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ASSESSMENT 3A: Critical Evaluation Report

Decision Making Exercise 3

Introduction
Glaxo Smith Kline (GSK) is a science-led global healthcare corporate that aims to research and develop various ranges of innovative medicines and brands (What we do 2013). This report is going to discuss the bribery of GSK and doctors and hospitals in China. It will firstly briefly introduce the overview of the case. Secondly, the report aims to analyse the external environment of GSK using the PESTLE framework. In addition, there will be a critical evaluation of the company from three perspectives including the quarterly sales volume of the company in the Chinese market, GSK share price and the reputation of the company. Last but not least, there will be a conclusion to emphasize the main points of the report.

Case study overview

GSK was alleged by Chinese authorities of bribery in July 2013, it indicated that the company gave as least three billion yuan in bribes to doctors and hospitals and received kick-backs from local travel agencies to arrange conferences. There were four Chinese GSK executives detained by authorities and have been alleged that they offered money to doctors to make them prescribe more drugs to patients. However, GSKs business response has been to reiterate their anti-corruption stance and consistently deny the bribery at the Head Office level. The company has co-operated with the Chinese authorities and the internal investigation of the issue has been started by GSK.

Critical analysis of the external environment using the PESTLE framework

PESTLE is an important framework to effectively and efficiently analyse the external environment of an organization and there are six areas of the framework including political, economic, social-cultural, technological, legal and environmental perspectives (Srdjevic,
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[Student ID, Tutors name, Day and time of tutorial] Bajcetic and Srdjevic 2012). It is essential to use the framework to illustrate the external environment of GSK in order to further analyse the case. According to the case, the external environment of GSK will be analysed on the basis of current situation in China. Political The most important policy published by Chinese government in allusion to medical industry is the Planning of Development in Bio industry (The pharmaceutical industry policy review 2013). According to the policy, Chinese government encourages pharmaceutical industry to develop and the objective is to maintain the GDP of pharmaceutical industry increasing by 20% in 3 years and support businesses in the industry to research and develop new products, medicines and medical apparatus and instruments. On the other hand, the price of medicines is regulated by Chinese government especially in breath and analgesic-antipyretic (The pharmaceutical industry policy review 2013). Therefore, there are opportunities for GSK to improve its business performance in Chinese market. However, it is also possible for the company lose financial benefit in some specific areas of medicines due to the regulation of price. Economic China is one of the most important emerging markets in the world the economy of the country is developing fast. In 2012, the annual GDP of China is 519,942 hundreds million yuan which has increased by 7.7% than 2011 (China Macro Economy Database 2013). In addition, the consumer price index has increased by 2.6% compare with 2011. The statistics indicate that the customer purchasing power is continually increasing in China. Social-cultural The most important element in social-cultural environment in China needs to be considered by GSK is the society consumption. Su and Li (2005) indicate that Chinese customers has paid more attention to health care consumption in recent years which means the customer demand for health care is increasing. Therefore, GSK is able to take advantage to gain higher potential market in Chinese market.

[Student ID, Tutors name, Day and time of tutorial] Technological Health care industry is highly rely on the development of technology and according to Nexon and Ubl (2010), the most significant influence on medical technology in a long-term period will be resulted by the measures to improve quality and efficiency. Siebert et al. (2002) illustrate the core consideration in technological aspect in medical industry are the safety and innovation of the products. In addition, due to the threats of disease for human beings, both of medicines and medical apparatus and instruments are important to be concerned by organizations to innovate consistently (Siebert et al. 2002). Legal There is a complete and strict legal system to regulate health care industry particularly in medicines in China (China Food and Drug Administration 2002). There are 10 chapters in the law which mainly focus on regulation of pharmaceutical producing and selling enterprise; regulation of pharmaceutical in medical institutions; regulation of pharmaceutical and packages and regulation of pharmaceutical price and advertisement (China Food and Drug Administration 2002). On the other hand, the crime of offering bribes is illegal in China and the highest criminal penalty of bribery is more than 10 years set term of imprisonment (Crime of offering bribes 2013) Environmental The most significant aspect for organizations to consider from environmental perspective is the essentiality of sustainable development (Babcicky 2013). There are four main areas for business to pay attention to: carbon dioxide and other emissions that contribute to climate change; the usage of water; waste reduction and environmental stewardship. On the other hand, to specifically focus on pharmaceutical industry, corporate should consider the ethical factors in animal experiment (Lindenmeier et al. 2012).

Critical evaluation of the business response using evaluation criteria

[Student ID, Tutors name, Day and time of tutorial] Although GSK has active response to the charge, the total performance of the company in Chinese market has declined significantly in 2013. According to the second quarter and interim management report for the half-year 2013 (GlaxoSmithKline 2013), the EMAP Pharmaceuticals and Vaccines turnover in China is 212 million which continually decline in total sales in China. On the other hand, as has been shown in Figure 1, the share price of GSK has gradually decreased since the charge of bribery by Chinese authorities in July 2013.

