/c3a90b3c-f20c-11e6-95ee-f14e55513608 [Accessed 25/07/17]
- Financial Times. (2017) GSK: continuity candidate. Financial Times. [Online] Available at: https://www.ft.com/content/20398414-2a96-11e7-9ec8-168383da43b7 [Accessed 25/07/17]
- Fletcher, N. (2017) GlaxoSmithKline to sell UK Horlicks brand and scrap factory plans. The Guardian. [Online] Available at: https://www.theguardian.com/business/2017/jul/19/glaxosmithkline-sell-uk-horlicks-brand-scrap-cumbria-factory-plans [Accessed 25/07/17]
- GSK (2016) Annual Report 2016. GSK. [Online] Available at: https://annualreport.gsk.com/ [Accessed 25/07/17]
- GSK. (2017) Less is more with advanced technologies in manufacturing. GSK. [Online] Available at: https://www.gsk.com/en-gb/behind-the-science/how-we-do-business/less-is-more-with-advanced-technologies-in-manufacturing/ [Accessed 25/07/17]
- Hirscheler, B. (2016) Sanofi, GSK expect further price pressure, more M&A under Trump. Reuters. [Online] Available at: http://www.reuters.com/article/us-usa-trump-pharmaceuticals-idUSKBN13A21M [Accessed 25/07/17]
- Hirschler, B. (2017) GlaxoSmithKline the latest drug maker to recruit robots to find new drugs. Business Day. [Online] Available at: https://www.businesslive.co.za/bd/companies/2017-07-03-glaxosmithkline-the-latest-drug-maker-to-recruit-robots-to-find-new-drugs/ [Accessed 25/07/17]
- Irvine, J. (2017) GSK changes way it accounts for significant legal expenses. Economia. [Online] Available at: http://economia.icaew.com/en/news/april-2017/gsk-changes-way-it-accounts-for-significant-legal-expenses [Accessed 25/07/17]
- Mukherjee, S. (2016) How GlaxoSmithKline Is Changing the World. Fortune Health. [Online] Available at: http://fortune.com/2016/08/18/glaxosmithkline-change-world/ [Accessed 25/07/17]
- Neville, S. (2017) GSK chief plans to shake up culture and competitiveness. Financial Times. [Online] Available at: https://www.ft.com/content/8edd1054-6c9d-11e7-b9c7-15af748b60d0 [Accessed 25/07/17]
- Robinson, M. (2016) Glaxo to Pay $20 Million SEC Fine Over Bribery in China. Bloomberg Markets. [Online] Available at: https://www.bloomberg.com/news/articles/2016-09-30/glaxo-to-pay-20-million-sec-fine-over-bribing-chinese-officials [Accessed 25/07/17]
- The Economic Times. (2017) GSK Pharma to invest Rs 1,000 crore in Karnataka plant. The Economic Times [Online] Available at: http://economictimes.indiatimes.com/articleshow/59513334.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst [Accessed 25/07/17]
- Wars, A., and Waldmeir, P. (2015) GlaxoSmithKline navigates difficult path in China after scandal. Financial Times. [Online] Available at: https://www.ft.com/content/7bcaa5de-93c9-11e5-9e3e-eb48769cecab [Accessed 25/07/17]
- Ward, A. (2016) GSK chief says pressure on US drug prices to rise. Financial Times. [Online] Available at: https://www.ft.com/content/3e9b54ca-0c7c-11e6-9456-444ab5211a2f [Accessed 26/07/17]
- Vina, G. (2016) GlaxoSmithKline lays plans to secure post-Brexit supply chain. Financial Times. [Online] Available at: https://www.ft.com/content/02c37d0e-9b85-11e6-b8c6-568a43813464 [Accessed 25/07/17]
- Zhang, C. (2017) Where Is China’s Corruption Crackdown? The Diplomat. [Online] Available at: http://thediplomat.com/2017/07/where-is-chinas-corruption-crackdown/ [Accessed 25/07/17]