This document provides an overview of Medstar Limited, an Australian pharmaceutical company. It discusses Medstar's current operations, which are focused on developed markets. It notes Medstar previously failed when trying to enter emerging markets in Cambodia and Vietnam. The document identifies opportunities for Medstar to improve its strategy and create shared value in emerging Asian markets by addressing social problems through innovative business models. It analyzes weaknesses in Medstar's current value chain and areas that need reassessment, such as research and development and marketing/sales, to better position the company for future growth opportunities.

1. Medstar Limited:
A Shi0 Towards Shared
Value
MGMT90148 – Consul1ng Fundamentals
AU | CHANDRA | DAHDOULE | KERMECI | RUPAREL

2. 2
Who We Are
Our current strategy, and how it
can be improved
Opportuni/es
What opportuniAes do we have, in
order to keep Medstar compeAAve
around the world?
Industry: At a
Glance
The current state of the industry in
the growing Asian economies
Strategy into the
Future
RecommendaAons for Medstar to
maximise its opportuniAes in Asia
using shared value as a key tool.
In the Spotlight:
GlaxoSmithKline
Company analysis to demonstrate
GSK’s methodologies in creaAng
shared value in emerging markets.
Today’s Journey
From Today, Into The Future

3. WHO WE ARE

4. 4
Current Standing
Medstar Ltd: A Company Snapshot
AUD$18 billion 1H15
Revenue
Sydney, Australia – with
addiAonal operaAonal
headquarters in the USA
Headquarters
Australia, New Zealand,
USA, UK, France,
Germany
Primary Markets
Approximately 90,000
employees worldwide
Personnel
Approximately 80
countries around the
globe
Global Presence
Medstar Ltd has two business divisions; consumer healthcare and pharmaceuAcals. Previous aYempts to enter into emerging markets including Cambodia and
Vietnam through distributors have failed. Recently, Medstar has taken noAce of the successes its compeAtors are achieving in emerging markets. The possible
entry of Medstar, influenced by the global acAviAes of its compeAtors could allow opportuniAes reflecAng posiAvely on not only Medstar’s boYom line but also
on its brand image. Despite the scope of opportunity that is present, penetraAon of internaAonal markets is fraught with risk and complexity and a focused
approach rather than opportunisAc is appropriate. Through creaAng economic efficiencies in emerging markets whilst improving the health of communiAes in
developing countries, a shared value outcome can be achieved.

5. 5
-­‐ VerAcal business model
-­‐ Medstar Ltd currently
conduct internal R&D,
producAon and markeAng
Opera/ons
-­‐ Revenue streams primarily
originate from operaAons in
established and mature
markets
Markets
-­‐ Previously unsuccessful in
Cambodia and Vietnam
-­‐ Need for reassessment of
strategy
Globalisa/on
Currently, Medstar Ltd is serving developed countries in which markets are established and matured. It uAlises a fully integrated, verAcal
business model, undertaking its own R&D, manufacturing and markeAng.
Since its disconAnued operaAons following previous failure in Cambodia and Vietnam, Medstar Ltd does not service emerging markets in Asia.
If chooses to do so it must develop its business model and accompanying strategy whilst carefully considering the markets it wishes to enter.
Current Strategy
How can our operaAons be improved?

6. OPPORTUNITIES

7. 7
What Is Shared Value?
How Can Medstar Ltd Prepare for the Future?
“Shared value is created when companies recognize that there
are tremendous opportuni7es for innova7on and growth in
trea7ng social problems as business objec7ves.”
-­‐ FSG
Medstar has been running on tradiAonal strategies, which are built
on the basis of operaAng and profiAng at the expense of the wider
society and the environment in which the firm funcAons. The
powerful and revoluAonary idea of social value idenAfies this is
harmful to the interests of stakeholders. It proposes work to
correct this damage by emphasising ‘inclusivity’ by recognising that
the company’s economic progress, and the wider social progress
are interrelated and interdependent.
Medstar’s current inefficiencies and the scope for
growth through innovaAve and trending business
strategies in the pharmaceuAcal sector leads us to pose
the quesAon:
Should Medstar break into the emerging markets -­‐
‘the next big business opportunity’-­‐ by adding a
social dimension to their business prac;ce?
Looking at business through a
difference lens:
Being in the pharmaceuAcal and
medical industry, Medstar faces
tremendous business opportuniAes in
entering the realm of serving a large
underserved populaAon that suffers
the burden of myriad diseases and
insufficient healthcare. OperaAonally,
Medstar would do this through
socially beneficial methods of
producAon, distribuAon and sales.

