A transnational corporation refers to a business organization that produces and markets goods and services in different countries. Transnational corporations are often headquartered in one country but have its operations spread to other countries. They are also called multinational corporations. A definition forwarded by the International Labor Organization (ILO) asserts that multinational or transnational organizations have their managements headquartered in one country, usually referred to as the host country as well as operations in other countries, usually known as the host countries.
Transnational corporations have become dominant in most national economies. Similarly, they have developed into authoritative and influential political entities in most countries across the globe. According to Armstrong, multinational organizations have more than eighty five percent of product patents all over the world. Additionally, they control approximately seventy percent of new technological advancements worldwide (2007). There numerous examples of transnational corporations worldwide. The major multinational corporations include Unilever, GlaxoSmithKline, General Motors, General Electric, Sony, And Nokia just but a few to mention.
In this paper, I will critically analyze GlaxoSmithKline as one the major transnational corporations, its global operations, the strategies it pursues as well as its involvements in political activities in host countries. Additionally, I will also look into details the organization structure of GlaxoSmithKline and its network of suppliers.
GlaxoSmithKline is a transnational corporation in the drugs and pharmaceutical industry that deals with large scale production and marketing of drugs. The company is based in London, United Kingdom, and has its subsidiaries spread across the globe. GlaxoSmithKline was formed after two giant pharmaceutical companies, Glaxo Wellcome and SmithKline Beecham, merged in December 2000 to form a single corporation. The merger of the two large pharmaceuticals formed a well solid foundation for GlaxoSmithKline, thereby making it a market leader in the pharmaceutical industry. It is estimated that GlaxoSmithKline serves approximately seven percent of the world’s pharmaceutical market. GlaxoSmithKline is headquartered in the United Kingdom with most of its operations being based in North California, United States of America. It currently operates in more than one hundred and twenty countries worldwide making it one of the most reputable and well recognized transnational or global corporation.
The major activities of GlaxoSmithKline are development, manufacture and marketing of pharmaceutical products. It also produces other consumer healthcare products such as toothpastes. GlaxoSmithKline majors in production of medicines that treat a variety of diseases. Currently, the company is developing new treatments for cancer. According to Sa%u0301nchez-Serrano, GlaxoSmithKline also produces and supplies almost a half of the world’s total vaccines (2011).
Critical Analysis of GlaxoSmithKline’s Global Operations
GlaxoSmithKline has undertaken numerous key changes in its organizational structure and operational strategies, with most efforts being focused towards the fast growing and newly emerging markets. For instance, the company has been struggling to position itself in emerging markets especially in Asia as well as strengthening its operations in the North American region.
In 2009, a new management team led by the company’s Chief Executive Officer, Mr. Andrew Witty, decided to reorganize the whole corporation in order to effectively meet the needs of its current consumers as well as target mew markets more strategically. The company focused at building strong business links with its stakeholders in China, Middle East and India.
Furthermore, Mr. Witty and his management team created the Asia-Pacific Unit which was mandated to handle the Japanese and Australian markets. In America, the North American Division was reorganized so that it may be able to combine the United States market in addition to the Canadian and Puerto Rican markets. In my view, these organizational changes which aimed at developing the business of GlaxoSmithKline required careful, well planned and strategic corporate focus. The company had to continuously seek new opportunities in order to expand effectively and be able to meet the global market demands.
Additionally, GlaxoSmithKline had to develop and implement effective marketing strategies that would facilitate its marketing efforts and result into increased sales volumes. In my opinion, the corporation has to focus more towards mew markets such as the Russian and Middle East markets that had substantial contribution of approximate twenty five percent of the company’s total income.
Furthermore, due to increased growth in the pharmaceutical markets, GlaxoSmithKline should also accelerate its development and growth strategies to keep its pace with global market growths and trends (Sauvant, 2009). From my part, the growth rates in emerging market are more promising and may exceed that of current markets Western nations such as USA. Its business units should thus focus on countries such as Eritrea which are still outside their regions of operations.
