Shareholders Wealth Maximization

Topics: Stock, Stock market, Corporate finance Pages: 8 (2115 words) Published: October 26, 2010


About GSK - Our company

Established in the year 1924 in India GlaxoSmithKline Pharmaceuticals Ltd. (GSK Rx India) is one of the oldest pharmaceuticals company and employs over 3500 people. Globally, we are a USD 45 billion, leading, research-based healthcare and pharmaceutical company. In India, we are one of the market leaders with a turnover of Rs. 1860 crore and a share of 5.2 per cent*. At GSK, our mission is to improve the quality of life by enabling people to do more, feel better and live longer. This mission drives us to make a real difference to the lives of millions of people with our commitment to effective healthcare solutions. The GSK India product portfolio includes prescription medicines and vaccines. Our prescription medicines range across therapeutic areas such as anti-infectives, dermatology, gynaecology, diabetes, oncology, cardiovascular disease and respiratory diseases. The company is the market leader in most of the therapeutic categories in which it operates. GSK also offers a range of vaccines, for the prevention of hepatitis A, hepatitis B, invasive disease caused by H, influenzae, chickenpox, diphtheria, pertussis, tetanus, rotavirus, cervical cancer and others. With opportunities in India opening up, GSK India is aligning itself with the parent company in areas such as clinical trials, clinical data management, global pack management, sourcing raw material and support for business processes including analytics. GSK's best-in-class field force, backed by a nation-wide network of stockists, ensures that the Company's products are readily available across the nation. GSK has two manufacturing units in India, located at Nashik and Thane as well as a clinical development centre in Bangalore. The state of art plant at Nashik makes formulations while bulk drugs and the active pharmaceutical ingredients are manufactured at Thane. Being a leader brings responsibility towards the communities in which we operate. At GSK, we have a Corporate Social Responsibility program that works towards fulfilling basic healthcare, education and other developmental needs of the underserved population. With this dedication and commitment, we believe that the world will be better, healthier and happier. GSK is committed to developing new and effective healthcare solutions. The values on which the group was founded have always inspired growth and will continue to do so in times to come.

Ten Ways to Create Shareholders Wealth

1. Do not manage earnings or provide earnings guidance.

Virtually all public companies play the earnings expectations game. The main drawbacks about focusing on earnings is that organizations compromise value when they invest at rates below the cost of capital (overinvestment) or forgo investment in value-creating opportunities (underinvestment) in an attempt to boost short-term earnings.

2. Make strategic decisions that maximize expected value, even at the expense of lowering near-term earnings.

Most companies evaluate and compare strategic decisions in terms of the estimated impact on reported earnings but they should be measuring against the expected incremental value of future cash flows instead. A sound strategic analysis by a company’s operating units should produce informed responses to three questions i.e. how do alternative strategies affect value, which strategy is most likely to create the greatest value, for the selected strategy how sensitive is the value.

3. Make acquisitions that maximize expected value, even at the expense of lowering near-term earnings.

Companies typically create most of their value through day-to-day operations, but a major acquisition can create or destroy value faster than any other corporate activity. When it comes to exchange-of-shares mergers, a narrow focus on EPS poses an additional problem on top of the normal shortcomings of earnings. Whenever the acquiring company’s...
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