Case Study Description of Merck: Operating Science-Based Business
Merck is known for its commitment to investing in basic R&D. Are Merck's long-term investments justifiable when the firm faces extreme earnings pressure?
Authors :: Ananth Raman, Inga Maurer, William Schmidt
Swot Analysis of "Merck: Operating Science-Based Business" written by Ananth Raman, Inga Maurer, William Schmidt includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Merck Justifiable facing as an external strategic factors. Some of the topics covered in Merck: Operating Science-Based Business case study are - Strategic Management Strategies, Operations management, Research & development and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Merck: Operating Science-Based Business casestudy better are - – talent flight as more people leaving formal jobs, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China,
increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Merck: Operating Science-Based Business
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Merck: Operating Science-Based Business case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Merck Justifiable, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Merck Justifiable 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 Merck: Operating Science-Based Business can be done for the following purposes –
1. Strategic planning using facts provided in Merck: Operating Science-Based Business case study
2. Improving business portfolio management of Merck Justifiable
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Merck Justifiable
Strengths Merck: Operating Science-Based Business | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Merck Justifiable in Merck: Operating Science-Based Business Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Merck Justifiable in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Merck Justifiable 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 Merck Justifiable is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Merck: Operating Science-Based Business Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Merck Justifiable in the sector have low bargaining power. Merck: Operating Science-Based Business has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Merck Justifiable to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Merck Justifiable is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Merck Justifiable 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.
Organizational Resilience of Merck Justifiable
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Merck Justifiable does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Finance & Accounting field
– Merck Justifiable 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 Merck Justifiable in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Merck Justifiable has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Merck: Operating Science-Based Business HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Merck Justifiable 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.
Ability to recruit top talent
– Merck Justifiable is one of the leading recruiters in the industry. Managers in the Merck: Operating Science-Based Business are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Successful track record of launching new products
– Merck Justifiable has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Merck Justifiable 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.
Effective Research and Development (R&D)
– Merck Justifiable has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Merck: Operating Science-Based Business - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses Merck: Operating Science-Based Business | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Merck: Operating Science-Based Business are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Merck: Operating Science-Based Business, is just above the industry average. Merck Justifiable 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 existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Merck Justifiable supply chain. Even after few cautionary changes mentioned in the HBR case study - Merck: Operating Science-Based Business, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Merck Justifiable vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Merck Justifiable 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.
Lack of clear differentiation of Merck Justifiable products
– To increase the profitability and margins on the products, Merck Justifiable needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Merck: Operating Science-Based Business HBR case study mentions - Merck Justifiable 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.
Need for greater diversity
– Merck Justifiable 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Merck Justifiable 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.
Interest costs
– Compare to the competition, Merck Justifiable 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.
Skills based hiring
– The stress on hiring functional specialists at Merck Justifiable has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Increasing silos among functional specialists
– The organizational structure of Merck Justifiable is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Merck Justifiable needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Merck Justifiable to focus more on services rather than just following the product oriented approach.
Aligning sales with marketing
– It come across in the case study Merck: Operating Science-Based Business 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 Merck: Operating Science-Based Business can leverage the sales team experience to cultivate customer relationships as Merck Justifiable is planning to shift buying processes online.
Opportunities Merck: Operating Science-Based Business | 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 Merck: Operating Science-Based Business are -
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Merck Justifiable can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Merck Justifiable can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Loyalty marketing
– Merck Justifiable has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Buying journey improvements
– Merck Justifiable can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Merck: Operating Science-Based Business 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Merck Justifiable is facing challenges because of the dominance of functional experts in the organization. Merck: Operating Science-Based Business case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Using analytics as competitive advantage
– Merck Justifiable has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Merck: Operating Science-Based Business - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Merck Justifiable to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Merck Justifiable in the consumer business. Now Merck Justifiable can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Merck Justifiable 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Merck Justifiable 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, Merck: Operating Science-Based Business, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– Merck Justifiable 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Merck Justifiable 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 Merck Justifiable to hire the very best people irrespective of their geographical location.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Merck Justifiable to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Merck Justifiable can use these opportunities to build new business models that can help the communities that Merck Justifiable operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Learning at scale
– Online learning technologies has now opened space for Merck Justifiable 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.
Threats Merck: Operating Science-Based Business External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Merck: Operating Science-Based Business are -
Environmental challenges
– Merck Justifiable 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. Merck Justifiable can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Merck Justifiable can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Merck Justifiable in the Finance & Accounting 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. Merck Justifiable 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.
High dependence on third party suppliers
– Merck Justifiable 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.
Increasing wage structure of Merck Justifiable
– 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 Merck Justifiable.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Merck Justifiable in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Regulatory challenges
– Merck Justifiable 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 Finance & Accounting industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Merck Justifiable 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 Merck: Operating Science-Based Business .
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 Merck Justifiable business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Merck Justifiable 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Merck: Operating Science-Based Business, Merck Justifiable may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
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. Merck Justifiable needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Merck: Operating Science-Based Business 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 Merck: Operating Science-Based Business 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 Merck: Operating Science-Based Business 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 Merck: Operating Science-Based Business 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 Merck: Operating Science-Based Business 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 Merck Justifiable needs to make to build a sustainable competitive advantage.