Additionally, the corporation should increasingly decentralize its business units throughout all emerging markets so that it may effectively exploit new opportunities for corporate growth and development. Adequate considerations should be given to global markets which offer lucrative business opportunities. This is because most global markets are situated in different countries which have varying economies and hence varying potentials of growth and development. GlaxoSmithKline thus has to operate in a dynamic manner and respond to new opportunities as soon as they emerge.
In early 2010, GlaxoSmithKline reported a drop a slight drop in its pretax operating profit. According the company’s Chief Executive Officer, Andrew Witty, the drop in profits was caused by stiff competition to its products. He further linked the decline in profits to regulatory pressures imposed by host countries (Ietto-Gillies, 2010). In my opinion, the company should develop appropriate competition strategies that would enable it gain competitive advantage over its competitors in the pharmaceuticals industry. It should also lobby the governments of host countries to adopt non-punitive policies and regulations that would favor its business operations in concerned countries.
GlaxoSmithKline Corporation is well known for producing innovative medicines and products that have helped millions of people across the globe. Through its research and development centre situated at Research Triangle Park in North California, the company has been able to develop high quality pharmaceutical products. Other research divisions of GlaxoSmithKline are located in Southern England and Philadelphia. These research divisions provide suitable sources of new innovations and inventions in the medicines industry.
Involvements Political Activities
GlaxoSmithKline has had numerous involvements in political activities until December 2008 when the company announced that it will withdraw its corporate political contributions. Earlier, GlaxoSmithKline voluntarily contributed substantial amounts of money as political contributions, especially in US and Canada. However, in 2008, it opted to refrain from such political involvements. This new policy was to be adopted globally by all its subsidiaries. According to the company’s CEO, such contributions did not give the company any special privileges and thus were meaningless. In Europe, the company stopped making political contributions in 2001. He further stated that the act was made to ensure transparency in its operations and dealing with governments and politicians. The withdrawal of political contributions was also made to ensure minimal political interference with the organization’s affairs. However, the company promised to continue complying with statutory laws and regulations of countries in which it operates. For instance, in the US, the company promised to continue supporting its employees in the Political Action Committee (PAC) so as to facilitate their contributions (glaoxsmithkline, 2010).
In my view, the policy would be of great benefit to the company as it would help in cutting costs and reducing expenditures. The political contributions were more of corruption than lobbying technique. Additional, this was the modest step taken by the company after its competitors such as Johnson & Johnson and Pfizer Incorporation has made similar steps.
Major Strategies Pursued By GlaxoSmithKline Corporation
One of the major strategies that GlaxoSmithKline pursues is delivering high quality pharmaceutical products at competitive prices. In my view, this is well stated in its corporate mission statement that state the company’s global quest in improving the quality of human life (GlaxoSmithKline, 2010).
Similarly, the company pursues partnership business. This is where the companies collaborate with another corporation in conducting business. For example, it partnered with Theravance Incorporation in development of the asthma drug, LABA 444.
Additionally, GlaxoSmithKline strives at being the most socially responsible corporation worldwide. Every year, it publishes the Corporate Responsibility Report in which it states its involvement in communal activities such as health awareness campaigns. For example, in early 1998, the company partnered with the World Health Organization (WHO) in reducing the spread of stomach worms through donation of Albendazole drugs to affected populations.
In some cases, the corporation outsources its management tasks; especially IT-related tasks to technology firms. However, most of its operations are carried out by the company’s employees and management team.
Last but not least, the company has been aiming at acquiring state-of-the-art facilities that it uses in manufacturing its pharmaceutical products. This would help in ensuring production of high quality health products.
GlaxoSmithKline adopted the functional organizational structure in which its managers head product departments, for example, Abbas Hussain heads the Emerging Markets Unit whereas John Clarke is the president of Consumer healthcare. In my view, this organizational structure has facilitated smooth flow of activities at GlaxoSmithKline as well as fostering responsibility amongst the corporation’s managers. The management is vertical integrated. All employees report to their immediate seniors.
Lastly, GlaxoSmithKline has a wide range of suppliers who furnishes it with raw materials, inventories and production equipment. It solely depends on this network of suppliers for its business operations.