Glaxo SmithKline Post Merger Objectives Performance, Reasons for Success or Failure
Introduction
Mergers and acquisitions often referred to as M&A is also a tool for expanding ones business or get around different laws or regulations such as tax laws or monopoly regulations. Merger and acquisition (M &A) has been the most debatable issue in the field of management and finance. There are arguments for and against corporate restructuring and mergers. Lambrecht (2005) argued that although M&A activities occur in waves but M&A activities are as a result of the economic environment. In the analysis pre and post merger performance of GlaxoSmithKline, Barron (2000) called this merger as ‘‘a marriage of convenience-with lots of tough issues to be worked out. He added that SmithKline is wedding itself to a slow-moving company with a lackluster pipeline of new drugs coming to market’’. It is found that mega pharmaceutical merger hasn’t delivered value. The stock prices underperform both in absolute and relative terms against the index. The merger has resulted into a substantial R&D reduction and downsizing instead of a potential employment haven (Ullah, et. al., 2010).
The Mergers and Acquisition
In the beginning of the merger and acquisition, it is expected to have a different side of view between the combined companies. At first, the business struggles to identify the goals, objectives, and processes that they will use. The new business or the business leaders must weigh the advantages and disadvantages. The business leaders are also entitled to take a good care their employees thus, they have to explain to the people the importance, reasons and possible outcomes of the business combination to the employees. Part of the duty of a leader is to make an effective development and implementation of strategies and programs for the employees. The action for merger and acquisition is one of the answers towards the globalization, technological developments, and deep market competition. Making this action also deserves to face various challenges and strategic planning.
Scope for Merger and Acquisition
The scope of merger and acquisition are from providing the market share up to meeting the global competition. The difficulty appears under the business combination is making a successful integration in contributing the necessities needed for the new company. The main objective of the entire business community, except for those non-profit organizations, is to generate or gain profit. Part of the scope is acquiring the needed strategic tool that is appropriate for expanding and entering in a new market, which involves the acquisition of new technologies and establishing a new organization with power and resources (Bhat, 2009).
The course of competition will depend on the particular combinations of industry structure and competitors in any individual scenario, so it is hard to do more than give some very general guidelines. Some key strategies for competitive interaction are considered below.
Surprise is a key means of securing short-term advantage. For example:
(1) When engaging in acquisition of a competitor, the ability to move quickly and unexpectedly can be crucial to achieving a successful result.
(2) When launching a series of new products, companies may deliberately disguise the roles they see for each; so as to divert defensive marketing responses towards a wide range of products, rather than allow competitors a focused response to the true product champions.
(3) Where resources are in short supply, companies can secure major competitive advantage by acquiring control of them before competitors notice that they are doing so. Property and mining companies, in particular, go to great lengths to disguise their processes of site acquisition.
Building a capability to spring such surprises – for example, by developing a flexible and responsive organizational structure, or an ability to evaluate opportunities very fast, or simply an ability to keep secrets – is a strategic process. That is because it requires cross-functional co-ordination and integration across operating units to achieve such a capability, from which the whole organization benefits (Bakhru, 2006).
Conclusion
Issues of timing are often sources of potential competitive advantage. Glaxo SmithKline, a UK pharmaceuticals firm, significantly shortened the clinical trial period by conducting simultaneous clinical trials in 20 countries and then building production plants before obtaining clinical approval for its drug Zantac. This illustrates why the development of an ability to respond quickly is an increasingly important strategic objective. As companies move towards time-based competition, with shortening development and production cycles, they gain an ability to influence the pace and nature of competition, to decide when and where the competitive battle is to be fought (Stalk, 1988). Maximum use of resources may seem to be an operational issue. Yet the ability to control and co-ordinate all aspects of a company’s operations, so that they are simultaneously engaged in enhancing a competitive position, is an important one (Clausewitz, 1982).
References:
Bakhru, A., (2006) Analyzing the External Environment, The Open University
Barron`s .2000. Wedded bliss? Don't bet on it. Forget throwing rice; some Glaxo and SmithKline holders are throwing up. January 24, p. 20.
Bhat, P., (2009) Impact of Mergers and Acquisition on Employees and Meaning of Mergers and Acquisition. India Law News. [Online] Available at: <http://www.indlawnews.com/display.aspx?4495> [Accessed 18 March 2011]
Clausewitz, Karl von (1982) first published 1832) On War (trans. Col. K. Graham 1908; 1982 edn edited by A. Rapaport), London, Penguin.
Lambrecht, B.M., 2005. Mergers and acquisitions as a response to economic change. Journal of financial transformation. Vol.13: 73-76
Ross, Westerfield and Jaffe, 2002. Corporate Finance. 6th edition. Boston: McGraw-Hill/Erwin.
Stalk, G. (1988) Time – the next source of competitive advantage, Harvard Business Review, July–August, pp. 41–51.
Ullah, S., Farooq, S.U., Ullah, N., & Ahmad, G., (2010) Does Merger Deliver Value? A Case of Glaxo Smith Kline Merger, European Journal of Economics, Finance and Administrative Sciences, Issue 24.
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