8. 8
Medstar’s current internaAonal strategy is riddled with inefficiencies where opportunity could otherwise be apparent. There are a number of
problems that need to be improved to sustain its posiAon as a global leader in the pharmaceuAcal industry. Areas of parAcular concern are
highlighted below on the company’s value chain.
It is worth noAng that throughout this value chain, support acAviAes such as human resource management, financial management, procurement,
IT, and the like, occur concurrently and simultaneously to enhance value of primary funcAons.
For the perspecAve of focus for Medstar’s strategy, primary acAviAes that require aYenAon include research and development (R&D) and
MarkeAng & Sales.
R&D focuses on idenAfying disease target, drug
research, discovery, drug-­‐development, pre-­‐clinics
and clinical trials.
R&D
How Could We Improve?
Inefficiencies in Medstar Ltd’s Current Strategy

9. 9
Obtaining Regulatory
Approval
Supply Chain and
Manufacturing
Seeking approval from the relevant bodies for the creaAon of types of
drugs. Seeking patents to protect intellectual property.
A0er the relevant approvals are sought, the drugs will enter the
manufacturing phase. Medstar operates a number of
manufacturing faciliAes globally.

10. 10
As well as distribuAon acAviAes, the products need
to be sold to front-­‐line distributors. Through
negoAaAons with buyers Medstar seeks to create
relaAonships to buyers and further channels of
markeAng to on its core strength, its brand.
Marke1ng & Sales
Post-­‐market surveillance and pharmaco-­‐vigilance
Evalua1on

11. 11
Currently, Medstar is focused on delivering results to only its shareholders and its strategy is characterised by profit-­‐
driven investments and innovaAon based on financial outcomes. In stark contrast to its direct compeAtors who are seen
as highly innovaAve and driven by social outcomes, Medstar is generally seen as a company owned by profit-­‐hungry
investors. This of course is not the case and the execuAve team should be commended for the philanthropic advances
taken to engage in corporate social responsibility, for example the recent strides to innovate upon criAcal depression
drugs. However, this percepAon is causing immense reputaAonal harm for a pharmaceuAcal that needs to be able to
balance the unique dilemma of improving the quality of life of humans and at the same Ame make money to fund
research and provide a compeAAve return for shareholders (Goldstein, 2011).
Another major problem is that whilst Medstar preaches an innovaAve strategy where it claims to ‘operate in the future’
there is liYle evidence of this in pracAce. Whilst a great deal of spending goes towards research and development, there
are few results to signify this and in recent years it has lagged behind its compeAtors. This can be drawn down to its
current strategy for innovaAon where each of its major research hubs focuses on each of its separate research
developments independent of other countries. This means that in each country in which Medstar operates there may be
overlapping development projects occurring at one Ame. This is a major inefficiency as unnecessary double-­‐ups are
cosAng the company a great deal. There is a need for an overarching global strategy for the research and development
team, this will ensure that the response Ames to global health needs can be improved. With innovaAon hubs working
together, there can be a harmonisaAon of R&D with each locaAon performing specialised tasks rather than overlapping
acAviAes that can result in a waste of Ame and resources. An open innovaAon plahorm is a consideraAon for the
company and will be further outlined, thereby ensuring that complementary research can be undertaken at any point.
Whilst research and development is highly decentralized due to the various innovaAon hubs around the world, sales is
highly centralised with the global sales team based in the company’s Sydney office. The Medstar sales strategy seems to
be universally accepted but not understood. This means that the sales force has not been able to adapt to the needs of
each market and to different cultures but rather passed down from the global sales team.
How Could We Improve?
Inefficiencies in Medstar Ltd’s Current Strategy

12. 12
Primary Markets
Medstar primarily serves in
developed markets that is Australia,
New Zealand, USA, UK, France,
Germany.
Headquarters
Sydney, Australia with addiAonal
operaAonal headquarters in the USA
Market PotenAal
Moving into emerging markets will
mean that Medstar can engage in
future potenAal benefits, as well as
reputaAonal benefits
The geographic focus of Medstar is proving a major barrier to growth. Currently, the health needs of only developed countries are
being fulfilled, with these markets already being highly saturated there is liYle growth prospects in the future. Moving into
emerging markets will mean that Medstar can capitalise on future potenAal benefits, at the Ame this can have major reputaAonal
benefits. There is a great deal to be acquired by reinvigoraAng the company strategy and moving into new markets and ignoring
this be a will be a lost opportunity to leverage upon the significant exisAng competencies the company.
How Could We Improve?
Inefficiencies in Medstar Ltd’s Current Strategy

13. INDUSTRY ANALYSIS

14. By the end of this year, 40% of today’s pharmaceuAcal market will lose patent
protecAon, which will also affect sales in emerging markets (PwC, 2015). Hence,
industry players are required to look out for an alternaAve and sustainable
source of revenue, as well as maintain their profitability. Given the pessimisAc
outlook of the pharmaceuAcal industry, the Asia-­‐Pacific’s strong economic
fundamentals have are an aYracAve market for the future scope for players
across the globe (Frost & Sullivan, 2014).
By 2016, the global pharmaceuAcal industry is expected to generate an
esAmated 30 percent of its total sales in emerging markets (PwC, 2015). Asia
Pacific is the fastest growing pharma market and is going through tremendous
change due to internaAonal and local developments.
As per the data from World Bank and Frost & Sullivan analysis (Appendix 3),
total Asia Pacific healthcare spending is expected to grow from $1.34 trillion in
2012 to $2.20 trillion in 2018 at a CAGR of 8.6%. The healthcare expenditure
per capita is expected to increase by 4.8% across the region by 2018. (Frost &
Sullivan, 2014).
Industry Analysis
Outlook: Pharma Sector in the EMEs

