GlaxoSmithKline plc. (GSK) was formed in December 2000 by the merger of “Glaxo Wellcome” and “SmithKline Beecham” and is now one of the world’s leading pharmaceutical and healthcare companies. The organisation is headquartered in London and has further production facilities in 114 countries within Europe as well as in Northern America and Asia. 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 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) The organisation invests in its own research to develop new drug substances. One in six employees’ works in the area of research and in 2007 GSK spent over 13 million pounds every day for R&D. Research efforts are also directed at diseases, which are mainly widespread in underdeveloped countries.
Table of Contents
1. Introduction
1.1 GlaxoSmithKline, PLC
1.2 Vision & Mission
2. Stakeholders
2.1 Stakeholder Theory
2.2 Stakeholders of GSK
2.3 Stakeholder mapping
3. GKS`s legal form and its implication on shareholders
3.1 Public Limited Company (PLC)
3.2 Shares
3.3 Formation
3.4 Implication on shareholders
4. Financial Section
4.1 Ratios
4.2. Horizontal Analysis
4.3 Profitability
4.4 Efficiency
4.5 Liquidity
4.6 Structure
4.7 Investment
4.8 Benchmarking
4.9 Financial strengths and weaknesses
4.10 Recommendation of strategy
4.11 Strategy of GSK
5. Strategy
5.1 Implementation
Objectives and Core Topics
The primary objective of this assignment is to conduct a detailed financial and strategic business analysis of GlaxoSmithKline (GSK) to inform stakeholders of the company's current performance, legal standing, and strategic direction.
- Legal structure and shareholder implications of a PLC.
- Comprehensive financial ratio analysis and horizontal performance review.
- Stakeholder mapping using the Mendelow Framework.
- Strategic recommendations including market growth and cost management.
- Implementation of corporate strategy and Balanced Scorecard application.
Excerpt from the Book
3. GKS`s legal form and its implication on shareholders
As GSK is registered in the UK, it underlies English law and thence the “Companies Act of 1985” which regulates the responsibilities of companies and their directors and secretaries in interior and exterior relationship.
3.1 Public Limited Company (PLC)
In contrast to the Private Company (Ltd), the Public Limited Company is permitted to offer shares to the public by advertisement and is therefore a more “suitable inviting investment by large numbers of people”. (Dine,2001,p.13)
Like other company forms the PLC is regarded as an “artificial person / legal entity” (as opposed to sole proprietor) which has an existence separate from its members and is able to
• Hold assets
• Employ associates
• Conclude contracts
• File a lawsuit
• Be sued
(www.companieshouse.gov.uk)
This separation (which is also referred to as the veil of incorporation) results in different liabilities for the corporation and the members. A PLC limits the liability of their shareholders, which means that in case of insolvency or liquidation of the cooperation, they are only liable with the amount of money they have already invested respectively the amount for that they obliged themselves before (guarantee). Shareholders are not personally responsible for company`s debts, while the company as “artificial person” is completely liable, with no limit for its own debts, although it obtains its capital and distributes its profits to the members. (§ 3 Companies Act 1985). Exceptions are “fraudulent” or “wrongful” trading (Section 213/214 Insolvency Act 1986). In the case of bankruptcy, the remaining values are given primarily to the shareholders and in second instance to the remaining creditors like suppliers etc., so shareholders are hidden from creditors. (Handley et al, 1996, p.131).
Summary of Chapters
1. Introduction: Provides an overview of GSK's formation, organizational scale, and the company's stated vision and mission objectives.
2. Stakeholders: Explores stakeholder theory and applies the Mendelow Framework to map and manage the relationships between the organization and its various groups.
3. GKS`s legal form and its implication on shareholders: Details the legal responsibilities, liability limitations, and shareholder rights associated with operating as a Public Limited Company under English law.
4. Financial Section: Analyzes the company’s financial health through ratio analysis, horizontal benchmarking, and evaluates strengths and weaknesses to form strategic recommendations.
5. Strategy: Discusses the implementation of corporate strategy, the use of generic business strategies, and the integration of a Balanced Scorecard for long-term performance management.
Keywords
GlaxoSmithKline, GSK, Stakeholder Theory, Public Limited Company, PLC, Financial Ratios, Profitability, Liquidity, Horizontal Analysis, Mendelow Framework, Corporate Strategy, Balanced Scorecard, Shareholder Value, Pharmaceutical Industry, Asset Turnover.
Frequently Asked Questions
What is the primary focus of this assignment?
The assignment focuses on a deconstructed business analysis of GlaxoSmithKline, covering its legal structure, financial performance as of 2007, and strategic outlook for stakeholders.
Which theoretical frameworks are used in the analysis?
The work utilizes the Stakeholder Theory, the Mendelow Framework for mapping, Michael Porter’s generic strategies, and the Balanced Scorecard for performance measurement.
What is the goal of the financial section?
The goal is to provide investors and shareholders with a comprehensive analysis of the company's financial strengths and weaknesses to aid in assessing investment performance.
How is the financial performance of GSK evaluated?
The author uses various financial ratios—including profitability, efficiency, liquidity, structure, and investment ratios—and performs horizontal analysis comparing 2006 and 2007 data.
What strategy is recommended for GSK in the face of generic competition?
Recommendations include increasing sales through new markets or products, intensifying marketing efforts, and analyzing cost factors, while maintaining a differentiation strategy where innovations allow for premium pricing.
Which scientific method underpins the research?
The report relies on secondary research, including corporate annual reports, lecture notes, legal texts like the Companies Act 1985, and financial data analysis.
How does the PLC structure protect shareholders?
The PLC structure creates a 'veil of incorporation,' limiting shareholder liability to their investment amount, meaning they are not personally responsible for the company’s debts.
What role does the Balanced Scorecard play in the proposed strategy?
It acts as a management system to extend traditional financial ratios with non-financial performance indicators across four perspectives: Financial, Customer, Internal Processes, and Learning and Growth.
- Quote paper
- Andrea Verhohlen (Author), 2008, A Business Deconstructed. Company Analysis of GlaxoSmithKline plc., Munich, GRIN Verlag, https://www.grin.com/document/117209