Figure 1: Share price of GSK (Detailed share price 2013) In addition, the bribery issue has consequently leaded to the decline of reputation of GSK. Hirschler (2013) indicates that the company has gradually lost its trust to the public.

Conclusion
In conclusion, there are clear evidences indicating that GSK has bribery to some local doctors and hospitals in China. The external environment has provided both opportunities and threats to the company and GSK should particularly pay attention to the political and legal areas in China due to the strict feature of its legal system. Although GSK has actively responded to the issue and began its own investigation immediately, the performance of the company in Chinese market has declined inevitably.

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Reference list
Babcicky, P. 2013, Rethinking the Foundations of Sustainability Measurement: The Limitations of the Environmental Sustainability Index (ESI), Social Indicators Research, vol. 113, no. 1, pp. 133-157, viewed 5 October 2013, <http://search.proquest.com.ezproxy2.library.usyd.edu.au/docview/1372303711/140F025D 97018D4A93E/4?accountid=14757> China Food and Drug Administration 2002, The Drug Administration Law of the PRC, China Food and Drug Administration, Beijing, viewed 5 October 2013, <http://www.sda.gov.cn/WS01/CL0111/23412.html> China Macro Economy Database 2013, People Finance and Economics, China, viewed 5 October 2013, <http://hgsj.people.com.cn/indexyear.php> Crime of offering bribes 2013, Baidu, Beijing, viewed 5 October 2013, <http://baike.baidu.com/link?url=gI2svprr3fp2a7eyJ34Bpaqb7UDSBk7drW2hyQWcmpaKqGCNADGb8s1H46zkvkS> Detailed share price 2013, GlaxoSmithKline plc., UK, viewed 5 October 2013, <http://www.gsk.com/investors/share-price-analysis/detailed-share-price.html> GlaxoSmithKline 2013, Press release: second quarter 2013, GlaxoSmithKline, 24 July, viewed 5 October 2013, <http://www.gsk.fr/gsk/mediasgp/2013/Q2-2013-resultsannouncement.PDF> Hirschler, B. 2013, GlaxoSmithKline chief executive Andrew Witty will detail what action the drugmaker is taking in response to allegations of bribery against it in China when he presents quarterly results on Wednesday, sources familiar with the matter said, Reuters, 21 July, viewed 6 October 2013, <http://www.reuters.com/article/2013/07/21/us-gsk-chinaidUSBRE96K07020130721> Lindenmeier, J., Tscheulin, D.K. and Drevs, F. 2012, The effects of unethical conduct of pharmaceutical companies on consumer behavior, International Journal of Pharmaceutical and Healthcare Marketing, vol. 6, no. 2, pp. 108-123, viewed 5 October 2013,

[Student ID, Tutors name, Day and time of tutorial] <http://search.proquest.com.ezproxy2.library.usyd.edu.au/docview/1113328242/140F02BA 42B3B492A99/5?accountid=14757> Nexon, D. and Ubl, S.J. 2010, Implications Of Health Reform For The Medical Technology Industry, Health affairs, vol. 29, no. 7, pp. 1325-9, viewed 5 October 2013, <http://search.proquest.com.ezproxy2.library.usyd.edu.au/docview/651811974/140EFDF06 465FE2B1E4/1?accountid=14757> Siebert, M., Clauss, L.C., Carlisle, M., Casteels, B., De Jong, P., Kreuzer, M., Sanghera, S., Stokoe, G., Trueman, P. and Lang, A.W. 2002, Healthy technology assessment for medical devices in Europe: what must be considered, International Journal of Technology Assessment in Health Care, vol. 18, no. 3, pp. 733-40, viewed 5 October 2013, <http://search.proquest.com.ezproxy2.library.usyd.edu.au/docview/210379022/140EFDF06 465FE2B1E4/9?accountid=14757> Srdjevic, Z., Bajcetic, R. and Srdjevic, B. 2012, Identifying the Criteria Set for Multicriteria Decision Making Based on SWOT/PESTLE Analysis: A Case Study of Reconstructing A Water Intake Structure, Water Resources Management, vol. 26, no. 12, pp. 3379-3393, viewed 5 October 2013, <http://search.proquest.com.ezproxy2.library.usyd.edu.au/docview/203623186/140EFA616 4D1F0C10D2/2?accountid=14757> Su, X.Y. and Li, Z.M. 2005, Economic analysis of health care consumption, Group Economy, vol. 176, pp. 43-44, viewed 5 October 2013, <http://doc.mbalib.com/view/1d579e150f487074a62ca742c303bf2a.html> The pharmaceutical industry policy review 2013, Guosen Securities Economic Research Institute, China, viewed 5 October 2013, <http://wenku.baidu.com/view/8e73b03da300a6c30c229f38.html> What we do 2013, GlaxoSmithKline plc., UK, viewed 5 October 2013, <http://www.gsk.com/about-us/what-we-do.html> Word count (including everything above the reference list): 1,073 words