THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A)
DARMSTADT, SEPTEMBER 2006. The Serono deal was long in the making; it had eluded the Merck Group, a 338-year-old German global pharmaceutical and chemical enterprise, for months. So much so that last March, the Merck Group and its family owners had hopped onto the Schering AG acquisition train to ensure the growth it needed to remain competitive in the cutthroat pharmaceutical business. When the a??14.6 billion hostile offer they made for Schering was rejected in favor of a friendly offer from Bayer, it was difficult not to feel despondent.For months, Jon Baumhauer, the Chairman of the Family Board and influential member of the Executive Board of E. Merck OHG, had sustained the commitment of the family owners to a transformational merger that would define the future of Merck. Maintaining such secrecy among the 120-plus family partners representing the 10th to the 12th generations of Merck family owners was no small feat, but the absence of a deal was starting to create tensions on all levels. The offer from Ernesto Bertarelli, the largest shareholder of Serono, a Swiss-listed, family-controlled biotechnology firm, was hardly a surprise. Ernesto, through the company's investment bankers, had peddled the firm for months to all major pharma companies in the world, but had found few takers. The surprise was the newfound willingness of Serono to consider a negotiated deal. Merck's Executive Board, the family and Merck's advisers had kept an eye on Serono throughout the year. The company was attractive for its family culture, strong R&D capabilities, significant US presence, a rich product pipeline and of course world-class biotechnology manufac-turing competencies. Its size would give Merck much needed critical mass, but the deal was not cheap. It required extensive leverage and new equity injections from the family, its risk profile was higher than Merck's and cultural differences ran deep. Now the deal was within reach. Was this the transformational opportunity the Merck family sought? It was time to put the "courage and pioneering spirit" of the family firm to the ultimate test. Learning objectives: Managing a family business for sustainability; sophisticated family and business governance structures; managing growth; technology innovation; maintaining the entrepreneurial spirit; multi-generation family business; critical size and growth issues in the pharma business; managing incentive systems for executives.
Swot Analysis of "THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A)" written by Benoit Leleux, Anne Catrin Glemser includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Family Merck facing as an external strategic factors. Some of the topics covered in THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) case study are - Strategic Management Strategies, Growth strategy, Mergers & acquisitions, Work-life balance and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) casestudy better are - – cloud computing is disrupting traditional business models, technology disruption, wage bills are increasing, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies,
talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Family Merck, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Family 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 THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) can be done for the following purposes –
1. Strategic planning using facts provided in THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) case study
2. Improving business portfolio management of Family Merck
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 Family Merck
Strengths THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Family Merck in THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) Harvard Business Review case study are -
Training and development
– Family Merck has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) 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.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Family Merck digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Family 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.
Organizational Resilience of Family Merck
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Family Merck does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– Family Merck is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Benoit Leleux, Anne Catrin Glemser 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.
Effective Research and Development (R&D)
– Family Merck 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 THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Family Merck 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 THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) 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
– Family Merck has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Family 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.
High switching costs
– The high switching costs that Family Merck has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Ability to lead change in Leadership & Managing People field
– Family 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 Family Merck in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Family Merck is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Family Merck is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Leadership & Managing People industry
– THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) firm has clearly differentiated products in the market place. This has enabled Family Merck to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Family Merck to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Family Merck is one of the leading recruiters in the industry. Managers in the THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) are -
Low market penetration in new markets
– Outside its home market of Family Merck, firm in the HBR case study THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) HBR case study mentions - Family 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A), in the dynamic environment Family Merck has struggled to respond to the nimble upstart competition. Family Merck has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Family Merck is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Family Merck needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Family Merck to focus more on services rather than just following the product oriented approach.
Need for greater diversity
– Family Merck has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow decision making process
– As mentioned earlier in the report, Family Merck has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Family Merck even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) 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 Family Merck has relatively successful track record of launching new products.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A), it seems that the employees of Family Merck don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High bargaining power of channel partners
– Because of the regulatory requirements, Benoit Leleux, Anne Catrin Glemser suggests that, Family 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.
Products dominated business model
– Even though Family Merck 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 - THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the segment, Family 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.
Opportunities THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) | 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 THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) are -
Manufacturing automation
– Family Merck 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.
Building a culture of innovation
– managers at Family 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 Leadership & Managing People segment.
Developing new processes and practices
– Family Merck 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.
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 Family Merck 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.
Learning at scale
– Online learning technologies has now opened space for Family 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.
Using analytics as competitive advantage
– Family Merck 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 THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Family Merck to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Creating value in data economy
– The success of analytics program of Family Merck has opened avenues for new revenue streams for the organization in the industry. This can help Family Merck to build a more holistic ecosystem as suggested in the THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) case study. Family Merck can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Family Merck 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.
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. Family Merck can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Family 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 Leadership & Managing People segment, and it will provide faster access to the consumers.
Better consumer reach
– The expansion of the 5G network will help Family Merck to increase its market reach. Family 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, Family 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, THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Family Merck can use these opportunities to build new business models that can help the communities that Family Merck operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Threats THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) are -
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. Family 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Family Merck with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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. Family Merck needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
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 Family 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 Family Merck.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Family 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 THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) .
Shortening product life cycle
– it is one of the major threat that Family Merck is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Family Merck has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Family Merck needs to keep up with the evolution of technology in the Leadership & Managing People sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Environmental challenges
– Family 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. Family Merck can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
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.
Consumer confidence and its impact on Family Merck demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Regulatory challenges
– Family 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 Leadership & Managing People industry regulations.
Weighted SWOT Analysis of THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) 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 THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) 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 THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) 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 THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) 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 THE MERCKS OF DARMSTADT: WHAT FAMILY CAN DO (A) 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 Family Merck needs to make to build a sustainable competitive advantage.
