Strategic management analysis of Alli weight loss program makers

Strategic Management Analysis of the Alli Weight Loss Program (Makers of)

Obesity is becoming a growing problem in our contemporaneous society as our exercising activities decrease, we become more sedentary and tend to eat less healthy. In this context then, a new market evolved -- that of weigh loss products and services. The aim of this paper is to assess a new player in this industry -- GSK as the makers of the Alli Weight Loss Program.

Company Description

The Alli Wight Loss Program is manufactured and distributed under the GSK logo, the largest pharmaceutical company in the United Kingdom and the second largest in the globe. The history of GlaxoSmithKline is a long and interesting one, commencing in 1880 and continuing to today. The current organization is the result of a 2000 merger between GlaxoWelcome and SmithKline Beecham. The company's mission is organized onto three directions -- growth of a diversified global business; delivery of more products of value and third, simplification of the operating model. More details on the mission statement are available on the company's website, under the heading Our mission and strategy as http://www.gsk.com/mission-strategy/index.htm.

3. External Environment

The most useful means of conducting an analysis of the external environment is that of looking at the political, economic, socio-cultural and technological forces, organized under the PEST analysis (Net MBA, 2007).

Political forces: the political climate in the United States is relatively stable, with modifications being possible to occur due to the recent change in presidents; otherwise put, it is possible for the new Obama administration to issue new laws for pharmaceutical organizations and products; legislative changes generally bring about financial costs as the organizations have to comply with new regulations

Economic features: the current state of the economy is a precarious one due to the crisis that emerged last year and turned into a recession; however pharmaceutical companies are not entirely recession-proof industries, they are among the least affected sectors as people will get sick and requires medicine regardless of economic cycle; in the future, the economy is expected to regain its strength

Socio-cultural characteristics: people are stressed, they eat more and less healthy aliments and exercise less; these led to a situation in which obesity is a growing social matter; due to reduced time, people seek easy solutions to loose weight, leading as such to a growing demand for weigh loss products; the future is uncertain, as there is a possibility the population will realize the danger and care better for their weight or the matter of obesity will continue to make victims

Technological features: the IT is the domain which develops at the highest rate with numerous innovations in healthcare and pharmaceuticals being already available; these innovations improve living standards for the populations, but also support economic agents in increasing their operational efficiencies; it is expected that the ascendant trend be maintained in the future as more and more applications will be developed

4. External Evaluation Matrix

Key External Factors

Weight

Ratings

Weighted Score

Opportunities

1. Demand for weight loss programs

20%

4

0.80

2. Obesity problems

20%

4

0.80

3. Technological Innovations

15%

3

0.45

Threats

1. Legislative change

10%

2

0.20

2. Economic instability

35%

1

0.35

Total

2.6

5. Competitor Analysis

Having assessed the environment in which GlaxoSmithKline operates, it becomes of relevant importance to assess the competitive climate. This will help the reader form a better opinion of the company by placing it within its operational context and its industry and market. Demand for pharmaceutical products reveals an uneven trend and is determined by the occurrence of illness and the desire to cure it. Large companies, such as GSK, have created scale economies and benefit from large resources to finance their research and marketing activities. Smaller size entities compete in local markets and often by becoming specialized in one or two ailments. The production of medicine increased by 11% throughout 2008 and is expected to grow at a lower rate in the years to come; the increase is however expected to be sustainable with 7% in 2009 and 2010, 8% in 2011, 9% in 2012 and 8% in 2013 (Hoovers, 2009).

GlaxoSmithKline's main competitors are Novartis, Pfizer and Sanofi-Aventis. The table below reveals the 2008 highlight in terms of sales and individuals employed for GSK and its primary three rivals:

GSk

Novartis

Pfizer

Sanofi-Aventis

Sales ($ million)

35,244.6

42,584.0

48,296.0

40,617.6

Employees

99,003

96,717

81,800

98,213

Aside the PEST analysis, another efficient tool in assessing the pharmaceuticals industry is constituted by Porter's five forces, briefly presented below (the current situations are expected to be maintained in the future):

Threat of new entrants -- there are numerous small size entities which strive to come up with a revolutionary product, but they possess reduced resources to invest in research and development, leading as such to low levels of threats.

Bargaining power of suppliers -- reduced, as the power of the pharmaceutical companies relies primarily on knowledge and intellectual property, rather than commodities.

