Case Study Description of Merck, Darmstadt: Sustaining Legacy Beyond 350 Years
This case is about the business, governance and leadership transformation of Merck - a 13th generation, family-owned, German multinational group operating in the pharmaceuticals, performance materials and life science industries. Established in 1668 as a pharmacy in Darmstadt, Germany, Merck ventured into the manufacturing of pharmaceuticals and specialty chemicals in 1827. Successfully overcoming several business and family challenges, it continued to grow. By 2017, Merck had a legacy of nearly 350 years of successful business operations, a presence in 66 countries and about 52,000 employees on its rolls. In 2017, Merck was led by Dr. Frank Stangenberg-Haverkamp (69), an 11th generation member who was the Chairman of the executive board and the family board of E. Merck KG (the group's holding company). With his 70th birthday approaching, Frank wanted to identify an able successor who could help him build the group for the next 100 years and take the Merck legacy forward.
Authors :: Navneet Bhatnagar, Kavil Ramachandran, Andrea Calabro, Sougata Ray
Swot Analysis of "Merck, Darmstadt: Sustaining Legacy Beyond 350 Years" written by Navneet Bhatnagar, Kavil Ramachandran, Andrea Calabro, Sougata Ray includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Merck Darmstadt facing as an external strategic factors. Some of the topics covered in Merck, Darmstadt: Sustaining Legacy Beyond 350 Years case study are - Strategic Management Strategies, Leadership, Strategy and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Merck, Darmstadt: Sustaining Legacy Beyond 350 Years casestudy better are - – increasing commodity prices, increasing household debt because of falling income levels, there is increasing trade war between United States & China, there is backlash against globalization, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies,
talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of Merck, Darmstadt: Sustaining Legacy Beyond 350 Years
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Merck, Darmstadt: Sustaining Legacy Beyond 350 Years case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Merck Darmstadt, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Merck Darmstadt 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, Darmstadt: Sustaining Legacy Beyond 350 Years can be done for the following purposes –
1. Strategic planning using facts provided in Merck, Darmstadt: Sustaining Legacy Beyond 350 Years case study
2. Improving business portfolio management of Merck Darmstadt
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Merck Darmstadt
Strengths Merck, Darmstadt: Sustaining Legacy Beyond 350 Years | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Merck Darmstadt in Merck, Darmstadt: Sustaining Legacy Beyond 350 Years Harvard Business Review case study are -
Training and development
– Merck Darmstadt has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Merck, Darmstadt: Sustaining Legacy Beyond 350 Years 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.
Sustainable margins compare to other players in Leadership & Managing People industry
– Merck, Darmstadt: Sustaining Legacy Beyond 350 Years firm has clearly differentiated products in the market place. This has enabled Merck Darmstadt to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Merck Darmstadt to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Merck Darmstadt is one of the leading recruiters in the industry. Managers in the Merck, Darmstadt: Sustaining Legacy Beyond 350 Years are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Learning organization
- Merck Darmstadt 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 Darmstadt is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Merck, Darmstadt: Sustaining Legacy Beyond 350 Years Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy in the Merck, Darmstadt: Sustaining Legacy Beyond 350 Years 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.
Innovation driven organization
– Merck Darmstadt is one of the most innovative firm in sector. Manager in Merck, Darmstadt: Sustaining Legacy Beyond 350 Years Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Cross disciplinary teams
– Horizontal connected teams at the Merck Darmstadt 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.
Highly skilled collaborators
– Merck Darmstadt 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, Darmstadt: Sustaining Legacy Beyond 350 Years HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Merck Darmstadt
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Merck Darmstadt does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Merck Darmstadt digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Merck Darmstadt 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.
High brand equity
– Merck Darmstadt has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Merck Darmstadt to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Merck Darmstadt in the sector have low bargaining power. Merck, Darmstadt: Sustaining Legacy Beyond 350 Years has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Merck Darmstadt to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Merck, Darmstadt: Sustaining Legacy Beyond 350 Years | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Merck, Darmstadt: Sustaining Legacy Beyond 350 Years are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Merck, Darmstadt: Sustaining Legacy Beyond 350 Years 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 Merck Darmstadt has relatively successful track record of launching new products.
