The History Of The Business Environment Business Essay

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There are many types of organisations all over the world at the time being. They were developed during the history of mankind as a necessity of survival at the very beginning and lately as a start up of a profit. In the moment of speaking organisations are so highly involved in the everyday life of the human being, that in a worst scenario of disappearing them the humankind will need to invent them again and again, because they are a necessity of existence.

According to the principle of existence we may say that organizations these days are separated in two categories. So we can mention the organizations belonging to the public sector meanwhile there are organizations belonging to the private sector.

Task 1:a Examine the various types of organisations and their purposes and compare the missions,goals,and strategic objectives of your chosen organisation with a similar organisation.

GlaxoSmithKline, PLC

One of the world biggest pharmaceutical organization is GlaxoSmithKline plc. The organization is not only pharmaceutical but healthcare products are also in the first line of sales with other healthcare companies of itself.Vaccines,developing new drug substances with production facilities in Europe,Northern America,Asia. (GSK) was formed in December 2000 by the merger of "Glaxo Wellcome" and "SmithKline Beecham" and the main offices are situated in London possessing more than over 100 facilities and branches all over the world. Apart from pharmaceutical products and vaccines, health-and sanitary items are also manufactured and sold in over 140 countries. (Annual Report, 2007, p.4) GSK employs over 103,000 people around the world in 117 countries. In 2007, women "accounted for 24 per cent of senior managers and 37 per cent of all managers" while "minorities made up 19.1 per cent of employees in the UK workforce". (Corporate Responsibility Report, 2007, p.100).Research is the key base for the organization because most part of the investments of GSK goes in this domain, spending almost 13 million pounds every day. The money on research is spending mainly due to the fact of the widespread diseases mostly in the countries with no facilities or access to medicines. (Annual Report, 2007, p.16).That is why because of its large size the organization in 2010 the total revenue generated was over 28 billion and the profit after taxes was over 1.8 billion.

Business Segments

GlaxoSmithKline develops almost a quarter of the world wide vaccines, also prescription products, prescription medication which can be included in many different therapeutic categories.Cardiovascularity,respiratory,nervous system and many others.The dominancy of GSK is on the vaccines market even if in the year 2009 more than 80% of revenue came from the sales of prescription medication. Pharmaceutical (GBP 23.4 Billion) 

According to American Health Department in U.S there are more than 20 million people suffering from Chronic Obstructive Pulmonary Disease (COPD).Fighting with such diseases and others similar like asthma the organization GSK came on the market with a product which is approved to treat such diseases which also acts as anti-inflammatory and bronchodilator. It's name is Seretide/Advair (GBP 55.1 Billion)

It is to be noticed that one of the major investments of GlaxoSmithKline is the research of vaccines and the anti-virals.The outcome is to treat a wide range of ailments and various childhood diseases. In 2009, GSK received a significant boost in orders for its Pandemrix™ H1N1 vaccine, following the global outbreak. Anti-Virals (GBP 1.1 billion) Vaccines (GBP 4.3 Billion) 

GlaxoSmithKline is very well known also for its nutritional supliments,oral care products and gastro-intestinal ailments. Aquafresh,Sensodyne,Nicorette,Tums and Citrucel are well known all over the world. Improving people's health care is also one of GSK work and consideration. Consumer Health Care (GBP 5 Billion) 

GlaxoSmithKline invests a lot in research and development. Researching is not a easy task because in order to have positive results takes time. Thus from the moment of the concept to get in the market takes anywhere from 10 to 15 years. Also finding the proper drugs for the demand of the market it is extremely expensive and most of the time quiet risky. Nevertheless some drugs and medication do not submit or pass the clinical trial of the phase development. That is why the product who gets in the final and passes all the tests is protected under patent for a maximum amount of 10 years. Being an extremely large organization GSK opens a multiple pipelines or potential products. Probably most of them will fail but the turnover or the possibility of even one to become a blockbuster(with sales annually of over 1 billion dollars) it makes worth the initial investment. Research and Development (GBP 4.46 Billion)

GSK plans growth in emerging markets

GSK plans for the future by 2020 year is to capitalize on emerging markets which from one side is to get more deals on vaccines through contracts approved by the government. Therefore GlaxoSmithKline aggressiveness on the emerging markets is very well known. The reason is because Asia, Latin America, Mid-East and Africa are potential studied with success for expanded its branded generic's business. Because competition on the market is rough, competitors are playing aggressively also. Among GSK competitors are to be named Pfizer, Novartis, Sanofi Aventis. This makes GlaxoSmithKline to look forward and getting businesses from Eli Lilly and UCB Pharma ,also trying to establish deals with India's organization such as Dr. Reddy's Lab and Africa's Aspen Pharmacare.