Bargaining power of buyers -- low or high, depending on the nature of the customer; individual customers purchasing from the drug store have virtually no bargaining power, but hospitals and other large customers have a great bargaining power.

Threat of substitute products -- this is increased as R&D investments are ongoing; a new products or products revealing similar characteristics with the already existent one are often produced and distributed.

Rivalry among competing firms -- finally, in the industry in which researchers work day and night for a new discovery or a cure to a disease, competitive rivalry is fairly intense (Investopedia, 2009).

6. Competitive Profile Matrix

Success Factors

Weight

GSK

Novartis

Pfizer

Sanofi-Aventis

Rating

Weighted Score

Rating

Weighted Score

Rating

Weighted Score

Rating

Weighted Score

Sales

25%

4

1

4

1

4

1

4

1

Advertising

15%

4

0.6

3

0.45

4

0.6

2

0.1

Quality

20%

4

0.8

4

0.8

4

0.8

3

0.6

Strength

15%

3

0.45

2

0.30

4

0.6

3

0.45

Financials

10%

3

0.30

3

0.30

4

0.40

3

0.30

Global presence

15%

3

0.45

2

0.30

4

0.60

3

0.45

Total

3.6

3.15

4

2.9

7. Strategy Overview

GSK uses a multitude of strategic courses of action that are aimed to strengthen the company's competitive position, increase its customer base and ultimately generate sustainable revenues. Two of the most notable GSK strategies include a focus on financial stability and a reliable balance sheet and major investments in research and development (Fierce Biotech, 2008). Overall however, the strategic direction is identifiable with the three points mentioned in the mission statement -- "Grow a diversified global business; Deliver more products of value and Simplify the operating model" (GSK 2008 Annual Report).

An important thing to mention relative to the business strategies of GlaxoSmithKline is that the organization develops specific approaches to each of its products in order to maximize its success rates. The most relevant example in this sense could be offered by the Alli Weight Loss Program. In a context of countless weight loss products and 'miracle' diets, Alli was promoted as a product that would offer the desired results, but only with the condition that the buyer is also engaged in other weight loss activities, namely a careful diet and exercise. The only weight loss item to be sold over the counter and approved by the FDA, Alli is a real product with real benefits; it does not make false promises but simply states that when the user is committed and takes a diet, Alli will help them lose more weight (myalli.com, 2009).

In terms of future courses of action, GSK should increase its investments in biotechnology research and development in order to make new discoveries that will cure, or at least alleviate, illnesses. A timeline for this strategy is yet unavailable as it depends on the progress of the current economic crisis. GSK remains a for-profit organization and must protect itself against the losses associated with internationalized financial challenges. However, once the worst is overcome, the managerial team ought to look into more projects to finance. An analysis of the results would occur every six months and additional decisions would be made at these stages. The rationale behind the utility of this course of action is that it would significantly increase the strength and market perception of GSK (Fierce Biotech, 2008).

Annotated Bibliography:

2007, PEST Analysis, Net MBA, http://www.netmba.com/strategy/pest/, last accessed on June 3, 2009 -- Net MBA represents an online "business knowledge center" that offers objective information on a variety of business topics. It can be helpful for both expert economists and well as novices. A limitation however resides in the reduced amount of examples to make the information presented easier to comprehend and relate to.

2008, GSK Chief Elaborates on Biotech Strategy, Fierce Biotech, http://www.fiercebiotech.com/story/glaxo-chief-elaborates-its-new-biotech-strategy/2008-07-24 last accessed on June 3, 2009 -- Fierce Biotech is a website that focuses on advancements in the field of biotechnology. The articles are generally recent ones but the website also has an archive that allows the users to browse through older articles. The main advantage is that the stories are well documented and written in an objective manner.

2008, GSK Outlines Plans to Become More 'Biotech-like', Fierce Biotech, http://www.fiercebiotech.com/story/gsk-outlines-plans-become-more-biotech/2008-06-10 last accessed on June 3, 2009

2009, GlaxoSmithKline Plc., Hoovers, last accessed on June 3, 2009 -- Hoovers is a centralized database that reveals information on multiple organizations. The benefit is that the data offered is extensive and comprises features such as industry forecasts, competition nature and organizational financial highlight, alongside with description of the respective company. The downside of the source is however given by the reduced amount of free information and for more extensive data, the user has to create a paid account.