15. 15
Growing Middle-­‐Income
Group
The middle class is esAmated to
reach 2 billion by 2016-­‐2017,
giving a boost to healthcare
spending.
Rapid Urban Growth
UrbanizaAon is rising at a higher pace in the Asia
Pacific region. UrbanizaAon improves the quality of
healthcare, but at the same Ame, brings several
risks in terms of increased polluAon, high
prevalence of smoking, stress, etc. These factors
have materially changed the profile of disease in
Asia Pacific countries.
Growing Healthcare
Coverage
Local governments are making an
effort to increase the healthcare
coverage to a larger populaAon.
Government iniAaAves to increase
access to healthcare and treatment
advancements will drive the sector
expansion.
The upwards trend of growth in emerging markets is not expected to slow down. Although the Asia Pacific is an aYracAve growth market, it is equally complicated, too. The
market is considerably heterogeneous, wherein, countries differ from each other poliAcally, economically, socially, technologically and, most importantly, culturally. Despite these
differences, there are common aYributes that are contribuAng to the rapid growth of the market. Some of these important aYributes include:
Industry Analysis
Outlook: Trends

16. 16
Industry Analysis
A PESTLE PerspecAve
-­‐ VolaAle PoliAcal Landscapes
-­‐ Need For Public Funding
-­‐ Local Government AuthoriAes
-­‐ Tax Schemes
Poli1cal
-­‐ Need For Fair Pricing
-­‐ OrganisaAonal ConsolidaAon
Economical
-­‐ UrbanizaAon
-­‐ Ageing PopulaAon
-­‐ Emerging Middle Class
-­‐ Ethics In PracAce
Socio-­‐Economical
-­‐ Need For Product InnovaAon
-­‐ Green Technology
Technological
-­‐ RegulaAon In Pricing
-­‐ Patent ProtecAon
Legal
-­‐ Sustainability Through ProducAon
-­‐ Adhering To Environmental PracAces
Enviromental
The pharmaceuAcal sector in emerging Asian regions vary across countries, mostly in terms of healthcare infrastructure. Thus, a “one-­‐size-­‐fits-­‐all” approach and analysis
cannot work here. However, there are many broad similariAes in the pharmaceuAcal landscape across the emerging naAons of Asia. A PESTLE framework, thus, provides a
peek into some significant pharmaceuAcal industry highlights within Asia’s emerging zones:

17. 17
Poli7cal landscape: Highly vola7le, with rapid government changes
affecAng economic prospects.
Corrup7on: Many incidents of high profile corrupAon crackdowns and
cases of companies trying to achieve rapid growth in unfamiliar markets.
For example: Firms try to woo medical professionals in India for
approvals through lavish gi0s under the pretext of medical conferences,
free samples, etc. In China, GSK was fined £300m by Chinese authoriAes
in September for “massive and systemic” bribery of doctors to boost
sales.
Insufficient public funding and reimbursement has led to an inefficient
healthcare infrastructure.
Local government Ini7a7ves are expanding healthcare coverage to the
larger populaAon and focusing on treatment advancements
Government focus is on localisa7on to encourage local manufacturers to
produce drugs of their own.
Tax policy: Tax deducAon for R&D and provision for deducAon for
expenditure incurred outside R&D (expenses related to overseas clinical
trials product approvals, patenAng,etc.) are low.
Poli1cal Economical
Pricing: Affordable products and services work in these naAons.
Governments are increasing their control over prices and inching
closer to stalling free pricing, to keep them low.
Demand drivers:
A Large middle class implies generally low affordability. At the same
Ame, increasing incomes are leading to discreAonary spending.
Focus has surpassed food, clothing, housing and energy costs and
has become health care, educaAon and financial services.
Increasing Urbaniza7on has increased the risks of polluAon,
prevalence of smoking, stress, etc.
Supply side dynamics:
Insufficient qualified talent and a highly fragmented network of
logisAcs and supply chain infrastructure is a challenge for
companies. Firms prefer local investment as to cut costs and
effecAvely leverage commercial success, there is a strong inclinaAon
for investment in local Research & Development and local
manufacturing.
Consolida7on amongst corporates: Local firms are increasingly gaining
market share, and growing through M&As and partnerships with
local and mulAnaAonal firms
Industry Analysis
A PESTLE PerspecAve