1.2 Vision & Mission

Many organizations have developed during the years of existence on the market a vision and a mission in order to fulfill their targets.It is GlaxoSmithKline vision to become the leader in the pharmaceutical industry "by helping people do more, feel better and live longer". A company's mission can be defined as "the overriding purpose in line with the values or expectations of stakeholders" (Johnson & Scholes, 2005, p.13).Therefore GSK bases for long term strategy in obtaining the profit and the growth on the market are following these objectives:

•Achieving the highest excellence in the commercial premises and operational ones by succeeding in building the best product pipeline inside the pharmaceutical industry

•Access improving to medicines for those categories of people who can not afford medical assistance

•Consideration in taking business decision regarding the ethics, the social, the safety and the environmental concerning issues

•Prioritizing the protection of its employees by enhancing the highest health of these all over the world, persisting in becoming a recognized leader and getting the sustainable business success

Task 1 b: Explain how stakeholders influence organizational missions and goals and discuss how and to what extent your chosen organization (responsibilities) meets stakeholder expectations.

2. Stakeholders

2.1 Stakeholder Theory

Figure 1

Any individual or individuals,groups who have an interest in the objectives of a business in fulfilling the goal inside of an organization.

Freeman defined stakeholder as "any group or individual who can affect or is affected by the accomplishment of that organization's goals." (Freemann, 1984, p: 48) Harrison & St. John mentioned the fact that the more improved the management of the stakeholders is, the better innovations will come, the less boycotts and strikes will appear.On the other side and contrasting with the stakeholders, the shareholders are centering the valuable principle of the needs and expectations of an organization. Another specialist in domain, Ward mentions that stakeholders are divided in 2 different very powerful groups with the ability to influence the business strategy.

stakeholders, adopted from Ward, 1992

Figure 2

2.2 Stakeholders of GSK

GSK recognizes the fact that being so various the organization stakeholders various interests and expectations are to be achieved even if the main goal is common. That is why" "shareholders, patients, governments, nongovernmental organizations, payers and employees but also the "scientific community and healthcare professionals and providers" are mentioned. (Annual Report, 2007, p.4 & 14). In contrast to Ward, GSK does not mention its suppliers as stakeholders.

In GlaxoSmithKline case the stakeholders can be divided in two parts: primary stakeholders and secondary ones. For the first type the stakeholders are:






Health insurance providers

Keeping a good relationship with the stakeholders, engaging them in conducting market research as a third parties in order to understand what are the needs of the patients. Also discussions groups with different stakeholders, let them to be involved in community projects in special open days, meetings with different multilateral organizations as well as NGOs, feedback after finished workshops.(Corporate Responsibility Report,2007, p.8)

One of the most controversial BBC broadcast in November 2004 was about non tested drugs on HIV. The report was putting in the center of attention the GlaxoSmithKlein organization who tested the drugs on children in their homes in New York. To prove the commitment of transparency GSK started to publish their research results and data on the web, thus becoming the first pharmaceutical company presenting their clinical trials online.

Task 2: a Explain the nature of UK economic system and how it affects business organization such as yours



62.6 million


$2.3 trillion

0.7% growth

0.1% 5-year compound annual growth

$36,090 per capita



Inflation (CPI):


FDI Inflow:

$53.9 billion

(The Heritage FoundationIn Partnership with The Wall Street Journal)

The legal system in the UK is considered a very opened one towards global trade and investments, enforcing from one side the contracts and from the other the property rights. What it makes a difference in the present days is the government ambitions to curb the growth of spending, as well as the cuts in the corporate tax rate, a fact which will continue also in 2014.In this light even if the control of government scored 0.7 higher than 2012 the top income tax rate is 50% and the corporate tax reduction got to a 24%. The overall tax burden equals 34.3 percent of total domestic income.

The UK economic system according to the World Bank is considered " Ease of Doing Business " being ranked as a second place in the EU and on the 7-th on the world scale. Also UK is considered as the second largest exporter, not at least the first having the European headquarters of major companies, that is why for the businesses the access to the international markets is rewardable. Open markets matter to the UK because exports of goods and services account for 19% of UK GDP. For Consumers-Free trade means more competition, and that will result in lower prices and better quality.

 Glaxo's chief executive, Andrew Witty, reiterated that 2013 year government's patent box made UK more attractive because this will offer lower rates of corporation tax on profits most probably generated from research and development department. Brentford, west London is the location where there are about 16,000 employees of GSK in Britain from a total 98,000 worldwide workforce. The CEO mentioned also that in the years to come the GlaxoSmithKline's activity is about to be increased mostly because one of the main competitors of GSK, the American Pfizer organization is intending to close in Britain one of its research and development center in Sandwich, southern England.

