GSK Consumer Healthcare Porter Five Forces Analysis
Five Forces analysis of GSK Consumer Healthcare covering threat of new entrants & substitutes, bargaining power of buyers & suppliers and competitive rivalry.
Threat of New Entrants:
GSK Consumer Healthcare is a leading drug and consumer healthcare product manufacturer. With popular products like Sensodyne toothpaste and Eno in its portfolio, the company strives to ease the health problems faced by people by serving mostly over-the-counter solutions. The company has a well-diversified portfolio of products where special compositions are required to create them. Most of these are not patented, which means that newer companies can start manufacturing these products and start competing with GSK. However, manufacturing and selling these products requires regulatory permissions which is sometimes challenging, owing to several roadblocks and compliances. When these are achieved, setting up the production unit is itself very cost intensive. Experts need to be employed to keep a check on proper manufacturing. Once the manufacturing process is complete, advertising both to consumers as well as the channel is tough, as the druggists are already used to selling GSK’s or another company’s products. In this scenario, profitability becomes challenging. Hence, we may conclude that threat of new entrants is a weak force for GSK Consumer Healthcare Products.
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This concludes the threat of new entrants in the GSK Consumer Healthcare Porter Five Forces Analysis.
Threat of Substitutes:
Below are the threats of substitute products of Porter’s Five Forces analysis of GSK Consumer Healthcare:
GSK Consumer Healthcare Products manufactures either over-the-counter solutions or ones where multiple type of products can be used to deal with the problems. This also includes Ayurveda- a science which had lost its sheen but is gradually picking up as more and more companies invest and sell the products across the globe and try to educate the potential customers.
This means that substitutes of GSK’s products exist and there is a notable shift towards them. However, there are still due questions on the reliability of such solutions, which means that the legacy standing of GSK is not likely to get hurt. People also may try home remedies for these minor problems, and only get proper products once the domestic solutions fail. Therefore, we may conclude that the threat of substitutes for GSK is a weak to moderate force in shaping its competitive landscape in the market.
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Bargaining Power of Customers:
In the GSK Consumer Healthcare Porter Five Forces Analysis the bargaining power of the customers can be explained as:
The customers of GSK Consumer Healthcare have little bargaining power over the price of the products, which is generally noted in case of medical products. Customers are in need when they request for these products, and the price elasticity is not very high. This means that the company has the potential to charge reasonable prices for their products from the customers, who would be happy to get relieved. However, since there would be many firms selling the same product at a relatively lesser price, the customer may switch to those products. As the patenting is missing, such products are readily available in the market. The expansion of internet has reduced the information asymmetry among the customers, who can easily search for the products online and know more about them.
Thus, we can say that the bargaining power of customers is a strong force to define the competitive strategies of GSK Consumer Products.
Bargaining Power of Suppliers:
Following is the bargaining power of suppliers in the Porter’s Five Forces analysis of GSK Consumer Healthcare:
The suppliers of raw material for these products are highly specialized players, who operate at a big scale and have contracts with multiple companies. The raw material itself is not available in infinite supply, which means that they hold significant power in the system. To counter this, major firms like GSK create a system of backward integration of the raw material, which is critical, and start the pre-processing in-house to ensure stability in supply quality, quantity, and prices. However, the companies like GSK still face a tradeoff, as thousands of different materials are required to produce these products. The production of only a few of which could be backward integrated into the system. Therefore, a need to create a strong supply chain network persists to encounter these challenges. We can conclude that the bargaining power of suppliers is a moderate force to impact the competitive environment for GSK Consumer Healthcare.
Competitive Rivalry:
The impact of key competitors in the GSK Consumer Healthcare Porter Five Forces Analysis is as follows:
GSK Consumer Healthcare Products is in an industry with intense rivalry, with multiple firms producing similar products to compete for every penny in the market. The products are advertised through several mediums, including television and newspaper, which itself is very costly. The companies also have to employ an aggressive sales force, which has to push the products through the sales channels by giving good margins to the intermediaries. Availability of the product and market penetration is another big cost center for these companies. Since the products are similar and the customer doesn’t usually feel the difference while using these products, the companies must invest a lot in brand building and making sure that their product gets pushed by the druggist. R&D costs to innovate and differentiate their products is also high. The loyalty of customers is difficult to accomplish, which means repeat purchases are equally costly to the companies, since the switching cost for the customers is negligible.
Therefore, we can conclude that firms in this space fight aggressively, hence taking a toll on their profitability and making competitive rivalry a strong force for GSK Consumer Healthcare Products.
To conclude, the above GSK Consumer Healthcare Porter Five Forces Analysis highlights the various elements which impact its competitive environment. This understanding helps to evaluate the various external business factors for any company.
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