GSK Economics Essay

However, ASK will, very often, pass on the price increase to consumers, given that ASK has monopoly rights over many drugs. This forms a safety net for the firm as it is for the same reason that the decrease in aggregate demand will not impact upon ASK significantly. (Monopoly rights) 4. Additionally, ASK will have contracts with their suppliers for many goods, such as crude oil. Thus, the impact of the increase in oil price could be reduced. (Forwards) Strategy 1 . The central purpose of strategy is to create and exploit market imperfections to protect the business from its vulnerabilities and exposures to external shocks.

In response to reduced profits in Europe and USA due to competition from generics, ASK has derived a number of strategies to address these issues. (Definition; generics) 2. (Advertising) ASK invests heavily in its brands, including consumer-driven scientific innovation and industry-leading consumer marketing. This is critical to differentiating its products and maintaining growth. A. Its 5-year partnership with McAllen is one of the more notable marketing strategies. 4 b. Divestment has also helped ASK raise profits in 2012, as it refocuses on its core 3. Collusion) The Vii healthcare, a collusion between ASK and Pfizer,

helps both companies reduce costs in the race in HIVE R&D, one of the most expensive public health programmers. In an oligopoly, the explicit collusion of two firms will pay because it enables the players to Jointly charges monopolist prices and earn monopolist profits. However, it is for the same reason that there is an incentive to cheat. 5 4. R&D) Ultimately, if oligopolies want to achieve and enhance supernormal profits, they need to erect barriers to entry to protect their competitive advantage.

This is why the ultimate strategy lies within R&D. It ensures that ASK remains a sustainable business. A. Over the past 4 years, ASK has had 16 new drugs and vaccines approved in the USA, more than any of its competitors. It has also sustained late-stage pipeline of around 30 assets. B. R&D is a long run investment that allows ASK to enjoy reduced MAC, which further extends its profits. Nonetheless, it is essential that it protects these assets through tenants, in order to achieve monopoly powers over these assets. 6 5.

Other countries (Emerging markets, Japan) 6. Acquisition (China, Argentina) Horizontal growth Conclusion As one of the major players in the pharmaceutical oligopoly, ASK continues to enjoy economic benefits, notably through their strategies. In the face of the threat of generics, ASK has seen its profits rise due to its efficiency in protecting its assets. This is reflected in its rise in profits in IQ 2012, as opposed to rival firm Austereness, which announced a sharp fall in profits in the previous quarter, for the same reasons. 7