18. 18
Distribu7on of wealth: These lower & middle-­‐income countries have a
large underserved populaAon, which represents a huge new customer
base. It demands the applicaAon of innovaAve technology to meet the
needs of populaAons that suffer from insufficient resources.
Unethical prac7ces: Cases have been reported on the use of vulnerable
populaAon groups in clinical trials.
Increase in ‘Lifestyle diseases’: With growing prosperity and improved
nutriAon, disease paYerns in emerging markets are changing and shi0ing
toward ‘lifestyle’ diseases, which are more common in mature markets.
This trend opens up new markets for exisAng products, for eg: the
number of cases of diabetes has gone up tremendously.
Growing trends: The growing senior popula7on creates a strong demand for
innovaAve cures, parAcularly in therapies that avoid tradiAonal drugs,
devices and surgery. In China, the age group 65 and over, accounts for
9.5% of its total populaAon. This trend is placing a greater strain on
healthcare services and increasing the demand for innovaAve therapies
for the treatment of age-­‐related diseases. Personalised and speciality
treatments are also becoming a trend, where efforts are being taken to
move away from the concept of one-­‐drug-­‐fits-­‐all to a more customised
approach.
Social Technological
Focus of innova7on: is on product development to deliver what the
customers truly ‘need’. This entails recognising the true benefits
to the customers and delivering through reengineering or
reformulaAng exisAng products, improving funcAonality,
adapAng innovaAve packaging to reduce costs or improve
safety, etc. This ‘frugal or lean’ innova7on adopted in the EMEs,
challenge the “more is beYer” mantra of the western world.
These inexpensive methods of producAon, which are ‘need
based’ are resulAng in new products and soluAons that are
tailored for emerging markets
Green technology: Increased pressure on scarce resources is
leading the companies and local governments to invest in green
technology and focus on environmental concerns.
Industry Analysis
A PESTLE PerspecAve

19. 19
The overall legisla7ve landscape of these na7ons is highly dynamic.
Pricing regula7ons: Regulatory bodies like the NaAonal Development & Reform
Commission (NDRC) in China introduced drug policies to cut drug prices and
to achieve “zero-­‐markup” in hospitals. Even the Indian government is moving
closer to directly controlling pricing of certain drugs, with the legislaAon
inching closer to stalling free pricing for consumer protecAon.
Patent protec7on: Firms, especially foreign players are fighAng over protecAon
for their IP with the governments, as regulators open up some patent
protected medicines to low cost-­‐generic producAon by local manufacturers.
Stricter standards for drug producAon, quality control and requirements on
qualificaAon of employees.
Regulatory defini7ons and explana7on to rules remain vague and unclear-­‐ Due to
such legislaAve ambiguity, delays are frequent.
Clearance delays and regulatory uncertainty: Prevalent are delays in clinical trial
approvals and compulsory licensing. FDI policies are unclear, especially in India
-­‐ the country is aYempAng to improve the situaAon, under the ambit of its
popular ‘Manufacture or Make in India’ campaigns. The clinical trial industry,
however, remains a challenge to operate in. These problems are also because
of mulAple agencies and government bodies within the pharmaceuAcal
industry.
Legal Environmental
Sustainability through redesign: Companies are redeveloping exisAng
product lines to meet the needs of these new markets, either by lowering
unit costs or improving funcAonality in resource-­‐poor environments (and
hence creaAng shared value).
Environmentally friendly produc7on methods: Companies are construcAng
and maintaining producAon faciliAes that are environment friendly with
special air, water and waste management procedures installed.
Stricter environment regula7ons: The concerned environment protecAon
boards of these naAons have tougher laws to target emissions from
pharma companies and wastewater treatment, and have rolled out a
number of iniAaAves to promote energy efficient green technology.
Industry Analysis
A PESTLE PerspecAve

20. GSK: COMPANY ANALYSIS

21. 21
Thinking About Shared Value
Looking at GlaxoSmithKline
Good Ideas
Affordable
Accessible
Sustainable
Vision
GlaxoSmithKline (GSK) recognises the importance of shared
value and its role in addressing the unmet health challenges
present in emerging markets (Our Strategy, 2015).
As a for-­‐profit company, public-­‐private partnerships such as
those with other companies, governments, internaAonal
agencies and academic insAtuAons, as well as stakeholders,
including community groups, allow GSK to sustainably meet
strategic objecAves, irrespecAve of their customer’s locaAon
and ability to pay.
Current partners include: AMREF, CARE InternaAonal, Save the
Children, Tony Blair Faith FoundaAon, Vodafone and Barclay’s
(Developing Countries Unit: Who We Are, 2015). GSK
endeavours to make their vaccines and medicines as affordable,
available and accessible to as many people who are in need of
their products as possible (Developing Countries Unit: Our
Business Model, 2015).

22. 22
Their current strategy is not considered philanthropy, but
rather an innovaAve way of doing business; this long-­‐term
strategy aims to create healthier communiAes over Ame,
whilst also building the GSK business through increasing
market size. On four occasions, GSK has been chosen as
number one in the ‘Access to Medicines’ index, which
measures and rates pharmaceuAcal companies operaAons
in improving access to medicine in emerging markets
(Developing Countries Unit: Our Business Model, 2015).
GSK believes tradiAonal business models will not be able
to sustainably deliver viable health soluAons to those in
need, therefore prices of patented medicaAons are
capped at no more than 25% of the recommended retail
price in developed countries. AddiAonally, 20% of the
profit made in developing markets is re-­‐invested into the
emerging markets healthcare system.
In effect, higher volumes of high quality, lower priced
vaccines and medicines are distributed, increasing the
scale of posiAve health soluAons available to communiAes
(Developing Countries Unit: Our Business Model, 2015).
In order to decrease the price of medicines, GSK is
working on repackaging and/or reformulaAng its exisAng
products, such as its Ventolin inhaler, which can sell in
developing countries for a few cents rather than for five
dollars in developed countries.
Furthermore, GSK conAnues to adapt their value chain,
offering incenAves to sales staff based on volume as
opposed to sales (Peterson et al, 2011). GSK measures its
success on the number of people lives in which they are
able to make a posiAve difference (Developing Countries
Unit: Our Business Model, 2015).
Thinking About Shared Value
Looking at GlaxoSmithKline