"We expect over the next several years to be increasing our activity in the UK. What we want to do is have more manufacturing and do more R&D work in Britain," Witty said on Tuesday. "We would expect this to lead to us paying a greater tax yield in the UK."(CEO GSK Andrew Witty)

Task 2 b: Discuss how governments manage the national economy briefly and analyze the impact of fiscal and monetary policy on business such as your chosen organization

The Bank of England was established back in 1694,very well known at the time being as "The Old Lady of Threadneedle Street" a London location which can be found even today. Her key role after it had been nationalized at the end of World War II,was the monetary policy of UK,dealing with and managing the national reserves and the most important is helping in maintaining the stability of the British banks as well as the financial systems.(

Among other tasks The Bank of England is to help controlling the price stability, be in agreement with Her Majesty's government policies, issue bank notes, acting as a banker for the government and controlling the money supply in market circulation. UK Economic Indicators are:


UK Interest Rates,

UK Inflation Rates,

UK Unemployment Rates,

UK Economic Data

UK Public Debt

UK Imports and Exports

The UK's GDP per capita is $37,400, which makes it the 30th richest country in the world. The European Union average is $33,800 and the world average is $10,500.(

Task 2 c: Analyze how competition policy and regulatory mechanism work in the UK in relation to your chosen organization

One of the most important UK documents which established the foundation of businesses is The Fair Trade Act from 1973.Even if someone might say the competition regime stayed unchanged for almost 25 years, the major turning point came with the year 1998 when it took place The 1998 Competition Act. The document was making reference to a necessary prohibition of those firms making anticompetitive agreements, abuse of a dominant position in a market, predatory pricing, exploitation of purchasers. Starting with November 2011 inside of the EU department of Mergers and Working Group new principles regarding the national competition authorities will be taken when it will involve multi-jurisdictional mergers. The UK competition authorities, the Competition Commission (CC) and the Office of Fair Trading (OFT),have agreed and fully supported the initiative. (

The GlaxosmithKline organization according to OFT regulations and the EU Merges practice succeeded a merger with Pfizer plc. In 2009, the main objective being a redevelopment with concern of HIV,and the improving of their businesses. The merger was 85 procent for GSK portfolio and 15procent for Pfizer organization.

In 2011 GSK desired more and went for another merger with Maxnutrition Group Holdings limited.

Task 3: a Using your chosen company as an example, explain how market structure determines the pricing and production decisions

According to the website ( in uk the pharmaceutical market is increasingly competitive obtaining a third place in Europe after Germany and Switzerland in 1998 regarding trade balance. Also the number of employees was estimated over 80.000, a quarter of them being graduates. The market apparently seemed to be divided into two sectors which are: prescription medicines, and over the counter medicines.(Association of the British Pharmaceutical Industries)The first category of medicines are to be obtained only if a qualified physician is prescribing them. The vast majority of prescribed pharmaceuticals in the UK are prescribed through the National Health Service (NHS).

The UK market for pharmaceuticals is working under the licensing authority of MCA which stands for Medicines Control Agency, collaborating very well with the European homologue Emea. The Abpi is underlining that the pharmaceutical industry is investing for over 20 procent in the market and more than 70 procent goes in research and development. In the UK,the manufacturer of over the counter medicines(OTC)is the main responsible for medicines to be safe, high quality so the customers can benefit by the advantages of good products.

The total market for pharmaceuticals in the UK was estimated to be worth £9.05bn in the year 2000, with a growth of 8.3% from 1999. Of this, the market for POMs(prescription medicines) and the OTC market with over 17.7%.In the case of GlaxoSmithKline the Reuters magazine's opinion is that multinationals organizations should charge less in the future for the new drugs especially if these ones are the result of research and development department.

Therefore the case of new medicines notably in cancer research is becoming quite a challenge for the healthcare providers. The high prices on the market nowadays are the issue particularly in a Europe hit by austerity with budgets under pressure. GSK primordial target about lowering the prices of medicines focuses firstly on the less developed markets in a bid to balance volume against price and maximize overall sales. On the other hand traditional companies are trying to convince governments for a necessary premium price needed in order to pay for the one billion dollar plus cost of developing a single new medicine.

The GlaxoSmithKline CEO , Andrew Witty said "It's entirely achievable that we can improve the efficiency of the industry and pass that forward in terms of reduced prices." a press conference in London on 15 march this year. In addition to improvements in research, global demand for medicines is increasing and the explosion in the volume of products sold in emerging markets should contribute to lower unit costs, Witty said.(Reuters Agency)

Task 3 b: Using a range of examples, analyze how market forces influence the organizational and examine how your organization would respond.

