Glaxosmithkline Beecham Case Study

1125 Words 5 Pages
Problem Identification/Issues

The merger between SmithKline Beecham and Glaxo Wellcome came about as both companies had poor returns to Research and Development (R&D) investment even though sharp increases in spending on we made in both companies. One GlaxoSmithKline (GSK) was formed they were under pressure as patents were on the verge of expiration and there were a lack of new drugs on the market. As it related management, there was a carry-over is issue with regards to Wellcome having laissez-faire management style which saw them operating unconscious of budget control whilst Glaxo was uncompromising, optimal profit and control-driven in nature. Analysts were therefore concerned whether their merger produced any synergies at
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Capabilities are formed when resources are integrated to achieve specific goals. Pharmaceutical companies merge with the intent to create economies of scale that fund research and development budgets. The matrimony between Glaxo Wellcome and SmithKline manifested due to the industry indicating its great need for critical mass in R&D and global marketing presence in order to gain competitive advantage for any one company. Patents can effectively protect proprietary technology the pharmaceutical industry. As such, GlaxoSmithKline when formed was more assured of an income stream by patent protection as a singular drug didn’t account for greater than 12% of revenue and leading up to the merger only 7% of Glaxo Wellcome’s revenue came from drugs that had US patents expiring earlier than 2006 in contrast to SB’s 33%.
II. The company has grown greatly in Central and Eastern Europe. Their share price had rocketed and associated costs to maintain and grow their presence in these markets such as marketing of new products were growing quickly as well. It was important for them to expand globally as a first-rate competitor cannot conduct all its operations from only their US home market that represented 6 to 8 per cent of its existence. The US accounted for 45% of the global pharmaceutical market so growth was more feasible on a global
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Beecham and SmithKline Beckman both felt threatened as potential takeover targets hence their merger. Glaxo’s hard-nosed culture however, prevailed over Wellcome’s compassionate style. Fewer former Wellcome executives carried over from the takeover to form Glaxo Wellcome. Senior managers of GlaxoSmithKline (GSK) need to pay keen attention when developing their own culture. Regulatory delays consumed over 10 months of negotiations which backtracked the merger process twice and would have put of this activity. It however needs to be done thoughtfully and in a timely manner so as to have the GSK benefit from economies of scale in the reduce costs and potential payoffs that could manifest from harmonizing the merged companies’ research skills. A supportive culture was formed as Garnier and others in senior management made efforts to get closer to employees via their method of correspondence. Members from each of the previous teams felt efforts to unite both cultures were being

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