High bargaining power of channel partners
– Because of the regulatory requirements, Navneet Bhatnagar, Kavil Ramachandran, Andrea Calabro, Sougata Ray suggests that, Merck Darmstadt 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.
Low market penetration in new markets
– Outside its home market of Merck Darmstadt, firm in the HBR case study Merck, Darmstadt: Sustaining Legacy Beyond 350 Years needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Products dominated business model
– Even though Merck Darmstadt has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Merck, Darmstadt: Sustaining Legacy Beyond 350 Years should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Merck Darmstadt 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. Merck Darmstadt 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.
Lack of clear differentiation of Merck Darmstadt products
– To increase the profitability and margins on the products, Merck Darmstadt needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Merck, Darmstadt: Sustaining Legacy Beyond 350 Years, in the dynamic environment Merck Darmstadt has struggled to respond to the nimble upstart competition. Merck Darmstadt has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Merck Darmstadt is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Merck, Darmstadt: Sustaining Legacy Beyond 350 Years can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Capital Spending Reduction
– Even during the low interest decade, Merck Darmstadt has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Slow to strategic competitive environment developments
– As Merck, Darmstadt: Sustaining Legacy Beyond 350 Years HBR case study mentions - Merck Darmstadt 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Merck, Darmstadt: Sustaining Legacy Beyond 350 Years, it seems that the employees of Merck Darmstadt 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.
Opportunities Merck, Darmstadt: Sustaining Legacy Beyond 350 Years | 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, Darmstadt: Sustaining Legacy Beyond 350 Years are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Merck Darmstadt in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
Developing new processes and practices
– Merck Darmstadt can develop new processes and procedures in Leadership & Managing People 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Merck Darmstadt 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 Darmstadt 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Merck Darmstadt 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 Darmstadt to hire the very best people irrespective of their geographical location.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Merck Darmstadt can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Merck Darmstadt 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.
Loyalty marketing
– Merck Darmstadt 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.
Building a culture of innovation
– managers at Merck Darmstadt 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 Leadership & Managing People segment.
Using analytics as competitive advantage
– Merck Darmstadt 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, Darmstadt: Sustaining Legacy Beyond 350 Years - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Merck Darmstadt to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Manufacturing automation
– Merck Darmstadt can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Merck Darmstadt can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Merck Darmstadt has opened avenues for new revenue streams for the organization in the industry. This can help Merck Darmstadt to build a more holistic ecosystem as suggested in the Merck, Darmstadt: Sustaining Legacy Beyond 350 Years case study. Merck Darmstadt can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Merck Darmstadt 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, Darmstadt: Sustaining Legacy Beyond 350 Years, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Merck, Darmstadt: Sustaining Legacy Beyond 350 Years External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Merck, Darmstadt: Sustaining Legacy Beyond 350 Years are -
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, Darmstadt: Sustaining Legacy Beyond 350 Years, Merck Darmstadt may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
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 Merck Darmstadt.
Consumer confidence and its impact on Merck Darmstadt 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
– Merck Darmstadt 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 Darmstadt can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
Regulatory challenges
– Merck Darmstadt 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 Leadership & Managing People industry regulations.
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 Darmstadt business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Merck Darmstadt 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, Darmstadt: Sustaining Legacy Beyond 350 Years .
High dependence on third party suppliers
– Merck Darmstadt 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Merck Darmstadt in the Leadership & Managing People industry. The Leadership & Managing People 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.
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.
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 Darmstadt 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.
Increasing wage structure of Merck Darmstadt
– 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 Darmstadt.
Shortening product life cycle
– it is one of the major threat that Merck Darmstadt is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Merck, Darmstadt: Sustaining Legacy Beyond 350 Years 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, Darmstadt: Sustaining Legacy Beyond 350 Years 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, Darmstadt: Sustaining Legacy Beyond 350 Years 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, Darmstadt: Sustaining Legacy Beyond 350 Years 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, Darmstadt: Sustaining Legacy Beyond 350 Years 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 Darmstadt needs to make to build a sustainable competitive advantage.