This content comes from The New Business Road Test by Professor John Mullins of the London Business School.

Threat of entry

Supplier power

Buyer power

Threat of substitutes

Competitive rivalry

The threat of entry for a new comer or entrepreneur is from one point of view an disadvantage because there are high barriers to overcome especially in launching a venture or a new product. From the other point of view these barriers can be advantageous once someone joined In the party keeping away eventually the others competitors.

The immediate response of GlaxoSmithKline is to improve and grow the diversified global business. In other words GSK is looking for the differentiation products and also market expansion, a strategy for the emerging markets to come such as China, Turkey, India.

Supplier power for the main drug companies seemed to be inexistent at the time being, if GSK is to be considered . The new supply chain hub(SCH) based in UK and it manages around 8,000 stock keeping units(SKUs) across 35 European markets.( It was not the same story at the beginning of 80's because only in America existed over 12,000 chemical companies. So the pharmaceutical companies were flooded with raw material suppliers anxious to sell their products for the new industry borned.

Buyer power has very little effect on drugs and pharmaceutics industry in the modern day. Starting with the eighties consumers were at the mercy of the unaware doctors who were partial to prescribing brand-name drugs to obtain the best medical effective solution no matter how high the price, and the consumers paid. Subsequently, if the prescribed medicine is not to be found on the market the consumer will buy a substitute. The weakness in buyer power contributed significantly to the profitability of the pharmaceutical companies. On the case of GlaxoSmithKline it can be said the followings:

ï‚· a very large number of buyers for the GSK products

ï‚· competition among some buyers predictable to appear

ï‚· patent allows the company to charge the customers according to monopoly price

ï‚· economically, the demand of drugs is not delivered in time at the customer

Threat of substitutes on the case of GlaxoSmithKline is very low , i.e.

. there is no chance for a perfect substitute,

the generic medication is a main substitute which is more price competitive,

the government is implementing directly in the way the companies strategically pair,

there is also the Complementary Alternative Medicine,

also the competition for the first mover is an advantage in a specific segment of the market.

The competitors for GlaxoSmithKline are presented in the chart below:

Direct Competitor Comparison







Market Cap:












Qtrly Rev Growth (yoy):






Revenue (ttm):






Gross Margin (ttm):






EBITDA (ttm):






Operating Margin (ttm):






Net Income (ttm):






EPS (ttm):






P/E (ttm):






PEG (5 yr expected):






P/S (ttm):







MRK = Merck & Co. Inc.

NVS = Novartis AG

PFE = Pfizer Inc.

Industry = Drug Manufacturers - Major

Biotechnology Companies Ranked By Sales






Market Cap


Amgen Inc.






Genentech, Inc.

Private - View Profile

Biogen Idec Inc.






Genzyme Corporation

Private - View Profile

Merck Serono S.A.

Private - View Profile

Gilead Sciences Inc.






MedImmune, L.L.C.

Private - View Profile

Life Technologies Corporation






Teva Pharmaceutical Industries Limited






Sandoz International GmbH

Private - View Profile


View Drug Manufacturers - Major Industry Center

Generic Drugmakers Ranked by Sales






Market Cap


Actavis, Inc.






Ranbaxy Laboratories Limited

Private - View Profile

Mylan, Inc.






Pfizer Inc.






Johnson & Johnson






GlaxoSmithKline plc












Novartis AG






Roche Holding AG






AstraZeneca PLC







View Drug Manufacturers - Major Industry Center

Drugmakers Ranked By Sales






Market Cap


Abbott Laboratories






Bristol-Myers Squibb Company







( John Mullins-The New Business Road Test) .


Task 3 c: Discuss the business and cultural environment of your selected organization and asses to what extent it shapes the behavior of the organization

The GlaxoSmithKline organization transformed a lot in the last years. The objective was to create new values for the patients, the consumers and the governments. In order to obtain that the focus was on transparency, respect for the people, patient and the integrity of GSK.

"Total disclosure has become a way of life in Agbara. We share success and failure with equal candor." -( Henry, GSK Nigeria)

Transparency demands meeting global challenges and innovation, also working with external groups of people and interacting with each other.

The respect for the people another priority of GSK, is obtained in the day-to-day job after emphasizing and prevailing simple, clear and easy to understand behaviors:

flexible thinking

building stable relationships

developing the abilities

enabling the change and driving it

continuous improvement

customer understanding

 "Our business is our people. Respect for the individual is what drives us forward." ( Rodger, GSK United Kingdom)