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Gsk a Merger Too Far

In: Business and Management

Submitted By clairette2220
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GSK, a merger too far?

1- Analyse these two forces :

* Threat of entry : Very important

* Very high expenses on advertising Direct to Consumer (DTC) * In this industry some specific skills to manufacture drugs are required, because they need to pass severe clinical trials before being commercialized. * It can take a very long time to become profitable and to compensate the speeding in R&D. * The whole industry has a bad reputation because of former issues so it is difficult to have a positive image. * Also, you need numerous sales representatives to have a real impact on the market and to get a global commercial reach.

* Threat of rivalry : important * Even niches areas in this industry are more and more crowded. * The top 10 pharmaceutical firms stand for 50% of the global sales. * There is he generic competition from which branded drugs producers are suffering. Indeed when the lifetime of a patent is over , generic companies rush to the market and offer drugs with the same active components but in a very low cost. There is also a real competition between generic companies. * Medium-sized pharmas have to consider M&A as a survival strategy.

2- Which factors explain the wave of mergers and acquisitions in the pharmaceutical industry?

The pharmaceutical industry is a really special one, on the contrary of the most part of industries there is very few new products coming to market. Indeed, a lot of money and a really long time are necessary to come up with a new drug (about £500 million and 10years).
Therefore, to fight against those expensive costs, mergers and acquisitions are really common in this market. Indeed by centralizing R&D, production, direction etc. they could impressively cut their costs while increasing their capital.
Moreover, firms merging share their strengths and weaknesses thus…...

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