The strategic responses of glaxosmithkline ltd following liberalisation of the pharmaceutical industry in Kenya

Abstract

GlaxoSmithKline PLC (GSK)is the second largest pharmaceutical company in the world. It commands a share of 7.3% of the world's pharmaceuticals market. In Kenya GSK has been operating since 1963 and it has grown into the largest pharmaceutical firm in the country and East Africa today. Despite the phenomenal growth locally, GSKhas been operating in an environment of uncertainties and challenges ranging from an extended economic slump to government litigation to increased competition among many others. Most of these challenges started soon after liberalization of the industry in the late 80s and early 90s. These challenges are discussed in detail in the study. The main objective of this case study was to highlight the environmental challenges multinational firms in general and GSK in particular have been subjected to after: liberalisation in Kenya. GSKwas used as the unit of study and the strategic responses revealed can serve as a benchmark for other firms operating in this industry. The:study has outlined the previous as well as current environmental challenges that the firm is facing and the measures it has instituted to manage them. In this study a number of GSK senior managers have been interviewed. Interviews were carried out by way of an open ended questionnaire and captured on tape recorder for subsequent analysis. All these people combined to give an accurate , VI representation of events cutting right across the entire company for the period of the study. Interviews revealed that GSKhas faced challenges occasioned by the economic slump of the 90s after certain market-based reforms were instituted as part of the Structural Adjustment Programmes (SAPs)imposed by donors on the government Some of these SAPs affected the markets in different ways resulting to fiscal problems that cut across the Kenyan economy. Liberalisation also brought about increased competition from other pharmaceutical importers. This was because the market became more receptive to more cost effective medications causing the existing multinationals to re think their competitive strategies. In addition, the regulation policy by the Ministry of Health opened the door for all manner of unfair competition occasioned by the sudden and consistent influx of parallel imports, illegal imports and counterfeits. This problem persists to date. An interesting challenge that .;manifested itself was increased demands by doctors and patients. With the revolution of the i?formation highway i.e. airwaves and the internet, customers have access to lots of information which they are now using t( demand safe, cost effective and effective medications. Demands from doctors and other medics for sponsorships to international scientific conferences have increased. Professional organisations have also become more demanding. In this regard GSK has set up systems that vet spcnsor'ship requests and a budget to offset these costs. Vll Government legislation has also posed a challenge to business and especially wher it was hijacked by lobby groups. Legislation relating to industrial property rights has been enacted and many multinational branded manufacturers have had to respond accordingly. Some responses have included lobbying with legislators and even threatening litigation on governments that are intent on imposing these laws Some of the responses detailed in the study have definitely contributed to GSKKenya's overall performance as will be adduced herein. As such I recommend that firms must set strategic priorities that ensure they meet their long term objectives of adding shareholder value by exploiting local opportunities, remaining relevant to local needs and conducting business responsibly while adhering to laid out regulations. These principles will guide firms across all industries to demonstrate responsible corporate conduct across all aspects of their operations. Further, a cross sectional study may be undertaken among firms in the pharmaceutical industry in Kenya in order to compare their strategic responses post liberalization. I also recommend a study on the impact of parallel imports. illegal imports and/ or counterfeits on pharmaceutical business in Kenya