23. 23
In Cambodia, GSK has been operaAng through local distributors since 1997 however, in 2013 through a partnership with the Ministry of Health it established a local
legal enAty in Phnom Penh (Developing Countries Unit: Cambodia, 2015). In March 2015, a new global headquarters was announced to be located in Singapore. The
reason being the PharmaceuAcals and Vaccines markets in countries covered by the new headquarters, are forecasted to grow at a significantly higher rate than that of
others around the world. GSK also partners with the Singapore Economic Development board and its operaAons indicate a conAnued commitment to servicing its
markets in Asia (GSK Announces Major, 2015).
When entering emerging markets, partnerships are key to achieving operaAonal efficiency combined with ethical conduct in developing countries. In 2004, former GSK
CEO Dr. Jean-­‐Pierre Garnier stated that “Improvement of health care in the developing world can only be addressed if the significant barriers that stand in the way of
improved access are tackled as a shared responsibility by all sectors of global society—governments, internaAonal agencies, chariAes, academic insAtuAons, the
pharmaceuAcal industry, and others—working in partnership“ (AMFAR, 2004).
Thinking About Shared Value
Company Analysis GlaxoSmithKline
At present, GSK operates a Developing Countries and Market Access Business Unit
(DCMA), which services over 50 countries including the following developing
markets: Angola, Bangladesh, Benin, Botswana, Burkina, Burundi, Cambodia,
Cameroon, Central African Republic, Chad, Comoros, DemocraAc Republic of Congo,
Ethiopia, Ghana, Ivory Coast, Liberia, Madagascar, Malawi, Mali, Mauritania,
MauriAus, Mozambique, Myanmar, Namibia, Niger, Nigeria, Sierra Leone, Tanzania,
Uganda and Zambia (Developing Countries Unit: Where We Work, 2015). In 2015,
it’s anAcipated that the DCMA unit will contribute approximately $300 million to
GSK’s top line (Peterson et al, 2011).

24. RECOMMENDATIONS

25. 25
1. Merger & Acquire For A Fast-­‐Tracked Entry
To enter new markets in the EMEs , Medstar Ltd should consider acquiring a local
company with an exisAng presence in the market. This would enable Medstar to
capitalise on local knowledge and internalise the core competencies developed by
the local counterpart to succeed in that economy. This means that Medstar would
not have to go into a new market through a greenfield investment starAng from
scratch, being exposed to the risks of failure in the infancy of the business life and
having to learn the processes and culture of the new market. Rather, the
acquisiAon would empower Medstar to capitalise on the exisAng knowledge in the
host country with the embedded skills to assist in working towards its strategy.
Moreover, this will allow Medstar to minimise ‘last mover disadvantage’, as the
company can build on the target’s relaAonship with local consumers as well as its
previous track record in the economy.
To kick-­‐start its expansion, Medstar should reconceive their products to make
them more appealing to its new market. A0er careful consideraAon of the product
offerings of its target company as well as local disease burden, Medstar should
create a tailored porholio of drugs to sell at affordable prices and target diseases
prevalent locally. This strategy was used by NovarAs to target poor families in rural
India and generated shared value by simultaneously increasing revenues and
decreasing disease burden through their easy to access, affordable medicaAons
(FSG, 2012).
RecommendaAons: Engage. Partner. Innovate
A Foot in the Door: Merger/AcquisiAon

26. 26
To determine a suitable target to acquire in the EMEs, Medstar
should consider pharmaceuAcal companies in both India and China.
Both the countries are expected to be strong growth areas for the
global pharmaceuAcal industry. As Appendix 1 indicates, the growth
in GDP of both these countries is expected to significantly
outperform that of other countries throughout the world.
Furthermore, given the rising wealth of the middle class in both the
countries, healthcare expenditure is expected to increase by 2.45x
and 2.34x in China and India respecAvely, as highlighted by
Appendix 3. Lastly, both these countries have a burgeoning
manufacturing sector and provide easy access to skilled workforce.
Hence a company in either country should be targeted by Medstar
to begin their expansion into the emerging economies of Asia.
Whilst the acquisiAon of a company would allow Medstar to enter
into a new market, due diligence should be performed to ensure
that the target is a cultural match for Medstar. AddiAonally, the
presence of an internal champion can ensure that the realigning of
processes and frameworks within the target company occurs
smoothly and the acquirer can execute the long-­‐term strategy for
the company in a hassle free manner.
RecommendaAon: Engage. Partner. Innovate
A Foot in the Door: Merger/AcquisiAon

