Title - GlaxoSmithKline plc
[Financial Analysis]
Table of Contents
1. Task 1
1.1 About the company
GlaxoSmithKline
plc is a pharmaceutical company that operates in the following three primary
areas of business:
1. Pharmaceuticals
which include prescription pharmaceuticals
2. Vaccines
3. Consumer
healthcare, including nutrition, oral health, wellness and skin health consumer
health products
1.1.1. Its strategic planning
GSK’s
business is laid around three strategic priorities that aim at increasing their
growth, at reducing risks that the company has to face in the industry that its
operates and so that it can improve its financial performance both in short and
long term
(GlaxosmithKline, 2013). These strategic
priorities include:-
1.
Growth
in diversified global business
In
the last five years, GSK has created a more balanced business and product
portfolio that has been able of delivering sustainable sales growth. The
company has substantially increased its investment in areas that promise higher
growth including emerging markets such as Japan and also in businesses that
give them an edge, for example, their global Vaccines and Consumer Healthcare
businesses
(GlaxoSmithKline, 2013). At the same time, the
company has also given a new and improved shape to its US Pharmaceuticals and
Vaccines business so that it is able to reflect the changing market dynamics
and also to prepare for the launch of newer products. In Europe, the company is
getting a new structure so that it can improve the efficiency and focus on
resources in such a challenging environment in the market.
2.
Delivering
more products lines and increasing value of the existing ones
The
company has changed its R&D and the new process is being able to sustain a
pipeline of products that would offer valuable improvements in treatment of
complex diseases and also those which help in improving facilities that
healthcare provider will use to give better services to the ailing. The company
has now increased the externalisation of its research and development (Website, 2012).
The company has also restructured and speeded up the process of decision making
so that those medicines that are differentiated from medications that exist.
The company has shifted away from traditional research processes of having long
hierarchical chains and has adopted working in smaller and flexible piecemeal
functional divisions where accountability is much higher than the traditional
working systems.
3.
Simplifying
the model on which the company operates
The
company has transformed and way it has been operating so as to reduce
complexity and becoming more efficient. Over the past four years, the company
has completely re-structured itself globally and has been working in such
manner so as to save a good amount and convert it into investment for growth of
its priority businesses.
1.1.2. Current strategic financial management position
The
financial management has been strategised in such as way so as to grow
sustainably, their earnings per share and the free cash flow of the company, so
as to maximise total returns to shareholders. Financial management has been
established on four key financial priorities:
- Sustainable
sales growth over the long term
The
sales figure was down 1% for 2012, while the sales were flat and they adjusted
for the lesser growth of consumer healthcare brands that have not been the core
area. The pressure in the western markets has been overcome through the
increasing sales in the ‘growth’ businesses of the emerging markets (Financial Summary, 2012).
- Improving
upon the operating leverage
The
core operating margins feel by 0.6% ending up in 31.5%, 0.3 percentage points
of this 0.6% fell since the HGS acquisition impacted it. The other 0.3
percentage points happened due to the effect of maintaining flat SG&A on a
lower turnover which would be, in part, played down by a lesser expenditure in
Research and Development. The company has a deep focus on maintaining and
effective cost base. Our operational excellence programme started in 2008 and
by now and is expected to deliver an annual saving of £1 billion by 2016. The
strategic financial planning includes balancing the cost savings and making
continued investment so as to support and launch the pipeline sales (FinancialSummary, 2012).
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