Glaxo Italia S.p.A. is the oldest wholly owned operating company of London-based Glaxo Holdings PLC. The company’s growth has been exceptional, averaging a 50% annual compound rate of growth in value since 1979. Glaxo focused on the relief of peptic ulcers and of asthma and was a major supplier of antibiotics as well as treatments for skin disorders. Glaxo maintained its dominant market position through the following: concentrating on research for unmet medical needs, keeping new-drug approval time low, building up one of the worlds largest sales forces (9,500 representatives), and gauged market potential very well.
Through Glaxo Holdings’ unusual autonomy to its operating subsidiaries, including discretion over product positioning, the choice of promotional mix, the timing of line extensions, and resource allocation to various products. This is where our consulting firm comes into play. We were hired to help determine what strategy is best to make Glaxos’ newest product, Zinnat, the most profitable. Zinnat is an oral antibiotic offering a new competitive remedy to current drugs for influenza-like feverish diseases. The two strategies considered and analyzed by our team were co-marketing distribution and direct sales. In a co-marketing strategy, Glaxo would permit another pharmaceutical company to make and market the same product under a different brand name. Glaxo would receive a fee from the co-marketer, plus profits on the sales of ingredients to that firm. Under a direct sales strategy, Glaxo’s own sales force would distribute the product, permitting the company to receive the highest potential gains. However, because of the extra demand on the sales representatives, market penetration would take longer. We will discuss our findings and ultimately the best strategy for Glaxo to take in the following report.
Summary of Analysis
We first needed to determine the WACC for Glaxo Italia. Since Glaxo Holdings, the... [continues]
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