Question

beginning "Novartis " discussing the breakup of the Novartis and GlaxoSmith Kline joint venture. In your opinion What factors -strategic and motivational -led to the dissolution of this once-promising venture ?

Answer 1

Background :

Novartis and GSK joined hands by 2014 by means of Joint venture to deal with consumer health care products (Oral health products ,skin health products ,products to relieve of respiratory issues and nicotine based products) , Typically products that can be brought over by consumer over the counter are not of prescriptional nature.

Why the JV ?
Both , GSK and Novartis come from pharma background . Novartis has been long knows for their series of acquisitions that are predominantly around pharma industry and core pharma products while their competence and business dominance does not lie in consumer healthcare . GSK , on the other hand had a broad base compared to that of Novartis in the health care range and during the joint venture initiation , it was a good move to consolidate the specific aspect of business that could give the joint venture a bigger market gain that could put them ahead of the competition in this segment.

Benefit of the JV
The consolidation of the consumer healthcare products also helped eliminate the duplicacy in the product line thus leading to products offered by the JV retain the customer base under the brand which helped consolidation and strengthening of those products.

Period of the Joint venture

After the joint venture , Novartis still continued to improve its core business units (Oncology , Pharma , Generics and Eye Care). GSK have been a key contributor to the the joint venture with the help of the exsiting brand image with which they could further strengthen their consumer healthcare products that had taken the product mix from Novartis helping sustain the customer base and market.

Decision on the dissolution
Of the 2 players . Though the contribution of Novartis is from their competency that provided the ingredients for the products , GSK have been successful in terms of taking the products to the end consumer. Thus , for Novartis the consumer healthcare products business unit is a non core business area that is not serving as a core asset , whereas for GSK it has started to add value. Novartis , with the aim of continuing to improvise and capitalise on the existing strength on the core business areas decided that it would be a better decision to sell the business unit to GSK for whom it could serve as an asset which could be a contributor than being with Novartis as a non core asset.