27. 27
Pfizer and GSK have created shared value through this method by merging their HIV related drug
porholios to create a new jointly owned company called ViiV Healthcare. This presents the new company
with a comprehensive R&D pipeline of numerous compounds and provides it with the opAon to selecAvely
progress only most the most promising leads through the drug development and approval process. Hence
the alliance saves money for the parent companies but also quickens the drug development process,
thereby benefixng the community.
Nonetheless, forming strategic alliances presents risks for Medstar. Different moAves of partner
organisaAons may render the process full of inefficiencies which drive up cost and benefits not being
realised. Moreover, in case of the an alliance involving a for profit firm and a public organisaAon, there is a
possibility of public backlash. The community and government may view the alliance as a means for the
commercial organisaAon to extract value from public bodies by exploiAng their research and experAse
without fair compensaAon in return.
RecommendaAon: Engage. Partner. Innovate
Building Value Through Partnership
A0er Medstar gains a foothold in the market, the
company should seek to form alliances with local
hospitals, research insAtutes and universiAes. This
would enhance its R&D porholio and build a strong
pipeline of new products with minimal iniAal
investment costs. As a result, the company could
engage with local stakeholders (for e.g. government
departments) and create shared value by
commercialising government funded research,
thereby increasing the rate of rate on taxpayer
dollars and reducing the burden on government
and NGOs to fund medical research. AddiAonally,
publically owned research organisaAons and
universiAes may gain access to the company
extensive intellectual property, technical knowhow
and financial resources which may further drive
their independent work and aid the society at large.
Therefore, shared value is created by redefining
producAvity in the value chain.
2. Medstar Limited’s New Partners -­‐ Form
Strategic Alliances

28. 28
3. Open Innova1on PlaYorm
A0er alliances are formed and Medstar has built an ongoing relaAonship with each
partner, the company should focus on creaAng a common plahorm where its
partners collaborate amongst themselves and with the company. An emerging
trend in the high technology industries has been for companies such as Boeing and
Apple to create an open innovaAon plahorm and bring together the experAse of
their partner organisaAons to create the end product. Similarly, Medstar should
create such a plahorm to uAlise specialist knowledge in different fields of medical
research, currently located in different organisaAons to create a comprehensive
product offering. The benefit of this approach is that Medstar gains access to
experAse of other organisaAons without the high cost associated with recruiAng
the pioneers of parAcular fields. The benefit for the community is that a profit
driven company like Medstar would drive up efficiencies and reduce bureaucracy
that is normally prevalent in public sector organisaAons. AddiAonally, the company
could also direct the research undertaken at such organisaAons to fields that are
relevant to the society at large and prevent individual scienAsts from undertaking
pet projects which provide no large scale benefit to the community.
In spite of the numerous shared benefits to the firm and the public, there exist
potenAal risks that need to be considered. Managing numerous stakeholders, each
with a different corporate culture and different moAvaAons for being part of the
open innovaAon plahorm may be a Ame consuming process. Apart from losing
Ame, the company could also lose valuable proprietary informaAon as a result of
sharing extensively to promote working cohesively.
RecommendaAon: Engage. Partner. Innovate
InnovaAon Is EssenAal

29. 29
Rethinking Innova1on Within Medstar
A related suggesAon that the Board should also consider is for Medstar to
have local R&D offices in which they can collaborate with their counterparts
in other countries. As previously outlined, a recent problem that Medstar
had been faced with, is the decentralised research department; with each
country’s R&D department seemingly operaAng as a separate enAty. This is
both costly and inefficient and limits the uAlisaAon of in-­‐house experAse in
developing innovaAve soluAons. Nowadays, innovaAon is more crucial than
ever before; lagging behind on innovaAon is one of the greatest challenges
for technology based companies going into the future (Industrial Research
InsAtute, 2002) and will separate market players from market leaders.
Therefore, an open innovaAon plahorm that fosters the transfer of
knowledge is criAcal to Medstar’s expansion in the future.
There is immense benefit for the board of Medstar to consider a strategy to
beYer coordinate these spaAally dispersed research hubs, integraAng them
under a single overarching strategy for innovaAon. CommunicaAon is key
here, with the global team in Sydney needing to build plahorms for strong
internaAonal interacAon between the naAonal teams. This will ensure that
research teams work in synergy wherever they are around the world, but sAll
be equip to meet local requirements for innovaAon. Furthermore, there
would be great value from forming a Global R&D Ambassador tem, this
internaAonal team will convene every year in Sydney and will head the
naAonal research agenda for their respecAve country.
RecommendaAon: Engage. Partner. Innovate
Facing Issues Before Moving Into EME’s

