Case Study Description of Succession at Merck KGaA
Focuses on the issue of succession in terms of family, management, and governing bodies. Describes in some detail the period between 1963 and 2000, when Hans Joachim Langmann, the charismatic leader, was at the helm of Merck. Illustrates the consequent internationalization, the research focus on liquid crystals for LC displays instead of pharmaceuticals, and the patriarchal leadership style of this time. Reviews the five-year stint of Bernhard Scheuble, a glamorous family outsider chosen by Langmann, a period that ended in 2005 with his dismissal and succession by Michael Romer, a 27-year Merck veteran formerly in charge of the Chemicals division and liked by many family insiders because of his low profile leadership style. Also discusses the issue of shorter CEO life cycles in Merck's highest management as a means of examining the effectiveness of the prevailing management structure in selecting and appointing top leaders and their successors.
Swot Analysis of "Succession at Merck KGaA" written by F. A. Neumann, Josep Tapies includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Langmann Merck facing as an external strategic factors. Some of the topics covered in Succession at Merck KGaA case study are - Strategic Management Strategies, and Organizational Development.
Some of the macro environment factors that can be used to understand the Succession at Merck KGaA casestudy better are - – technology disruption, central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, geopolitical disruptions,
increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of Succession at Merck KGaA
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Succession at Merck KGaA case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Langmann Merck, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Langmann Merck operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Succession at Merck KGaA can be done for the following purposes –
1. Strategic planning using facts provided in Succession at Merck KGaA case study
2. Improving business portfolio management of Langmann Merck
3. Assessing feasibility of the new initiative in Organizational Development field.
4. Making a Organizational Development topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Langmann Merck
Strengths Succession at Merck KGaA | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Langmann Merck in Succession at Merck KGaA Harvard Business Review case study are -
Learning organization
- Langmann Merck is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Langmann Merck is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Succession at Merck KGaA Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Langmann Merck are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
High switching costs
– The high switching costs that Langmann Merck has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Operational resilience
– The operational resilience strategy in the Succession at Merck KGaA Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Low bargaining power of suppliers
– Suppliers of Langmann Merck in the sector have low bargaining power. Succession at Merck KGaA has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Langmann Merck to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Langmann Merck is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by F. A. Neumann, Josep Tapies can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Superior customer experience
– The customer experience strategy of Langmann Merck in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– Langmann Merck is one of the leading recruiters in the industry. Managers in the Succession at Merck KGaA are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Ability to lead change in Organizational Development field
– Langmann Merck is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Langmann Merck in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Langmann Merck is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– Langmann Merck has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Langmann Merck to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Organizational Development industry
– Succession at Merck KGaA firm has clearly differentiated products in the market place. This has enabled Langmann Merck to fetch slight price premium compare to the competitors in the Organizational Development industry. The sustainable margins have also helped Langmann Merck to invest into research and development (R&D) and innovation.
Weaknesses Succession at Merck KGaA | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Succession at Merck KGaA are -
Increasing silos among functional specialists
– The organizational structure of Langmann Merck is dominated by functional specialists. It is not different from other players in the Organizational Development segment. Langmann Merck needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Langmann Merck to focus more on services rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, Langmann Merck has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Langmann Merck even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Workers concerns about automation
– As automation is fast increasing in the segment, Langmann Merck needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Succession at Merck KGaA, in the dynamic environment Langmann Merck has struggled to respond to the nimble upstart competition. Langmann Merck has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As Succession at Merck KGaA HBR case study mentions - Langmann Merck takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High operating costs
– Compare to the competitors, firm in the HBR case study Succession at Merck KGaA has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Langmann Merck 's lucrative customers.
High cash cycle compare to competitors
Langmann Merck has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Succession at Merck KGaA, it seems that the employees of Langmann Merck don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Succession at Merck KGaA HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Langmann Merck has relatively successful track record of launching new products.
Need for greater diversity
– Langmann Merck has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Aligning sales with marketing
– It come across in the case study Succession at Merck KGaA that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Succession at Merck KGaA can leverage the sales team experience to cultivate customer relationships as Langmann Merck is planning to shift buying processes online.
Opportunities Succession at Merck KGaA | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Succession at Merck KGaA are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Langmann Merck can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Langmann Merck can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Langmann Merck can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Langmann Merck can use these opportunities to build new business models that can help the communities that Langmann Merck operates in. Secondly it can use opportunities from government spending in Organizational Development sector.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Langmann Merck in the consumer business. Now Langmann Merck can target international markets with far fewer capital restrictions requirements than the existing system.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Organizational Development industry, but it has also influenced the consumer preferences. Langmann Merck can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Langmann Merck can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Creating value in data economy
– The success of analytics program of Langmann Merck has opened avenues for new revenue streams for the organization in the industry. This can help Langmann Merck to build a more holistic ecosystem as suggested in the Succession at Merck KGaA case study. Langmann Merck can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Langmann Merck to increase its market reach. Langmann Merck will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Langmann Merck can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Succession at Merck KGaA, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for Langmann Merck to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Manufacturing automation
– Langmann Merck can use the latest technology developments to improve its manufacturing and designing process in Organizational Development segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Buying journey improvements
– Langmann Merck can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Succession at Merck KGaA suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Threats Succession at Merck KGaA External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Succession at Merck KGaA are -
High dependence on third party suppliers
– Langmann Merck high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Consumer confidence and its impact on Langmann Merck demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Environmental challenges
– Langmann Merck needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Langmann Merck can take advantage of this fund but it will also bring new competitors in the Organizational Development industry.
Easy access to finance
– Easy access to finance in Organizational Development field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Langmann Merck can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Langmann Merck is facing in Organizational Development sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Langmann Merck with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Langmann Merck.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Langmann Merck in the Organizational Development sector and impact the bottomline of the organization.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Langmann Merck will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Regulatory challenges
– Langmann Merck needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Organizational Development industry regulations.
Technology acceleration in Forth Industrial Revolution
– Langmann Merck has witnessed rapid integration of technology during Covid-19 in the Organizational Development industry. As one of the leading players in the industry, Langmann Merck needs to keep up with the evolution of technology in the Organizational Development sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Weighted SWOT Analysis of Succession at Merck KGaA Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Succession at Merck KGaA needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Succession at Merck KGaA is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Succession at Merck KGaA is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Succession at Merck KGaA is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Langmann Merck needs to make to build a sustainable competitive advantage.