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 - – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, geopolitical disruptions, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, talent flight as more people leaving formal jobs,
cloud computing is disrupting traditional business models, 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 -
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.
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.
Strong track record of project management
– Merck Darmstadt is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Merck Darmstadt 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 Navneet Bhatnagar, Kavil Ramachandran, Andrea Calabro, Sougata Ray 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.
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.
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.
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.
High switching costs
– The high switching costs that Merck Darmstadt 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.
Effective Research and Development (R&D)
– Merck Darmstadt 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, Darmstadt: Sustaining Legacy Beyond 350 Years - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Leadership & Managing People field
– Merck Darmstadt 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 Darmstadt 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 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.
Successful track record of launching new products
– Merck Darmstadt has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Merck Darmstadt 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.
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 -
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.
High cash cycle compare to competitors
Merck Darmstadt 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.
Aligning sales with marketing
– It come across in the case study Merck, Darmstadt: Sustaining Legacy Beyond 350 Years 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, Darmstadt: Sustaining Legacy Beyond 350 Years can leverage the sales team experience to cultivate customer relationships as Merck Darmstadt is planning to shift buying processes online.
Workers concerns about automation
– As automation is fast increasing in the segment, Merck Darmstadt 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.
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.
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.
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.
No frontier risks strategy
– After analyzing the HBR case study Merck, Darmstadt: Sustaining Legacy Beyond 350 Years, it seems that company is thinking about the frontier risks that can impact Leadership & Managing People strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Need for greater diversity
– Merck Darmstadt 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.
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.
High operating costs
– Compare to the competitors, firm in the HBR case study Merck, Darmstadt: Sustaining Legacy Beyond 350 Years 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 Merck Darmstadt 's lucrative customers.
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 -
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.
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. Merck Darmstadt can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Merck Darmstadt 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.
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.
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.
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.
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.
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.
Leveraging digital technologies
– Merck Darmstadt 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.
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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Merck Darmstadt to increase its market reach. Merck Darmstadt 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.
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 .
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.
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.
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 Darmstadt needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
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.
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.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Merck Darmstadt can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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 .
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.
Stagnating economy with rate increase
– Merck Darmstadt 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.
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.
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.
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.