30. 30
Whilst the acquisiAon of a company would allow Medstar to enter into a new market, due diligence should be performed to ensure that the target is a cultural
match for Medstar. AddiAonally, the presence of an internal champion can ensure that the realigning of processes and frameworks within the target company
occurs smoothly and the acquirer can execute the long-­‐term strategy for the company in a hassle free manner.
RecommendaAon: Engage. Partner. Innovate
How Medstar Ltd Can Prepare for the Future

31. 31
In order to scope out the potenAal merger or
acquisiAon of an exisAng pharmaceuAcal company.
RaAonale: this company will have on the ground
operaAons and a branded reputaAon in developing
countries, rather than Medstar needing to undertake
greenfield investment. Reduce the cost of not being
an early mover into EME’s and minimising the last
mover disadvantage.
Risk: need to ensure a clear strategic and cultural
alignment, and that the core acAviAes will not be
disrupted by the M&A.
Undertake Due Diligence
Preferable markets to move into would be
markets that are yet to be saturated, provide a
compeAAve plahorm, soon-­‐to-­‐be robust emerging
middle class and low poliAcal risk.
Execute M&A
1
2

32. 32
With universiAes, hospitals, and similar
partners; the value is in the ability to leverage
on core local knowledge and fostering
engagement with the community at large.
Public-­‐private partnerships will allow Medstar
to further focus on conAnuously innovaAon.
Build Strategic Alliances
Backward verAcal integraAon with
research insAtuAons. This will assist in
building a strong research component.
Ver1cal Integra1on
3
4

33. 33
A hub near a cluster of synergisAc ameniAes-­‐ so,
close to universiAes and hospitals. This will be a
research hub that will specialise in finding new
medicines and enhancing and reissuing drugs
that are close to the expiraAon of patent date.
Open Innova1on Hub 5

34. 34
Through our analysis of Medstar Limited, the industry
and the wider environment, we have been able to
outline recommenda1ons moving forward.
These recommenda1ons will tap into new markets and
capitalise on the opportuni1es that are present.
Implemen1ng this new strategy, Medstar will be able to
sustain its market leading posi1on through realising
Shared Value.
In Summary

35. 35

36. THANK YOU
Designed by: Robert Au
For: AusAn Chia
MGMT90148
Melbourne Business School, 2015

37. 37
All stock images provided by: www.geYyimages.com.au
AMFAR, (2004). CreaAng New Partnerships and Rules of Engagement, TREAT Asia Report, Retrieved from <hYp://www.amfar.org/arAcles/around-­‐the-­‐world/treatasia/older/an-­‐
interview-­‐with-­‐glaxosmithkline-­‐ceo-­‐jean-­‐pierre-­‐garnier%E2%80%94creaAng-­‐new-­‐partnerships-­‐and-­‐rules-­‐of-­‐engagement/Developing>
Bhidé, A. (2009). Where innovaAon creates value. The McKinsey Quarterly, 2, 119-­‐125.
Booz & Company,. (2013). How emerging markets are driving the transforma7on of the pharmaceu7cal industry. Retrieved from <hYp://www.strategyand.pwc.com/global/home/what-­‐
we-­‐think/reports-­‐white-­‐papers/arAcle-­‐display/pharma-­‐emerging-­‐markets>
Clarke, M. (2011) Emerging market growth pushes GSK to profit, Fresh Business Thinking, Reviewed at <hYp://www.freshbusinessthinking.com/news.php?NID=9471&Title=Emerging
+market+growth+pushes+GSK+to+profit#.VV8eQBf9pek>
Countries Unit: Cambodia, (2015). Retrieved from <hYp://www.developingcountriesunit.gsk.com/FileViewer.ashx?f=AssetsLibrary43cambodia.pdf>
Crawford, R. K. (2002). Industrial Research InsAtute's R&D Trends Forecast for 2002: As They Tightly Target R&D Spending for Tangible Business Results, IRI Members ConAnue to
Emphasize Growth through New Businesses and Partnerships. Research-­‐Technology Management, 45(1), 16.
Developing Countries Unit: Our Business Model, (2015). Retrieved from <hYp://www.developingcountriesunit.gsk.com/Our-­‐innovaAve-­‐business-­‐model>
Developing Countries Unit: Where We Work, (2015). Retrieved from: <hYp://www.developingcountriesunit.gsk.com/Where-­‐we-­‐work>
Developing Countries Unit: Who We Are, (2015). Retrieved from <hYp://www.developingcountriesunit.gsk.com/Who-­‐we-­‐are>
Ernst & Young. (2014). Rapid-­‐growth markets. Retrieved from <hYp://www.ey.com/PublicaAon/vwLUAssets/EY-­‐rapid-­‐growth-­‐markets-­‐february-­‐2014/$FILE/EY-­‐rapid-­‐growth-­‐
markets-­‐february-­‐2014.pdf>
Referencess

