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 - – increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, increasing government debt because of Covid-19 spendings,
technology disruption, central banks are concerned over increasing inflation, 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 -
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.
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.
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.
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.
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.
Digital Transformation in Organizational Development segment
- digital transformation varies from industry to industry. For Langmann Merck digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Langmann Merck has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
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.
Successful track record of launching new products
– Langmann Merck has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Langmann Merck has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Diverse revenue streams
– Langmann Merck is present in almost all the verticals within the industry. This has provided firm in Succession at Merck KGaA case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Training and development
– Langmann Merck has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Succession at Merck KGaA Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
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.
Organizational Resilience of Langmann Merck
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Langmann Merck does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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 -
Interest costs
– Compare to the competition, Langmann Merck has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Succession at Merck KGaA, is just above the industry average. Langmann Merck needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
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.
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.
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.
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.
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.
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.
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.
High bargaining power of channel partners
– Because of the regulatory requirements, F. A. Neumann, Josep Tapies suggests that, Langmann Merck is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
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 -
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.
Developing new processes and practices
– Langmann Merck can develop new processes and procedures in Organizational Development industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Langmann Merck in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Organizational Development segment, and it will provide faster access to the consumers.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Langmann Merck to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Langmann Merck to hire the very best people irrespective of their geographical location.
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.
Building a culture of innovation
– managers at Langmann Merck can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Organizational Development segment.
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 -
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Succession at Merck KGaA, Langmann Merck may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Organizational Development .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Langmann Merck can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Succession at Merck KGaA .
Increasing wage structure of Langmann Merck
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Langmann Merck.
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.
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.
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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Langmann Merck business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
Stagnating economy with rate increase
– Langmann Merck can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Langmann Merck needs to understand the core reasons impacting the Organizational Development industry. This will help it in building a better workplace.
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.
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.
