Harvard Business School Case: Smithkline Beecham
Harvard Business School Case: Smithkline Beecham
Corporate strategy. Scope, Scale,5 forces, SWOT, Direction, long term, Competitive advantages, Stakeholders
1.Direction The first key concept of strategy is the direction the company wants to follow. The direction of SmithKline Beecham clearly adjusts in order to cope with the increasing competition in the pharmaceutical industry.
In 1989, SmithKline Beecham was formed out of a merger of SmithKline Beckman and the Beecham Group. Five years later, the Annual Report Chief Executive Leschly wrote: "Through a series of strategic acquisitions and disposals, SB made progress in its transformation from a company made up of four successful, but separate, businesses into a unified organisation focused on human healthcare." To reach SB's philosophy several actions were taken by management: •they were the second firm that integrated vertically (with DPS); •DPS was sold in 1999 because of failed efforts to control distribution channels; •It divided its operations into four and later in three businesses: SB Pharmaceuticals, SB Healthcare Services and SB Consumer Healthcare.
The direction of the management can best be seen as 'vision' because of their philosophy. They have a vision and want to achieve it, no matter what road they take. The figure below represents this approach.
2.Long term The most eye-catching trait of the current global pharmaceutical industry is that the largest pharmaceutical companies consolidate to become the number one in the industry. For example the merger between Zeneca and Astra, which became AstraZeneca, which is now the world leading pharmaceutical company. These facts were all to the detriment of SmithKline Beecham, which became smaller in comparison with its giant competitors .
SB slipped from the 4th position in rank to the 9th player in the market in eight years, since 1989. Therefore it focused on a merger strategy and went into merger talks with AHP and later with Glaxo Wellcome. A merger with Glaxo would make the new combination a number one, with around 8% market share. Currently the merger talks with Glaxo Wellcome seem to be failed, but if the goal is to be a giant, this is the road to become one.
3.Environment (STEP, Porter, SWOT) STEP Socio-cultural factors The demand for medicines changed in the last 20-30 years. There is a clear shift from antibiotics towards more complex drugs for cancer, heart diseases and more. The effectiveness of these drugs is more difficult to test and requires a longer R&D process. A trend of increasing use of drugs...