38. 38
FSG (2012). Compe7ng by Saving Lives: How Pharmaceu7cal and Medical Device Companies Create Shared Value in Global Health. Retreived from <hYp://www.fsg.org/publicaAons/
compeAng-­‐saving-­‐lives-­‐0>
Goldstein, K. (2010). Corporate ReputaAon Management in the PharmaceuAcal Industry. Ins7tute for Public Rela7ons.
GSK Announces Major New Commitment to Asia, (2015). Retrieved from <hYps://www.gsk.com/en-­‐gb/media/press-­‐releases/2015/gsk-­‐announces-­‐major-­‐new-­‐commitment-­‐to-­‐asia/
>
Kim, S., Peterson, K., Rehrig, M. & Stamp, M. (2011). CompeAng by Saving Lives: How PharmaceuAcal and Medical Device Companies Create Shared Value in Global Health,
FoundaAon Strategy Group (FCG), pp. 35
Persaud, A., Kumar, V., & Kumar, U. (2002). Managing synergis7c innova7ons through corporate global R&D. Greenwood Publishing Group.
PricewaterhouseCoopers LLP. (2012). 10 Minutes on Medical Innova7on. PricewaterhouseCoopers LLP. Retrieved from <hYp://www.pwc.com/us/en/10minutes/assets/medical-­‐
innovaAon.pdf>
PwC Analysis. (2015). Retrieved from <hYp://www.pwc.com/gx/en/issues/the-­‐economy/assets/world-­‐in-­‐2050-­‐february-­‐2015.pdf>
Our Strategy, (2015). Retrieved from <hYp://www.gsk.com/en-­‐gb/investors/invesAng-­‐in-­‐gsk/our-­‐strategy/>
Ward, A. (2014). Pharma giants face developing market ambiAons. Financial Times. Retrieved from <hYp://www.0.com/intl/cms/s/0/
e1b39b2c-­‐2f97-­‐11e4-­‐83e4-­‐00144feabdc0.html#axzz3aljZ3uV4>
Referencess

39. 39
Projected Growth Profiles for Major Economies:
Projected average annual real GDP growth rates for the BRICs,
the US, the UK, the EU and the world over the period to 2020
and in the following three decades. Our model suggests that
growth in emerging economies, par7cularly China but also to a
lesser degree India, could moderate ader 2020 as they mature.
Brazil and Russia show a slightly different paeern since short-­‐
term problems give them scope to improve in the 2020s, but
they too see their growth rates revert back towards the
advanced economy norm of around 2% in the longer run.
Appendix 1
(Source: PwC)

40. 40
A quick look on the growth paths (US$ Billion)
Emerging 7 (E7) -­‐ the seven largest emerging market economies
-­‐ China, India, Brazil, Russia, Indonesia, Mexico and Turkey,
Versus, the mature economies (G7)
-­‐ US, Japan, Germany, the UK, France, Italy and Canada.
It is expected that the E7 economies will con7nue to be the
driving force of the world economy in 2014 – 2050.
Appendix 2
(Source: PwC)

41. 41
Emerging Market Economies: Inflows from Foreign Direct
Investment, 2000-­‐2012
As published in the report by the Interna7onal Monetary Fund,
Regional Economic Outlook: Asia and Pacific:
the past few years in Emerging Asia have seen an upward trend
in Foreign Direct Investments. In 2012, it aeracted about a
quarter of the world’s FDI flows. This has risen sharply ader the
global financial crisis, making these Asian countries an aerac7ve
FDI des7na7on.
Appendix 3
(Source: IMF)

42. 42
0
1000
2000
3000
4000
5000
6000
7000
8000
Australia Japan Singapore China Malaysia Indonesia India
Healthcare Expenditure per Capita, Asia-Pacific (Source: Frost & Sullivan)
Where developed markets are struggling with a single-­‐digit,
year-­‐over-­‐year growth of 1-­‐4%, the Asia Pacific market is
witnessing strong double-­‐digit growth of 12-­‐18%.
Appendix 4
(Source: Frost & Sullivan)

43. 43
Strengths
• One of the top 5 largest pharmaceuAcal
companies in the world
• Strong R&D focus and is one of the
worlds largest investors in R&D
• Vast resources and funds
• Strong exploraAon of new markets
• Global presence in over 100 countries
• Over 97,000 employees worldwide
• Winner of awards regarding chemical
industry manufacturing and resource
efficiency.
• Strong sales and markeAng team
Weaknesses
• Patent expiry dates
• Controversy regarding safety of products
affecAng GSK image
• Controversy regarding ethical pracAce
affecAng GSK image
• Product recalls
Opportuni1es
• Strategic alliances with public and private
organisaAons such as government,
chariAes, academic insAtuAons and other
pharmaceuAcal companies
• Global penetraAon
• Specialised markets and segments
• Mergers and acquisiAons
• Increasing awareness of healthcare
• Increase in demand for health soluAons
exp: HIV/Aids medicaAons
Threats
• Risk of product failure in new markets
• Increasingly stringent regulaAons and
legal requirements
• Slowdown in exisAng markets (Europe)
• CompeAtors
• AlternaAve medicines
• Complacency as shown in operaAons
(USA)
S
W
T
O
In order to conAnue entering emerging markets with
success, GSK must draw on its strengths, and seize
opportuniAes whilst minimising or managing its
weaknesses and threats.
Appendix 5
SWOT Analysis